FinCEN shuts down Bitzlato, a €700 million cryptocurrency "dirty money safe haven," in France.
Updated: Jan 20
Bitzlato's co-founder and majority shareholder was detained for allegedly handling €700 million in illicit funds. Bitzlato is a cryptocurrency exchange established in Hong Kong.
Russian citizen Anatoly Legkodymov, who now resides in China, was detained on Tuesday in Miami on suspicion of running the exchange as a “high-tech financial hub that, in his own words catered to ‘known crooks'” according to a senior Justice Department official.
It was a part of a global operation when FinCEN declared that Bitzlato Ltd., a virtual currency exchange, was a "money laundering concern" associated with Russian criminal funding.
In parallel, Bitzlato's digital infrastructure was destroyed by French authorities working with Europol and allies in Spain, Portugal, and Cyprus, according to the Treasury.
Investigators claim that Hydra Market, the world's biggest and longest-running darknet market for drugs, stolen financial data, falsified identification documents, and money laundering services, was Bitzlato's biggest counterparty in cryptocurrency transactions.
Until Hydra Market was shut down by U.S. and German law authorities in April 2022, "“Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022," claim the prosecution.
They claim that Bitzlato also got over $15 million in ransomware earnings.
The National Cryptocurrency Enforcement Network of the Justice Department took this action as its first significant step.
Following its designation of Bitzlato Ltd as a "money laundering concern" associated with Russian criminal finance, FinCEN declared that it has forbidden certain transmittals of funds involving Bitzlato by any covered financial institution.
Since May 3, 2018, Bitzlato has handled bitcoin transactions totaling $4.58 billion, according to the prosecution.
Deputy Attorney General Monaco said, "Today the Department of Justice dealt a significant blow to the cryptocrime ecosystem."
"Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime, and to arrest its founder, Russian national Anatoly Legkodymov."
The Deputy Attorney General stated that "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."
Some of the evidence presented by the Treasury against Legkodymove is as follows: "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... ;" it stated.
Full statement from the Treasury Department:
“A complaint was unsealed this morning in federal court in Brooklyn charging Anatoly Legkodymov, a Russian national and senior executive of Bitzlato Ltd. (Bitzlato), a Hong Kong-registered cryptocurrency exchange, with conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements.
Legkodymov was arrested last night in Miami and 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 taking concurrent enforcement actions.
Breon Peace, United States Attorney for the Eastern District of New York; Lisa O. Monaco, Deputy Attorney General for the Department of Justice; Kenneth A. Polite, Assistant Attorney General for the Department of Justice’s Criminal Division; Brian C. Turner, Associate Deputy Director, Federal Bureau of Investigation (FBI); and Michael J. Driscoll, Assistant Director-in-Charge, FBI, New York Field Office, announced the arrest and charge.
“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach,” stated U.S. Attorney Breon Peace. “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. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosy