US arrests Bitzlato founder in USD 700 million fraud

US arrests Bitzlato founder in USD 700 million fraud

Bitzlato founder and majority owner Anatoly Legkodymov was arrested by US authorities on suspicion of processing $700 million in illicit funds.

He was arrested in Miami for allegedly operating a money-transmitting business that failed to adhere to US regulatory safeguards, including anti-money laundering regulations, and moved and transferred illegal funds.

“The 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 US courtroom,: said Deputy Attorney General Lisa O. Monaco from the US Department of Justice.

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The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has designated Bitzlato as a “primary money laundering concern” in connection with the Russian government.

“Bitzlato has repeatedly facilitated transactions for Russian-affiliated ransomware companies, notably Conti, a Ransomware-as-a-Service group that links to the Russian government and Russian-connected darknet markets,” said Deputy Secretary of the Treasury Wally Adeyemo.

Legkodymov is a senior executive and the majority stakeholder of Bitzlato, a Hong Kong-based crypto exchange that operates internationally, according to court filings.

Bitzlato has positioned itself as requiring minimal identification from its users, specifying that “neither selfies nor passports are required”.

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When Bitzlato did require users to submit identifying information, it permitted them to frequently enter information belonging to “straw man” registrants.

According to the Justice Department, as a result of these inadequate know-your-customer (KYC) processes, Bitzlato reportedly became a sanctuary for illegal profits and funds intended for use in criminal activities.

Hydra Market (Hydra), an anonymous, unlawful online marketplace for drugs, stolen financial information, fake identification documents, and money laundering services, was Bitzlato’s top counterparty in bitcoin transactions.

Until Hydra was shut down by US and German law authorities in April 2022, Hydra users transferred more than $700 million in bitcoin with Bitzlato, either directly or through intermediaries.

In addition, Bitzlato got more than $15 million in ransomware proceeds.

“The FBI will continue to pursue actors who attempt to mask their criminal activity behind keyboards and use means such as cryptocurrency to evade law enforcement,” said Associate Deputy Director Brian Turner of the FBI.

Legkodymov is accused of running an unauthorized money-transfer firm. He risks a maximum sentence of five years in jail if convicted.

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