Bizlato, crypto exchange accused of laundering $700 million, shut down by international law enforcement

by Arthur · February 9, 2023

Bizlato, crypto exchange accused of laundering 0 million, shut down by international law enforcement

Gen. Lisa O. Monaco speaks at a press conference on recent enforcement actions against cryptocurrency at the US Justice Department Building on January 18, 2023 in Washington. Justice Department officials held the press conference alongside Treasury Department officials to announce a recent arrest of Russian national Anatoly Legkodymov, the founder of Bitzlato, a criminal online platform. (Photo: Anna Moneymaker/Getty Images)

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The US Justice Department announced on Wednesday that it charged the founder and majority owner of Hong Kong-registered exchange Bitzlato with unlicensed money transmission as the exchange processed more than $700 million worth of illicit funds.

Anatoly Legkodymov was arrested in Miami last night following a joint investigation by the Department of Justice, the Treasury Department’s Financial Crimes Network and French authorities.

“As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange and reaped hundreds of millions of dollars in deposits as a result,” said United States Attorney Breon Peace.

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The Hong Kong-registered exchange marketed itself as a peer-to-peer depository cryptocurrency exchange that allowed customers to exchange and trade 60 supported cryptocurrencies, including bitcoin, ethereum, bitcoin cash and the monolithic ruble, with “no middleman.” The charges allege that the exchange required only minimal identification from users, with “neither selfies nor passports” required.

By doing this, the exchange became a safe haven for criminals looking to store their cryptocurrency with few, if any, know-your-customer (KYC) procedures. The charges allege that Legkodymov and other Bitzlato executives were aware of the presence of illegal activity in the exchange, citing an instance on May 29, 2019, where Legkodymov wrote in Bitzlato’s internal chat system that the exchange’s users were “known to be crooks. “

Their biggest counterparty, the charges allege, was Hydra Market, a Russian dark web used to sell illegal drugs, stolen financial information and money laundering services. Hydra Market was seized by the authorities in April 2022.

The announcement of Bitzlato’s shutdown provoked mixed reactions in the crypto industry as experts await news on more high-profile crypto cases, including the allegations against FTX founder Sam Bankman-Fried.

“I’ve worked in the space since 2013. Never heard of it,” partner at Brown & Rudnick and Forbes legal expert Hailey Lennon tweeted.

But the exchange’s links to Russian groups have been documented since June 2022, when crypto cybersecurity research firm Chainalysis found that Bitzlato had facilitated the laundering of approximately $1 billion worth of crypto money since 2019.

The report found that Bitzlato had received $206 million from darknet markets, $224.50 million from fraud and at least $9 million from ransomware attackers.

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Corrected on January 25 to clarify in the headline that Bitzlato was shut down by international law enforcement agencies and that the $700 million figure was the amount of cash it was alleged to have laundered.

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I am a general assignment reporter on the Forbes Digital Assets team where I focus on cryptocurrency, NFTs and blockchain technology. Originally from Peru, I graduated from New York University with a degree in journalism and comparative literature, where I wrote my thesis on non-fungible tokens.