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The US Department of Justice has arrested and charged Russian national Anatoly Legkodymov, the founder of Hong Kong-registered cryptocurrency exchange Bitzlato, for helping cybercriminals launder illegally obtained money.

Legkodymov was arrested Tuesday night in Miami and will be arraigned today in U.S. District Court for the Southern District of Florida.

French authorities also dismantled Bitzlato’s digital infrastructure in an operation where they worked with Europol and partners in Spain, Portugal and Cyprus.

Due to “flawed know-your-customer (KYC) procedures, Bitzlato has allegedly become a haven for proceeds of crime and funds intended for use in criminal activity,” the DOJ said.

“Bitzlato’s largest counterparty in cryptocurrency transactions was Hydra Market, [..] the largest and oldest darknet market in the world”, before being dismantled by the German American authorities in April 2022.

Hydra Market users have traded over $700 million in cryptocurrency with Bitzlato, either directly or using intermediaries, and over $15 million in what the DOJ called ransomware.

Legkodymov and other Bitzlato officials were also aware that illicit activity was prevalent on Bitzlato accounts and that many users registered their accounts using stolen identities.

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Bitzlato Grab Banner

Additionally, why the crypto exchange claimed not to allow US users to register accounts, reports received by Legkodymov showed heavy traffic to the platform from US-based IP addresses, amounting to over 250 million visits in July 2022 alone.

Today, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) appointed crypto exchange Bitzlato as a “primary money laundering concern” in relation to illicit Russian finance.

“Bitzlato plays a critical role in laundering convertible virtual currency (CVC) by facilitating illicit transactions for ransomware actors operating in Russia, including Conti, a Ransomware-as-a-Service group with ties to the Russian government,” FinCEN said.

“Bitzlato poses a global threat by allowing Russian cybercriminals and ransomware actors to launder the proceeds of their theft,” said Himamauli Das, acting director of FinCEN. added Wednesday.

“As criminals and criminal enablers evolve, so does our ability to disrupt these networks.”

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