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DoJ moves against the "criminal exchange" Bitzlato, arrests its founder Anatoly Legkodymov

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(Kitco News) - The United States Department of Justice (DoJ) held a special press conference on Wednesday to announce that it has seized the website of the cryptocurrency exchange Bitzlato, which the DoJ referred to as a global cybercrime organization.

According to a press release that accompanied the live conference, a federal court in Brookly has charged Anatoly Legkodymov, a Russian national and senior executive of Bitzlato, 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 on Tuesday night in Miami and is scheduled to be arraigned in the U.S. District Court for the Southern District of Florida this afternoon. The takedown of Bitzlato and the arrest of Legkodymov was a joint operation between French authorities and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Multiple agencies in the U.S. participated in the enforcement action.

“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach,” stated U.S. Attorney Breon Peace. “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.”

According to Lisa O. Monaco, Deputy Attorney General for the Department of Justice, Bitzlato was a China-based money laundering operation “that fueled a high-tech axis of cryptocrime.” Monaco said the arrest of Legkodymov sends the clear message that “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.”

Court documents show that Legkodymov is a senior executive and the majority shareholder of Bitzlato Ltd., a Hong Kong-registered cryptocurrency exchange that operates globally. The exchange had previously boasted about its minimal identification requirements, specifying that “neither selfies nor passports [are] required.”

Due to the lax know-your-customer (KYC) procedures, Bitzlato “allegedly became a haven for criminal proceeds and funds intended for use in criminal activity,” the release said.

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The exchange’s largest counterparty in cryptocurrency transactions was Hydra Market, “an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest-running darknet market in the world.”

According to the DoJ, Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until the marketplace was shut down by authorities in the U.S. and Germany in April 2022.

The investigation is being jointly prosecuted by the National Security and Cybercrime Section of the United States Attorney’s Office for the Eastern District of New York and the National Cryptocurrency Enforcement Team (NCET).

To go along with today’s arrest announcement, 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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