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By Robert Legare
/ CBS News
Washington – The founder and senior executive of cryptocurrency exchange Bitzlato was arrested on Tuesday in Miami and charged with directing the company to knowingly transmit funds derived from cybercrimes and other illicit activity, Justice Department officials announced Wednesday.
Anatoly Legkodymov, a Russian national living in China, is accused of using Bitzlato to create a safe financial haven for criminals, requiring little identifying information for its customers and allowing transactions to go virtually untraced and shielded from investigators. According to prosecutors, the company even allowed users to submit fake registrant information to avoid detection. Investigators said that anonymity attracted drug and cyber criminals looking to exchange their illicit money to Legkodymov and his company.
Announcing the arrest, Deputy Attorney General Lisa Monaco said Bitzlato’s illegal transactions amounted to more than $700 million in direct and indirect exchanges between 2018 and 2022. The company’s executives, including Legkodymov, allegedly communicated about the drug dealers and other criminals using their platform to hide their profits, investigators said, and even identified some of the proceeds transmitted through their portals as “dirty money.”
The year-long investigation into Legkodymov’s allegedly criminal conduct was the result of coordination between federal prosecutors, the U.S. Treasury Department, and French law enforcement officials, Monaco said Wednesday, and culminated in the seizure of Bitzlato’s servers across Europe and cryptocurrency. The exchange also faces further regulatory actions by the U.S. Treasury Department, officials said, as it is suspected of being linked to Russian-affiliated ransomware groups.
Bitzlato’s fall marked the second and final takedown of what Monaco referred to as the “high-tech axis of crypto crime,” an alleged partnership between the crypto exchange and Hydra, the world’s largest and longest-running darknet market.
In April, the Justice Department seized that platform, which officials said accounted for an estimated 80% of all darknet market-related cryptocurrency transactions since 2015 worth $5.2 billion.
Using cryptocurrency, users of Hydra mainly in Russian-speaking countries bought and sold illegal drugs, stolen financial information and fraudulent identification documents, prosecutors alleged. Much of the money used to facilitate these illegal transactions, Monaco said Wednesday, was held in Bitzlato’s servers.
“Today marks the elimination of the Hydra-Bitzlato cryptocrime axis,” Monaco said, “Coordinated operations like this against Bitzlato—using all tools and designed for maximum impact—are the linchpins of international success against cybercrime.”
According to the criminal complaint that was unsealed Wednesday in the Eastern District of New York, Bitzlato did business with customers in the U.S. and its employees advised users that they could transfer funds to American banks. Legkodymov allegedly led the exchange as its senior executive and majority owners from Miami since 2023. He faces a maximum of 5 years in prison if convicted, but federal authorities on Wednesday stressed that the investigation is ongoing and additional charges could follow.
In announcing the charges and arrest, Assistant Attorney General Kenneth Polite, who oversees the Justice Department’s Criminal Division, said the international work marked an important step in the federal government’s work to combat illegal activity across the cryptocurrency ecosystem.
“We are just getting started,” Polite added.
First published on January 18, 2023 / 3:22 PM
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