The U.S. Department of Justice arrested and charged Russian national Anatoly Legkodymov, the founder of the Hong Kong-registered cryptocurrency exchange Bitzlato, with helping cybercriminals allegedly launder illegally obtained money.
Legkodymov was arrested on Tuesday night in Miami and will be arraigned today in the U.S. District Court for the Southern District of Florida.
French authorities also dismantled Bitzlato’s digital infrastructure as part of an operation where they worked with Europol and partners in Spain, Portugal, and Cyprus.
Because of “deficient know-your-customer (KYC) procedures, Bitzlato allegedly became a haven for criminal proceeds and funds intended for use in criminal activity,” the DOJ said.
“Bitzlato’s largest counterparty in cryptocurrency transactions was Hydra Market, [..] the largest and longest running darknet market in the world,” before being taken down by U.S. German authorities in April 2022.
Hydra Market users have exchanged over $700 million in cryptocurrency with Bitzlato, directly or using intermediaries, and more than $15 million in what the DOJ tagged as ransomware proceeds.
Legkodymov and other Bitzlato managers were also allegedly aware that illicit activity was widespread across Bitzlato accounts and that many users registered their accounts using stolen identities.
Additionally, why the crypto exchange claimed not to allow users from the United States to register accounts, reports received by Legkodymov showed substantial traffic to the platform from U.S.-based IP addresses, amounting to more than 250 million visits in July 2022 alone.
Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) also designated the Bitzlato crypto exchange as a “primary money laundering concern” in connection with illicit Russian finance.
“Bitzlato plays a critical role in laundering Convertible Virtual Currency (CVC) by facilitating illicit transactions for ransomware actors operating in Russia, including Conti, a Ransomware-as-a-Service group that has links to the Government of Russia,” FinCEN said.
“Bitzlato poses a global threat by allowing Russian cybercriminals and ransomware actors to launder the proceeds of their theft,” FinCEN Acting Director Himamauli Das added on Wednesday.
“As criminals and criminal facilitators evolve, so too does our ability to disrupt these networks.”