Anatoly Legkodymov, the Russian founder of Hong Kong-registered crypto exchange Bitzlato, has been spared further jail time after his exchange processed over $700 million in illicit proceeds from the Russian dark web.
Despite the severity of the charges, the court deemed Legkodymov’s time served sufficient, marking a significant chapter in the crackdown on illegal cryptocurrency activities.
Bitzlato Founder Arrested for Facilitating a $700M Dark Web Fund Transfer
On July 18, 2024, in a New York District Court, Judge Eric Vitaliano sentenced Legkodymov to time served, acknowledging the harsh conditions at Brooklyn’s Metropolitan Detention Centre (MDC), where he had already spent 18 months.
“It’s a terrible place and the court does consider that,” Vitaliano remarked, referencing two recent detainee murders as a reason against imposing further prison time.
It all began with the arrest of Legkodymov on January 17, 2023, in Miami, following a coordinated international effort involving the United States, Spain, Portugal, Cyprus, and the European Union Agency for Law Enforcement Cooperation (Europol).
The operation led to the shutdown of Bitzlato on January 23, 2023. According to the U.S. Department of Justice (DOJ), Bitzlato has processed approximately $4.58 billion in cryptocurrency transactions since May 2018, with a substantial portion linked to criminal activities.
The DOJ accused Legkodymov of running the exchange as an unregistered money-transmitting business that facilitated the transfer of illicit funds, largely due to its lax anti-money laundering (AML) measures and lack of Know Your Customer (KYC) requirements.
Bitzlato had a notorious relationship with Hydra Market, a Russian dark web marketplace that was shut down in April 2022. Before its closure, Hydra accounted for 80% of darknet market revenue worldwide.
FBI investigations revealed that Hydra users sent around $170.6 million worth of crypto to Bitzlato wallets between May 2018 and April 2022.
Additionally, users sent an extra $218.7 million to non-Bitzlato addresses, which were subsequently transferred to Bitzlato.
Europol reported that approximately 46% of the assets processed by Bitzlato were linked to illicit activities, including money laundering, cyber scams, ransomware, and child exploitation material.
Legkodymov Laments During His Guilty Plea
Crypto Exchange Bitzlato in Hot Water as Co-founder Pleads Guilty
Anatoly Legkodymov, a Russian national and co-founder of crypto exchange Bitzlato, has pleaded guilty in a US federal court in New York.#CryptoNewshttps://t.co/tzuCsL0LE6
— Cryptonews.com (@cryptonews) December 7, 2023
Later, in December 2023, Legkodymov pleaded guilty in a US federal court to charges of operating an unlicensed money-transmitting business.
Due to its lax controls over illicit transactions, Legkodymov admitted to overseeing Bitzlato, which was used for dark market transactions and ransomware activities.
Bitzlato was known for its minimal user identification requirements, which attracted criminal elements seeking to exploit its lenient procedures.
Until its shutdown, it facilitated over $700 million in crypto exchanges with Hydra Market, a major Russian darknet market for illegal goods.
In addition to his time served, Legkodymov agreed to relinquish any claim to the $23 million in crypto assets seized by French law enforcement during the sting operation.
In court, Legkodymov expressed regret for his actions, acknowledging his responsibility as the founder of Bitzlato.
“I realize now as the founder of the company, I could have done more,” he stated.
Prosecutors emphasized that Bitzlato users frequently sought assistance with transactions on Hydra Market, often admitting they were trading under false identities.
A notable May 2019 message from Legkodymov to a colleague highlighted his awareness of the dubious nature of many Bitzlato users, stating they were “known to be crooks.”
In a noteworthy mention, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) disclosed that Bitzlato’s transactions were heavily linked to Binance, a major cryptocurrency exchange.
Although, Binance’s founder, Changpeng Zhao, stepped down in late November 2023 as part of a $4.3 billion settlement agreement with U.S. regulators, Zhao was later sentenced to four months in prison for violating U.S. laws.
The post Bitzlato Founder Spared Further Jail Time After Guilty Plea for $700M in Illicit Transactions appeared first on Cryptonews.
