Anatoly Legkodymov, founder and majority owner of cryptocurrency exchange Bitzlato, has been charged for alleged illicit money transmitting.
A complaint was unsealed in federal court in Brooklyn, which charges the Russian national with conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements
Legkodymov was arrested last night in Miami.
French authorities and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) are taking concurrent enforcement actions.
U.S. Attorney Breon Peace said, “Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach.
“As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem.”
Lisa Monaco – Deputy Attorney General for the Department of Justice – added, “Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime, and to arrest its founder, Russian national Anatoly Legkodymov. Today’s actions send the clear message: whether you break our laws from China or Europe—or abuse our financial system from a tropical island—you can expect to answer for your crimes inside a United States courtroom.”
Bitzlato is a Hong Kong-registered cryptocurrency exchange that operates across the globe. It markets itself with needing minimal identification from users, specifying “neither selfies nor passports [are] required,” the announcement claims.
According to the United States Attorney’s Office, when Bitzlato asked users to submit identifying information, it repeatedly allowed them to provide information belonging to “straw man” registrants.
With these lax onboarding processes, Bitzlato allegedly became a haven for criminal proceeds and funds intended for criminal activity. It also claims the largest counterparty in cryptocurrency transactions for Bitzlato was Hydra Market, an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services. It claims that over $700m in crypto was exchanged with Bitzlato.
The United States Attorney’s Office alleges that Legkodymov and Bitzlato’s other managers were aware of the illicit activity.
It claims that on May 29, 2019, Legkodymov used Bitzlato’s internal chat system to write to a colleague that Bitzlato’s users were “known to be crooks,” using others’ identity documents to register their accounts. Additionally, Legkodymov was allegedly warned by colleagues that Bitzlato’s customer base consisted of “addicts who buy drugs at [] Hydra” and “drug traffickers.”
One senior executive stressed Bitzlato should combat drug dealers only “nominally,” to avoid hurting the company’s bottom line. An internal spreadsheet saved in Bitzlato’s shared management folder encapsulated the company’s view of itself: “Positives: No KYC. . . . Negatives: Dirty money. . . .”
According to the complaint, while Bitzlato said it did not accept users from the US, it had ‘substantial business with US-based customers’ and service representatives repeatedly advised users that they could transfer funds from US financial institutions.
The charge in the complaint is an allegation and the defendant is presumed innocent unless and until proven guilty.
Alongside this complaint, French authorities, working with Europol and partners in Spain, Portugal, and Cyprus, dismantled Bitzlato’s digital infrastructure and took enforcement actions.
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