U.S. authorities have arrested the Russian founder of Bitzlato, a cryptocurrency exchange based in Hong Kong that prosecutors say enabled criminals to launder hundreds of millions of dollars in recent years.
Anatoly Legkodymov, 40, was taken into custody in Miami, Florida, Tuesday night and charged with conducting an unlicensed money transmitting business. The resident of Shenzhen, China, is a senior executive and majority shareholder at Bitzlato, which operates around the world, according to court documents.
Bitzlato is accused of exchanging more than $700 million in cryptocurrency for users of Hydra Market, a notorious darknet marketplace that was shut down by U.S. and German authorities last year. Bitzlato is also accused of receiving more than $15 million in ransomware proceeds.
Announcing Legkodymov’s arrest at a Justice Department press conference, officials declined to say why he was in Miami.
His arrest came as part of an international law enforcement operation that led to the exchange’s takedown. French authorities dismantled its digital infrastructure and seized its cryptocurrency, officials said.
In a rare move, the U.S. Treasury Department designated Bitzlato as a “primary money-laundering concern” in connection with laundering illicit funds by Russia-based ransomware criminals.
“Today, the Department of Justice dealt a significant blow to the crypto crime ecosystem,” said Deputy Attorney General Lisa O. Monaco.
Monaco described Bitzlato as a “China-based money-laundering engine that fueled a high-tech axis of crypto crime.”
“Today’s 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 United States courtroom,” Monaco said.
Deputy Treasury Secretary Wally Adeyemo said nearly 50% of all known Bitzlato transactions between 2019 and 2021 involved Russian illicit finance or otherwise risky sources.
“Bitzlato is particularly active in facilitating illicit activity, but it is ultimately part of a larger ecosystem of cybercriminals that are allowed to operate with impunity in Russia,” Adeyemo said.
Cryptocurrency exchanges are largely unregulated, but U.S. prosecutors say Bitzlato flagrantly ignored anti-money-laundering safeguards.
Breon Peace, U.S. attorney for the Eastern District of New York, said Bitzlato marketed itself as “a no-questions-asked cryptocurrency exchange.”
“The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem,” he said.