Defendant Wrote on Bitzlato’s Internal Chat Room That its Users Were “Known to be Crooks”
BROOKLYN, NY – A grievance was unsealed this morning in federal courtroom in Brooklyn charging Anatoly Legkodymov, a Russian nationwide and senior govt of Bitzlato Ltd. (Bitzlato), a Hong Kong-registered cryptocurrency alternate, with conducting a cash transmitting enterprise that transported and transmitted illicit funds and that failed to fulfill U.S. regulatory safeguards, together with anti-money laundering necessities. Legkodymov was arrested final night time in Miami and is scheduled to be arraigned this afternoon within 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, introduced the arrest and cost.
“Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach,” said 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 ecosystem.”
“Today the Department of Justice dealt a significant blow to the cryptocrime ecosystem,” said Deputy Attorney General Monaco. “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. 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.”
“As alleged, the defendant helped operate a cryptocurrency exchange that failed to implement anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking,” said Assistant Attorney General Polite. “The National Cryptocurrency Enforcement Team’s tremendous efforts to disrupt Bitzlato and arrest the defendant demonstrate that we will continue to work with our partners – both foreign and domestic – to combat cryptocurrency-fueled crimes, even if they transcend international borders.”
“The FBI will continue to pursue actors who attempt to mask their criminal activity behind keyboards and use means such as cryptocurrency to evade law enforcement,” said FBI Assistant Deputy Director Turner. “We, along with our federal and international partners, will work relentlessly to disrupt and dismantle these types of criminal enterprises. Today’s arrest should serve as a reminder the FBI will impose risk and consequences upon those who engage in these activities.”
“As alleged today, Legkodymov knowingly allowed Bitzlato to become a perceived safe haven for funds used for and resulting from a variety of criminal activities. The FBI and our partners remain steadfast in our commitment to keeping cryptocurrency markets – as with any financial market – free from illicit activity. Today’s action should serve as an example of this commitment as Legkodymov will now face the consequences of his actions in our criminal justice system,” said FBI Assistant Director-in-Charge Driscoll.
According to courtroom paperwork, Legkodymov is a senior govt and the bulk shareholder of Bitzlato Ltd. (Bitzlato), a Hong Kong-registered cryptocurrency alternate that operates globally. Bitzlato has marketed itself as requiring minimal identification from its customers, specifying that “neither selfies nor passports [are] required.” On events when Bitzlato did direct customers to submit figuring out information, it repeatedly allowed them to offer information belonging to “straw man” registrants.
As a outcome of these poor know-your-customer (KYC) procedures, Bitzlato allegedly grew to become a haven for legal proceeds and funds supposed to be used in legal exercise. Bitzlato’s largest counterparty in cryptocurrency transactions was Hydra Market, an nameless, illicit on-line market for narcotics, stolen monetary information, fraudulent identification paperwork, and cash laundering providers that was the biggest and longest working darknet market on this planet. Hydra Market customers exchanged greater than $700 million in cryptocurrency with Bitzlato, both straight or by means of intermediaries, till Hydra Market was shuttered by U.S. and German legislation enforcement in April 2022. Bitzlato additionally obtained greater than $15 million in ransomware proceeds.
As alleged within the grievance, Bitzlato’s prospects routinely used the corporate’s customer support portal to request help for transactions with Hydra, which Bitzlato typically offered, and admitted in chats with Bitzlato personnel that they had been buying and selling below assumed identities. Moreover, Legkodymov and Bitzlato’s different managers had been conscious that Bitzlato’s accounts had been rife with illicit exercise and that many of its customers had been registered below others’ identities. For occasion, on May 29, 2019, Legkodymov used Bitzlato’s inside chat system to jot down to a colleague that Bitzlato’s customers had been “known to be crooks,” utilizing others’ id paperwork to register their accounts. Legkodymov was repeatedly warned by colleagues that Bitzlato’s buyer base consisted of “addicts who buy drugs at [] Hydra” and “drug traffickers,” with one senior govt even stressing that Bitzlato ought to fight drug sellers solely “nominally,” to keep away from hurting the corporate’s backside line. An inside spreadsheet saved in Bitzlato’s shared administration folder encapsulated the corporate’s view of itself: “Positives: No KYC. . . . Negatives: Dirty money. . . .”
As alleged within the grievance, though Bitzlato claimed to not settle for customers from the United States, it did substantial enterprise with U.S.-based prospects, and its customer support representatives repeatedly suggested customers that they may switch funds from U.S. monetary establishments. Moreover, Legkodymov – who himself administered Bitzlato from Miami in 2022 and 2023 – obtained experiences reflecting substantial visitors to Bitzlato’s web site from U.S.-based Internet Protocol addresses, together with over 250 million such visits in July 2022.
The cost within the grievance is an allegation and the defendant is presumed harmless until and till confirmed responsible. If convicted of working an unlawful cash transmitting enterprise, he faces a most penalty of 5 years in jail.
Concurrent with the arrest introduced in the present day, French authorities, working with Europol and companions in Spain, Portugal, and Cyprus, dismantled Bitzlato’s digital infrastructure and took enforcement actions.
The investigation is being collectively prosecuted by the National Security and Cybercrime Section of the United States Attorney’s Office for the Eastern District of New York and the National Cryptocurrency Enforcement Team (NCET). NCET Trial Attorneys Alexander Mindlin, Scott Meisler, and Matthew Blackwood of the Justice Department’s Criminal Division and Assistant U.S. Attorney Artie McConnell of the Eastern District of New York are prosecuting the case, with help from Paralegal Specialist Mary Clare McMahon.
The Justice Department investigated this case in shut coordination with French legislation enforcement authorities and the Treasury Department’s FinCEN, each of which took separate actions in the present day below their respective authorities. The Justice Department’s Office of International Affairs and the FBI’s Legal Attaché in France offered vital help on this case, with vital help from the division’s Cyber Operations International Liaison.
The NCET and U.S. Attorney’s Office for the Eastern District of New York additionally prolong their appreciation to the Cyber Division of the Paris Prosecution Office and to France’s Gendarmerie Nationale Cyberspace Command (Cyber Crime Investigation Unit / C3N). Assistance was additionally offered by the Customs and Border Protection, the Transportation Safety Administration, and the New York City Police Department. EUROPOL and Dutch and Belgian authorities have contributed to the general investigation with respect to operational experience, coordination, and information-sharing.
The NCET was created in October 2021 to fight the rising illicit use of cryptocurrencies and digital belongings. Under the supervision of the Criminal Division, the NCET conducts and helps investigations into people and entities that allow the use of digital belongings to commit and facilitate a selection of crimes, with a explicit give attention to digital forex exchanges, mixing and tumbling providers, and infrastructure suppliers. The NCET additionally units strategic priorities relating to digital asset applied sciences, identifies areas for elevated investigative and prosecutorial focus, and leads the division’s efforts to collaborate with home and international authorities businesses in addition to the non-public sector to aggressively examine and prosecute crimes involving cryptocurrency and digital belongings.
The Defendant:
ANATOLY LEGKODYMOV (also called “Anatolii Legkodymov”, “Gandalf”, and “Tolik”)
Age: 40
Residence: Shenzen, People’s Republic of China; Russia
E.D.N.Y. Docket No.: 23-MJ-17