The platform founded by Anatoly Legkodymov
US authorities said on Wednesday they had arrested the owner of China-based cryptocurrency exchange Bitzlato for alleged money laundering, hailing the move as a “global blow to the cryptocrime ecosystem.”
Anatoly Legkodymov, 40, a Russian who lives in Shenzhen, China, was detained in Miami overnight and was due to appear in the city court during the day, the Justice Department said at a news conference.
He was detained for his role in the alleged transmission of a total of $700 million in illicit funds, the department said, pointing to criminals using the exchange as a haven for narcotics trafficking and selling stolen financial information.
According to court documents, Legkodymov is the founder and majority shareholder of Hong Kong-registered Bitzlato, which has been promoted as requiring minimal user identification.
Bitzlato’s largest trading partner was Hydra, an anonymous and illicit darknet online marketplace that was shut down by US and German authorities last year.
Hydra sold illegal drugs, stolen credit card data, counterfeit currency, and fake identity documents, masking the identities of those involved through encryption.
“Today, the Department of Justice dealt a significant blow to the cryptocrime ecosystem,” US Assistant Attorney General Lisa Monaco told reporters in Washington.
US Attorney for the Eastern District of New York Breon Peace is joined by Kenneth Polite, Assistant Attorney General for the Justice Department’s Criminal Division, as he discusses the arrest of the majority shareholder and co-founder of the virtual currency exchange. Bitzlato Ltd, registered in Hong Kong, for allegedly processing hundreds of millions of dollars in illicit funds, during a news conference at the Justice Department in Washington, U.S., January 18, 2023 (REUTERS/Daphne Psaledakis)
“Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that powered a high-tech cryptocrime hub, and to arrest its founder, the Russian citizen Anatoly Legkodymov”.
Monaco said that “today’s actions send a clear message: whether you break our laws in China or Europe, or abuse our financial system on a tropical island, you can expect to answer for your crimes in a US court.”
When it closed in April 2022, the Hydra marketplace had around 17 million customer accounts and more than 19,000 vendor accounts, according to the German federal police.
The secret “darknet” includes websites that can only be accessed with specific software or authorizations, thus ensuring the anonymity of users.
These networks have faced increased pressure from international law enforcement after a boom in usage during the coronavirus pandemic.
“As alleged, Bitzlato sold itself to criminals as a cryptocurrency exchange with no questions asked and obtained hundreds of millions of dollars in deposits as a result,” said Breon Peace, US Attorney for the Eastern District of New York.
“The defendant is now paying the price for the malign role his company played in the cryptocurrency ecosystem.
“Bitzlato allegedly became a haven for criminal proceeds and funds earmarked for criminal activity.”
In May 2019, Legkodymov allegedly used Bitzlato’s internal chat system to write to a colleague that users were “known criminals” who used others’ identity documents to register accounts.
The United States said that when the arrest was announced, French authorities, in collaboration with Spain, Portugal and Cyprus, dismantled Bitzlato’s digital infrastructure and seized cryptocurrency.
(With information from AFP)
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