Bitzlato co-founder pleads guilty in $700M crypto crime

Anatoly Legkodymov, co-founder and former CEO of Hong Kong-based cryptocurrency exchange Bitzlato, pleaded guilty on December 6 to operating an unlicensed money transmitter that facilitated money laundering and criminal activity.

Authorities accused Legkodymov of facilitating the transfer of $700 million in funds tied to ransomware attacks, drug trafficking and other crimes. They noted that Bitzlato’s lax verification procedures had made it attractive for criminals seeking to conceal their financial activities.

After spending 11 months in custody, Legkodymov pleaded guilty to one count of operating an unregistered exchange at the Eastern District Court in Brooklyn. The plea agreement also stipulated the dissolution of Bitzlato and the relinquishment of $23 million in seized assets.

“In January, the Department and our partners took down Bitzlato’s infrastructure and seized its cryptocurrency. Today’s conviction of Bitzlato’s founder is the latest product of our efforts,” said Deputy Attorney General Lisa O. Monaco.

The U.S. Attorney’s Office conducted the investigation for the Eastern District of New York (EDNY) and the National Cryptocurrency Enforcement Team (NCET). The Justice Department’s Office of International Affairs and the FBI’s Legal Attaché in France also assisted in the process.

The government’s case is being prosecuted by Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS)/NCET Trial Attorneys Alexander Mindlin and Sarah Wolfe, as well as EDNY Assistant U.S. Attorneys Artie McConnell and Matthew Blackwood.

Criminal allegations against Bitzlato

Prosecutors believe that Legkodymov knew Bitzlato was used as a money laundering tool by criminals seeking to circumvent regulations. The platform lacked adequate know-your-customer (KYC) and anti-money laundering (AML) procedures, creating an environment conducive to criminal activity.

The lack of compliance allowed the infamous Hydra darknet marketplace, among others, to exploit Bitzlato for illicit activities. Europol, the European Union’s police agency, had previously accused Bitzlato of processing $1 billion in illegal funds. In response, they took action against the exchange, suspending digital wallets with €18 million ($19.38 million) in assets.

Europol’s investigation revealed that approximately 46 percent of Bitzlato’s transactions were linked to criminal activities, confirming the Department of Justice’s findings regarding Hydra’s reliance on the exchange. Both agencies noted that Hydra had used Bitzlato to transfer significant funds using falsified identification documents.

Furthermore, investigators discovered that Binance, a prominent cryptocurrency exchange, was a major recipient of Bitcoin from Bitzlato. Between 2019 and 2021, Bitzlato facilitated the transfer of $206 million from darknet markets, $224 million from scams, and $9 million from ransomware attacks.

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