Anatoly Legkodymov, the co-founder of the Hong Kong-based cryptocurrency exchange Bitzlato, has pled guilty to operating an unlicensed money-transmitting business involved in transporting and transmitting illicit funds. This plea was entered in federal court in Brooklyn before Judge Eric N. Vitaliano. Legkodymov, a Russian national, was arrested in Miami in January as part of an international operation following allegations that Bitzlato served as a primary conduit for dark market purchasers and sellers and a haven for ransomware criminals.
The U.S. Attorney’s Office alleged that Bitzlato had implemented lax controls over illicit money transactions, allowing users to submit identity information belonging to “straw man” registrants. This lack of stringent verification processes made Bitzlato a preferred platform for Hydra Market, an online marketplace involved in narcotics, money laundering services, stolen financial information, and fraudulent identity documents. Over $700 million was exchanged between Hydra Market and Bitzlato.
As part of his guilty plea, Legkodymov has agreed to dissolve Bitzlato and release any claim over $23 million in seized assets of the exchanges. The U.S. Department of Justice (DOJ) has been actively cracking down on fraud and illicit finance in the cryptocurrency markets, and Legkodymov’s conviction represents a significant victory in these efforts. The DOJ, along with international law enforcement agencies, has been focusing on dismantling the cryptocrime ecosystem, using tools including criminal prosecution.
This case highlights the ongoing challenges and risks associated with the cryptocurrency market, particularly concerning money laundering and other illicit activities. The sentencing of Legkodymov is yet to be announced, and he faces up to five years in prison.