The founder and majority owner of a cryptocurrency exchange, Bitzlato Ltd. (Bitzlato), was apprehended last night in Miami for his alleged involvement in a money transmitting business that processed more than $700 million of illicit funds and failed to abide by U.S. regulations, which include anti-money laundering requirements.
Anatoly Legkodymov, 40, a Russian national and resident of Shenzhen, People’s Republic of China, is scheduled to be arraigned this afternoon in the U.S. District Court for the Southern District of Florida. French authorities and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) are simultaneously taking enforcement actions.
“Today the Department of Justice dealt a severe blow to the cryptocrime ecosystem,” said Deputy Attorney General Lisa O. Monaco. “In one night, the Department worked with key partners here and abroad to take down Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime, and to arrest its founder, Russian national Anatoly Legkodymov. Today’s actions make it clear: 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 misdeeds in a United States courtroom.”
“As alleged, the defendant helped run a cryptocurrency exchange that neglected to enforce the expected anti-money laundering safeguards and enabled criminals to benefit from their offenses, such as ransomware and drug trafficking,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “The National Cryptocurrency Enforcement Team’s exceptional efforts to disrupt Bitzlato and arrest the defendant demonstrate that we will continue to work with our partners – both foreign and domestic – to battle crypto-driven crimes, even if they cross international borders.”
According to court documents, Legkodymov is a senior executive and the majority shareholder of Bitzlato, a Hong Kong-registered cryptocurrency exchange that operates globally. Bitzlato has marketed itself as requiring minimal identification from its users, specifying that “neither selfies nor passports [are] required.” On occasions when Bitzlato did demand users to submit identification information, it consistently allowed them to provide data of “straw man” registrants.
“Institutions that engage in cryptocurrency are not above the law and their owners are not out of reach,” said U.S. Attorney Breon Peace for the Eastern District of New York. “As alleged, Bitzlato presented itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem.”
As a result of these deficient know-your-customer (KYC) procedures, Bitzlato allegedly became a safe haven for criminal proceeds and funds intended for use in criminal activity. Bitzlato’s most significant counterparty in cryptocurrency transactions was Hydra Market (Hydra), an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest running darknet market in the world. Hydra users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra was shutdown by U.S. and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.
“The FBI will continue to pursue actors who try to cloak their criminal activity behind computer screens and make use of means such as cryptocurrency to evade law enforcement,” said Associate Deputy Director Brian Turner of the FBI. “We, along with our federal and international partners, will work tirelessly to disrupt and dismantle these types of criminal enterprises. Today’s arrest should serve as a reminder the FBI will impose risk and consequences upon those who engage in these activities.”
“As alleged today, Legkodymov knowingly allowed Bitzlato to become a perceived safe haven for funds used for and resulted from a variety of criminal activities,” said Assistant Director in Charge Michael J. Driscoll of the FBI New York Field Office. “The FBI and our partners remain committed to keeping cryptocurrency markets – as with any financial market – clear of illicit activity. Today’s action should serve as a demonstration of this commitment as Legkodymov will now face the consequences of his actions in our criminal justice system.”
As alleged in the complaint, Bitzlato’s customers routinely used the company’s customer service portal to request support for transactions with Hydra, which Bitzlato often provided, and admitted in chats with Bitzlato personnel that they were trading under false identities. Furthermore, Legkodymov and Bitzlato’s other managers were aware that Bitzlato’s accounts were full of illegal activity and that many of its users were registered under others’ identities. For instance, on May 29, 2019, Legkodymov used Bitzlato’s internal chat system to write to a colleague that Bitzlato’s users were “known to be crooks,” using others’ identity documents to register their accounts. Legkodymov was repeatedly warned by colleagues that Bitzlato’s customer base consisted of “addicts who buy drugs at [] Hydra” and “drug traffickers,” with one senior executive even stressing that Bitzlato should combat drug dealers only “nominally,” to avoid hurting the company’s bottom line. An internal spreadsheet saved in Bitzlato’s shared management folder encapsulated the company’s view of itself: “Positives: No KYC. . . . Negatives: Dirty money. . . .”
As alleged in the complaint, although Bitzlato claimed not to accept users from the United States, it conducted considerable business with U.S.-based customers, and its customer service representatives repeatedly advised users that they could transfer funds from U.S. financial institutions. Moreover, Legkodymov – who himself managed Bitzlato from Miami in 2022 and 2023 – received reports showing substantial traffic to Bitzlato’s website from U.S.-based Internet Protocol addresses, including over 250 million such visits in July 2022.
Legkodymov is charged with running an unlicensed money transmitting business. If convicted, he faces a maximum penalty of five years in prison.
In addition to the arrest announced today, French authorities, working with Europol and partners in Spain, Portugal, and Cyprus, dismantled Bitzlato’