DOJ sues crypto exchange founder Bitzlato for handling $700M in illicit funds MastStatus

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At a press conference on Wednesday, the US Justice Department announced that it has arrested Anatoly Legkodymov, founder of crypto exchange Bitzlato, for allegedly handling more than $700 million in illicit funds.

“The ministry worked overnight with key partners at home and abroad to disrupt Bitzlato, the China-based money laundering machine that fueled a high-tech axis of crypto-crime and to destroy its founder, the Russian citizen Anatoly Legkodymov,” Deputy Attorney General Lisa said. Oh Monaco. “Today’s actions send a clear message: Whether you break our laws from China or Europe — or abuse our financial system from a tropical island — you can expect to be held accountable for your crimes in a United States courtroom. .”

According to the DOJ, Bitzlato allowed users to trade cryptocurrencies without verifying their identity. The Hong Kong-registered exchange advertised itself to customers by saying that “neither selfies nor passports [are] required.” The government said this lack of know-your-customer procedures made Bitzlato a hotbed for criminal activity.

US government regulators have cracked down on the crypto space. Coinbase, one of the most popular crypto exchanges, was recently fined $50 million by New York State regulators for failing to conduct adequate background checks. According to a government filing, Coinbase employed outside contractors to handle a backlog of more than 100,000 unreviewed transaction monitoring alerts, but Coinbase failed to implement quality control measures, so it turned out that much of this contracted work was fraught with errors sat. As a result of these errors, regulators wrote that Coinbase failed to report potential cases of money laundering, narcotics trafficking, and CSAM-related activities to authorities.

Meanwhile, FTX founder Sam Bankman-Fried was arrested on federal charges of defrauding investors after his $32 billion company imploded and filed for bankruptcy. Bankman-Fried continues to claim not guilty and even started a Substack to defend himself, though his former associates like FTX co-founder Gary Wang and Alameda CEO Caroline Ellison have pleaded guilty to federal charges.

Events like the bankruptcy of FTX shocked the crypto industry, but long time cryptocurrency insiders didn’t seem to know what Bitzlato was before the DOJ announcement. According to data from known wallets from Arkham, a crypto intelligence tool, wallets linked to Bitzlato hold just over $11,000; at their peak, they held over $6 million, making Bitzlato a very small player in the industry.

If convicted, Legkodymov could face up to five years in prison.

“The FBI and our partners remain steadfast in our commitment to keeping cryptocurrency markets – as with any financial market – free from illicit activity,” said Michael J. Driscoll, an assistant director at the FBI’s New York field office. “Today’s action should serve as an example of this commitment, as Legkodymov will now have to bear the consequences of his actions in our criminal justice system.”

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