The United States Department of Justice announced the founder of crypto exchange Bitzlato Ltd. (Bitzlato), Russian-national Anatoly Legkodymov, was arrested in Miami on suspicion of running a firm that failed to adhere to anti-money-laundering regulations and carried transactions of illicit funds.
According to the report, concurrent enforcement actions are being taken by French authorities and the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury against Bitzlato.
Legkodymov is accused of operating an illegal money transfer company and might receive a maximum sentence of five years in prison if found guilty. He was due to be arraigned on Wednesday in the Southern District of Florida U.S. District Court following his arrest.
Together with Europol, allies in Spain, Portugal, and Cyprus, French police dismantled Bitzlato’s digital infrastructure, seized Bitzlato’s crypto, and carried out other enforcement steps concurrently with the arrest in the US.
The inadequate know-your-customer (KYC) processes allegedly led to Bitzlato being a shelter for illegal proceeds and money meant for use in criminal activity. The biggest and longest-running darknet market in the world, Hydra Market (Hydra) was Bitzlato’s biggest counterparty in crypto transactions.
Before Hydra was shut down last year, users of Hydra traded more than $700 million in crypto with Bitzlato either directly or through middlemen. Additionally, Bitzlato collected almost $15 million in ransomware revenue.
Bitzlato users frequently utilized the company’s customer service portal to request assistance with transactions with Hydra, which Bitzlato frequently gave. Users also admitted to trading under false identities in chats with Bitzlato staff.
Legkodymov and Bitzlato’s other managers were also aware of the fact that many of the site’s users had registered using false information and that Bitzlato’s accounts were plagued with illegal behavior.
The case, according to US Deputy Attorney General Lisa Monaco, is the “most significant enforcement effort” against an exchange since the National Cryptocurrency Enforcement Team was established in October 2021.
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