An individual of Russian origin, Anatoly Legkodymov, credited with establishing a cryptocurrency exchange, purportedly transformed into a haven for the ill-gotten gains of illicit activities, finds himself in custody, as disclosed by federal authorities on Wednesday.
Residing in China, Legkodymov faced apprehension on Tuesday night in Miami, being charged with the operation of an unlicensed money-transmitting business, an offense that carried significant legal consequences.
Prosecutors assert that Legkodymov’s brainchild, Bitzlato Ltd., where he predominantly held ownership, negligently omitted mandatory anti-money-laundering measures. The exchange ostensibly demanded only cursory identification from its users, even accommodating the submission of details from “straw man registrants,” individuals serving as deceptive fronts for the true users.
In the narrative of the prosecutors, Bitzlato metamorphosed into a sanctuary for criminals, encompassing drug traffickers and ransomware syndicates. Breon Peace, the U.S. attorney overseeing the case in Brooklyn, elucidated, “They knew that when the police traced their funds to Bitzlato, Bitzlato would not be able to turn over its users’ true identities.”
Established in 2016 and headquartered in Hong Kong, Bitzlato operated on a global scale, intricately involved in the intricate web of cryptocurrency exchanges, facilitating transactions exceeding $700 million. Particularly noteworthy is the connection to Hydra Market, an ominous darknet marketplace for contraband such as drugs and forged identifications, which was seized and dismantled by the Justice Department last year.
Deputy Attorney General Lisa Monaco, stern in her address at a Wednesday news conference, conveyed a clear message to malefactors: “Operating offshore or moving your servers out of the continental U.S. will not shield you.”
The mention of a “tropical island” by Monaco intriguingly harked back to the recent arrest of Sam Bankman-Fried, the erstwhile CEO of the now-defunct cryptocurrency firm FTX, transpiring in the Bahamas.
Facing a charge that could lead to a maximum prison sentence of five years upon conviction, the 40-year-old Legkodymov found himself in custody, the presence of legal representation remaining uncertain. Potential additional charges loom as the investigation unfolds.
In response to inquiries about Bitzlato aiding Russia in circumventing sanctions linked to the Ukrainian invasion, Deputy Treasury Secretary Wally Adeyemo responded cautiously, stating, “What we do know is Russia has set up an ecosystem that is permissive for cybercriminals.”
The collaborative efforts of the U.S. Treasury Department’s Financial Crimes Enforcement Network and French authorities underscored the global cooperation aimed at cleansing cryptocurrency markets of nefarious elements.