As the United States pursues criminal suspects in the digital space, a Russian was charged with money laundering through a cryptocurrency exchange that allegedly disguised the proceeds of illegal gambling and drug deals worth more than $700 million.
The Justice Department announced at a press conference on Wednesday that Anatoly Legkodymov, the founder of the cryptocurrency exchange Bitzlato, was arrested on Tuesday in Miami. Deputy Attorney General Lisa Monaco stated at the conference that the Hong Kong-registered Bitzlato was a "critical financial resource" for the Hydra dark web market, which was the largest and longest-running marketplace of its kind. Illegal merchandise and services are traded on the dark web.
According to a statement issued by the Justice Department, Bitzlato processed illegal funds, including millions of dollars in ransomware gains. According to the United States, 40-year-old Legkodymov posted on an internal chat that Bitzlato users were "known to be crooks." Legkodymov lives in Russia and Shenzhen, China.
Monaco made an apparent reference to the activities of FTX co-founder Sam Bankman-Fried, stating, "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." He was in charge of his crypto empire from the Bahamas, and he is currently fighting federal fraud charges related to its demise.
Legkodymov was scheduled to appear in court in the Southern District of Florida on Wednesday afternoon. Legkodymov was represented at the appearance by Miami-based lawyer Joel DeFabio, who did not immediately respond to an email and voicemail requesting information on the case.
Monaco was the epitome of the Bitzlato-Hydra connection.
She stated that the two "formed a high-tech axis of cryptocrime." From crypto accounts hosted at Bitzlato, Hydra buyers funded illicit purchases of illegal drugs, stolen financial information, and hacking services, and Hydra sellers sent criminal proceeds to Bitzlato accounts."
Breon Peace stated at the conference that Bitzlato "became a safe haven for criminals" by allowing users to open accounts with minimal information. Peace is the US attorney in charge of the case's prosecution in Brooklyn, New York.
The US claims that Legkodymov also goes by the name Gandalf, possibly after the Tolkien character, but he has a typically sparse online presence for a crypto figure. Bankman-Fried, for instance, has been present on social media frequently.
However, the founder of Bitzlato made a post on the chat forum for his exchange. The government cites a number of messages sent by Legkodymov and others in a criminal complaint filed in Brooklyn federal court. A user writes to the portal for customer service in one.
"I buy opiates in Hydra... but I did not get the address," the user declares in "Dirty Bitcoin."
A helpful Bitzlato employee responds: We appreciate your message to us! Kindly supply the transaction number.
A user asks if he could "exchange dirty bitcoin" in an exchange on or around May 5, 2021, with "an apparent reference" to a Russian bank and "without problems here," as the US points out.
According to the charging document, a representative from Bitzlato asks the user for clarification, the user responds, and the representative states that "in this case there are no limitations from the service."
Easy access Bitzlato advertisements on websites in Russian suggest that users can open accounts on the exchange with just an email address rather than a passport or a photo. They were also able to buy cryptocurrency with cash at a relatively low fee through the exchange. On the other hand, it has received mixed online reviews, with one claiming that it makes it simple to insert cryptocurrency but difficult to remove it.
Chainalysis, a company that focuses on tracking cryptocurrency transactions, claims that since 2019, Bitzlato has assisted in the laundering of approximately $1 billion worth of cryptocurrencies.
The National Cryptocurrency Enforcement Team was established by the Justice Department to combat the illegal use of cryptocurrencies and recover the proceeds of those crimes, and the US charges follow. In October 2021, Monaco announced the team's formation to investigate and prosecute crypto cases, devise strategies for such investigations, and prioritize professional money launderers and ransomware schemes.
Veteran cybersecurity prosecutor Eun Young Choi, who led the successful prosecution of JPMorgan Chase & Co.'s 2014 hack, was appointed to lead the squad in February 2022. In more than a dozen nations, hackers and conspirators stole hundreds of millions of dollars from that crime.
Additionally, Choi argued the appeal against Ross Ulbricht, the founder and chief administrator of the now-defunct underground virtual drug bazaar known as Silk Road.
At the news conference on Wednesday, Deputy Treasury Secretary Wally Adeyemo stated that now that Bitzlato has been identified as a money laundering operation, it is "an international pariah."
US v. Anatoly Legkodymov, 23-m-17, Eastern District of New York (Brooklyn), United States District Court