US authorities on Wednesday said they have arrested the majority shareholder and co-founder of Hong Kong-registered virtual currency exchange Bitzlato Ltd for allegedly processing $700 million (about Rs 5,700 crore) in illegal funds.
A top Justice Department official said Anatoly Legkodimov, a Russian citizen living in China, was arrested in Miami on Tuesday on charges that he operated the exchange as an unlicensed money exchange business , which “catered, in his words, to ‘known scoundrels'”. ,
Prosecutors said Bitzlato exchanged more than $700 million (roughly Rs. 5,700 crores). cryptocurrency With hydra marketWhat he described as an illegal online marketplace for narcotics, stolen financial information, fraudulent identity documents and money laundering services was shut down by US and German law enforcement in April 2022.
“Whether you break our laws from China or Europe or abuse our financial system from a tropical island – you can commit your crimes inside a United States courtroom,” Deputy Attorney General Lisa Monaco told reporters at a news conference at the Justice Department. can be expected to answer for.” ,
Prosecutors said Bitzlato received more than $15 million (roughly Rs. 122 crores) in ransomware proceeds. It was not immediately possible to contact Hydra Markets for comment.
“Despite it being a short name, it carries a lot of weight,” said Chen Arad, chief operating officer at crypto market surveillance company Solidus Labs.
“Smaller actors are not safe and they bear the same risk as any big name exchange (or) platform,” he said.
Officials described Legkodimov as a co-founder of the cryptocurrency exchange, adding that the 40-year-old Russian helped run the company from the Chinese city of Shenzhen. Legkodimov 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, “Oh, sorry.”
Prosecutors said that Bitzlato has processed cryptocurrency transactions worth $4.58 billion (roughly Rs. 37,300 crores) since May 3, 2018, with a substantial portion constituting “proceeds of crime”.
Authorities said it also broke rules requiring significant vetting of customers and failed to meet requirements aimed at preventing money laundering. Archived versions of Bitzlato’s website noted that customers of the site could register using “only your email”.
Prosecutors said Bitzlato knowingly serviced US customers and conducted transactions with US-based exchanges using US online infrastructure. He added that it was being managed by the defendant for at least some of the time when he was in the United States.
The charges were filed in conjunction with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which said it had labeled Bitzlato Ltd. a “primary money laundering concern” for any covered financial transactions related to the Russian illegal Some transmissions of funds linked to Bitzlato have been banned by the Institute. finance.
“Bitzlato’s identification as a primary money laundering concern effectively makes the exchange an international pariah,” Deputy Treasury Secretary Wally Adimo told the news conference.
Adeyemo said Bitzlato has repeatedly facilitated transactions for Russian-affiliated ransomware groups, including the gang behind Conti, which he said has ties to the Russian government and Russia-linked darknet marketplaces. .
Carrie Steinbower, a former Treasury Department official who is now a partner at the law firm Winston & Strawn, said the penalties imposed are similar to Section 311 of the US Patriot Act and would make Bitzlato untouchable by US and foreign banks.
“None of the mainstream financial institutions would deal with an entity identified as a primary money laundering concern,” she said.
“While US financial institutions will refuse to do business with Bitzlato, (hopefully) other financial institutions will follow suit,” he said. “The ramifications of this would force Bitzlato out of the global financial sphere almost immediately.”
As of Wednesday afternoon, Bitzlato’s website had been replaced by a notice saying the service had been seized by French authorities “as part of a coordinated international law enforcement operation.”
© Thomson Reuters 2023