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At a press conference on Wednesday, the US Department of Justice announced that it had stopped Anatoly Legkodymov, founder of crypto exchange Bitzlato, for allegedly processing over $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 fueled a high-tech cryptocurrency axis, and to arrest its founder, Russian national Anatoly Legkodymov,” Deputy Attorney General Lisa said. O.Monaco. “Today’s actions send a clear message: whether you are breaking our laws from China or Europe – or abusing our financial system from a tropical island – you can expect to answer for your crimes in a courtroom in the United States.

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

US government regulators have cracked down on the crypto space. Coinbase, one of the most popular crypto exchanges, has recently been a $50 million fine by New York State regulators for failing to conduct adequate background checks. According to a government deposit, Coinbase employed third-party contractors to manage a backlog of over 100,000 unexamined transaction monitoring alerts, but Coinbase failed to take quality control measures, so it turned out that Much of this contract work was riddled with errors. Following these errors, regulators wrote that Coinbase failed to report potential cases of money laundering, narcotics trafficking, and CSAM-related activity to authorities.

Meanwhile, FTX founder Sam Bankman-Fried was stopped on federal charges of defrauding investors after his $32 billion company implosed and filed for bankruptcy. Bankman-Fried continues to claim that he is not guilty and even started a Sub-stack to defend himself, though his former associates like FTX co-founder Gary Wang and Alameda CEO Caroline Ellison have to plead guilty federal charges.

Events like the FTX bankruptcy shook the crypto industry, but long duration crypto insiders didn’t seem to know what Bitzlato was before the DOJ announcement. According to known wallet data from Arkham, a crypto-intelligence tool, wallets associated with Bitzlato contain just over $11,000; at its peak, they contained over $6 million, making Bitzlato a very small player in the industry.

If found guilty, Legkodymov faces up to five years in prison.

“The FBI and our partners remain steadfast in our commitment to keeping the cryptocurrency markets – like any financial market – free from illicit activity,” said Michael J. Driscoll, Deputy Director of the FBI’s New York Field Office. . “Today’s action should serve as an example of that commitment as Legkodymov will now have to face the consequences of his actions in our criminal justice system.”

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