A crypto currency exchange has been shut down and its owner arrested after allegations of money laundering and connections with financing Russian criminal activity.
Bitzlato, a Hong Kong-based global cryptocurrency exchange, was issued with an order by the US Financial Crimes Enforcement Network (FinCEN) for violations of the US Combating Russian Money Laundering Act last week.
Deputy Secretary of the US Treasury, Wally Adeyamo, said: “FinCEN is officially identifying Bitzlato as a primary money laundering concern in connection with Russian illicit finance.”
“This is a unique step that has only been taken a handful of times in Treasury’s history for some of the most egregious money laundering cases, and is the first of its kind specifically under new authorities to combat Russian illicit finance.”
Bitzlato is accused of facilitating transactions for Russian-based ransomware groups, including Conti, a Ransomware-as-a-Service group with links to the Russian government and to Russian-connected entities operating on the dark web.
“Two thirds of Bitzlato’s top receiving and sending counterparties are associated with darknet markets or scams, and Bitzlato received virtual currency worth almost half a billion dollars from illicit activity between 2019 and 2021,” said Adeyemo. “Nearly 50% of all known Bitzlato transactions during that time involved Russian illicit finance or otherwise risky sources,” he added.
The Russian-born, China-based founder of the exchange, Anatoly Legkodymov, was arrested in Miami last week charged with operating an unlicensed money transmitting business, among other charges.
According to court documents, Legkodymov is a senior executive and the majority shareholder of Bitzlato, which is registered in Hong Kong and operates globally. It markets itself as requiring minimal identification from its users, specifying that “neither selfies nor passports [are] required,” and where personal details are required, to use “straw man” information.
According to the US Justice Department, Bitzlato’s biggest crypto trading partner was Hydra Market, which was a Russian-language marketplace operating on the dark web, and was used for illegal activity such as selling/buying illegal drugs, people’s financial information and soliciting money laundering services.
Hydra Market was shut down in April 2022 by German and US law agencies, but reportedly exchanged more than US$700m in cryptocurrency with Bitzlato beforehand.
Adeyemo says the Treasury’s action “sends a clear message that we are prepared to take action against any financial institution – including virtual asset service providers – with lax controls against money laundering, terrorist financing, or other illicit finance.”
