Russian cryptocurrency exchange owner, who lives in China, arrested in Miami
Anatoly Legkodymov, the majority owner of Bitzlato Ltd., is charged with conducting an unlicensed money transmitting business
The Justice Department said Bitzlato told its customers and would-be customers that it had lax identification requirements for users and did not ask anyone to submit passports or photos of themselves to participate in the cryptocurrency exchange.
That allegedly made Bitzlato a “haven” for criminals, according to officials. The company frequently did transactions with Hydra Market, the world’s largest dark net marketplace, which was accused of selling hacked personal information, drugs and hacking services. U.S. and German law enforcement agencies shut Hydra Market down in April 2022.
“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach,” Breon Peace, the U.S. Attorney for the Eastern District of New York, said in a news release. “As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars’ worth of deposits as a result.”
Global regulators are freshly scrutinizing cryptocurrency exchanges — the freewheeling, largely unregulated online marketplaces where digital assets are bought and sold — following the recent implosion of FTX, a popular trading platform that authorities say was a years-long scheme to defraud investors.
In recent months, Justice Department investigators also sent subpoenas to American investors as part of a long-running investigation into potential violations of money-laundering rules at Binance, one of the world’s leading crypto companies, The Washington Post reported earlier this month.
Prosecutors emphasized on Wednesday that Bitzlato was subject to U.S. money-laundering rules even though it was based in China and run by a Russian national. Although the company claimed that it did not allow U.S. users, prosecutors allege the company did “substantial” business with U.S.-based customers.
“Today’s actions send the clear message: 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 O. Monaco said in a news release announcing the arrest.
If convicted, Legkodymov faces up to five years in prison.
The Justice and Treasury Departments have previously gone after larger exchanges they said marketed themselves to criminals looking to avoid identification. In the best-known criminal case, prosecutors charged the founder of BTC-E, a major exchange in Eastern Europe favored by ransomware gangs, with money-laundering. Originally arrested on a Greek beach holiday, Alexander Vinnick was extradited to the United States last year.
In 2021, the Treasury Department sanctioned the exchange SUEX after estimating that 40 percent of its volume was for illicit actors, including eight ransomware gangs.
This is a developing story. It will be updated. Joseph Menn contributed to this report.
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