Bitzlato Co-Founder Arrested by US Authorities Over Alleged Processing of $700 Million in Illicit Funds

Bitzlato's Co-Founder was arrested on charges of operating an unlicensed money exchange business that "in his own words, catered to 'known crooks".

Bitzlato Co-Founder Arrested by US Authorities Over Alleged Processing of $700 Million in Illicit Funds

Photo Credit: Pixabay

Bitzlato received more than $15 million in ransomware proceeds

Highlights
  • Prosecutors described Hydra Market as an illicit online marketplace
  • Bitzlato exchanged more than $700 million in cryptocurrency with it
  • U.S. and German law enforcement shut down Hydra Market in April 2022
Advertisement

U.S. authorities said on Wednesday they have arrested the majority shareholder and Co-Founder of Hong Kong-registered virtual currency exchange Bitzlato Ltd for allegedly processing $700 million (roughly Rs. 5,700 crore) in illicit funds.

Anatoly Legkodymov, a Russian national living in China, was arrested in Miami on Tuesday on charges that he operated the exchange as an unlicensed money exchange business that "in his own words, catered to 'known crooks,'" a top Justice Department official said.

Prosecutors said Bitzlato exchanged more than $700 million (roughly Rs. 5,700 crore) in cryptocurrency with Hydra Market, which they described as an illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents and money laundering services that U.S. and German law enforcement shut down in April 2022.

"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," Deputy Attorney General Lisa Monaco told reporters at a news conference at the Justice Department.

Bitzlato also received more than $15 million (roughly Rs. 122 crore) in ransomware proceeds, prosecutors said. It was not immediately possible to contact Hydra Market for comment.

“Despite it being a small name, it carries a lot of weight," said Chen Arad, the chief operating officer at Solidus Labs, a crypto market surveillance company.

"Small actors are not safe and they carry just as much risk as any big-name exchange (or) platform," he said.

Authorities described Legkodymov as the cryptocurrency exchange's Co-Founder, saying the 40-year-old Russian helped run the company from the Chinese city of Shenzhen. Legkodymov did not immediately respond to an email with questions, and messages left on Bitzlato's automated Telegram support chat service were answered with the phrase, "Oops, sorry."

Bitzlato has processed $4.58 billion (roughly Rs. 37,300 crore) worth of cryptocurrency transactions since May 3, 2018, prosecutors said, adding a substantial portion constitutes "the proceeds of crime."

It also broke rules requiring significant vetting of customers and failed to meet requirements aimed at preventing money laundering, authorities said. Archived versions of Bitzlato's website noted that the site's clients could register using "only your email."

Prosecutors said Bitzlato knowingly serviced U.S. customers and conducted transactions with U.S.-based exchanges using U.S. online infrastructure. For at least some period of time, it was being managed by the defendant while he was in the United States, they said.

The charges were filed in conjunction with the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), which said it has prohibited certain transmittals of funds involving Bitzlato by any covered financial institution after labeling Bitzlato Ltd a "primary money laundering concern" related to Russian illicit finance.

"Identifying Bitzlato as a primary money laundering concern effectively renders the exchange an international pariah," Deputy Treasury Secretary Wally Adeyemo said at the news conference.

Adeyemo said Bitzlato has repeatedly facilitated transactions for Russian-affiliated ransomware groups, including the gang behind Conti, which he said has links to the Russian government and Russia-connected darknet markets.

Cari Stinebower, a former Treasury Department official now a partner at law firm Winston & Strawn, said the penalties imposed are akin to those under Section 311 of the U.S. Patriot Act and will make Bitzlato untouchable by U.S. and foreign banks.

"None of the mainstream financial institutions will deal with an entity identified as a primary money laundering concern," she said.

"While U.S. financial institutions will refuse to engage in business with Bitzlato, (one would expect that) other financial institutions will follow suit," she added. "The impact will be to freeze Bitzlato out of the global financial sector almost immediately."

By midday Wednesday, Bitzlato's website was replaced by a notice saying that the service had been seized by French authorities "as part of a coordinated international law enforcement action."

© Thomson Reuters 2023


Is 2023 the year when you should finally buy a foldable phone? We discuss this and more on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.
Affiliate links may be automatically generated - see our ethics statement for details.
Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.

Further reading: Bitzlato, cryptocurency
Crypto Firms Seek Refined Approach Towards Sector From Government, Pit India as Next Industry Hub
Vivo X90 Pro Global Variant Reportedly Certified by EEC, NBTC, TKDN Ahead of Official Launch
Share on Facebook Gadgets360 Twitter Share Tweet Snapchat Share Reddit Comment google-newsGoogle News
 
 

Advertisement

Follow Us

Advertisement

© Copyright Red Pixels Ventures Limited 2024. All rights reserved.
Trending Products »
Latest Tech News »