DOJ Charges Founder of Crypto Exchange Bitzlato for Processing $700 Million in Illegal Funds TechCrunch

In a Wednesday press conference, the US Justice Department announced it had arrested Anatoly Legkodymov, founder of cryptocurrency exchange Bitzlato, on charges of processing more than $700 million in illicit funds.

“Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that has powered a high-tech axis of cryptocrime, and to arrest its founder, the Russian citizen Anatoly Legkodymov,” Deputy Attorney General Lisa O. Monaco said. “Today’s actions send a clear message: whether you violate our laws from China or Europe, or abuse our financial system from a tropical island, you can expect to answer for your crimes in a courtroom of courts of the United States”.

According to the DOJ, Bitzlato allowed users to trade cryptocurrencies without verifying their identity. The Hong Kong-registered exchange advertised to clients by saying that “no selfies or passports [are] necessary.” The government said this lack of customer knowledge procedures has turned Bitzlato into a hotbed of criminal activity.

US government regulators have been cracking down on the crypto space. Coinbase, one of the most popular cryptocurrency exchanges, was recently fined $50 million by New York state regulators for failing to conduct proper background checks. According to a government filing, Coinbase employed third-party contractors to handle a backlog of more than 100,000 unexamined transaction tracking alerts, but Coinbase failed to conduct quality control measures, so it was found that much of this contract work was full of mistakes. Following these errors, regulators wrote that Coinbase failed to report potential cases of money laundering, drug trafficking, and CSAM-related activities to authorities.

Meanwhile, FTX founder Sam Bankman-Fried was arrested on federal charges of defrauding investors after his $32 billion company imploded and filed for bankruptcy. Bankman-Fried continues to claim not guilty and has even started a substack to defend himself, although former partners like FTX co-founder Gary Wang and Alameda CEO Caroline Ellison have pleaded guilty to federal charges.

Events like the FTX bankruptcy have rocked the cryptocurrency industry, but long crypto insiders he didn’t seem to know what Bitzlato was before the Justice Department’s announcement. According to data from known wallets by Arkham, a cryptographic intelligence tool, wallets associated with Bitzlato contain just over $11,000; at its peak, they held over $6 million, making Bitzlato a very small player in the industry.

If convicted, Legkodymov faces up to five years in prison.

“The FBI and our partners remain steadfast in our commitment to keep the cryptocurrency markets, like any other financial market, free from illicit activity,” said Michael J. Driscoll, assistant director of the FBI’s New York office . “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.”

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