Bitzlato and its founder face enforcement action from US authorities

The United States Department of Justice has announced a “major international cryptocurrency enforcement action” against crypto firm Bitzlato and the arrest of its founder Anatoly Legkodymov.

In a Jan. 18, U.S. Deputy Attorney General Lisa Monaco said authorities had taken enforcement action against Bizlato in coordination with France, seizing Bitzlato’s website and calling the company a “primary concern of money laundering” linked to Russian illicit financing. According to Monaco, the Ministry of Justice worked with the Treasury Department and French law enforcement to take action against Bitzlato for allegedly “running a money transmission business that transported and transmitted illicit funds and which failed to comply with U.S. regulatory safeguards”.

As part of the case against Bitzlato, FBI officials arrested Legkodymov, a Russian national based in China, on January 29. 17 in Miami. He is to be arraigned in the U.S. District Court for the Southern District of Florida.

US authorities said the criminal complaint against Bitzlato was based on the company being a “crucial financial resource” for the Hydra darknet market, allowing users to launder funds, including those from attacks. ransomware:

“Hydra Market users traded over $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shut down by law enforcement US and German in April 2022. Bitzlato also received over $15 million in ransomware proceeds.”

The enforcement action was a coordinated effort across Europe and the United States to seize many of Bitzlato’s resources – including the company’s servers – and take the founder into custody. Monaco called the case the “largest enforcement effort” against an exchange since the launch of the national cryptocurrency enforcement team in October 2021.

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Assistant Attorney General Kenneth Polite of the Justice Department’s Criminal Division suggested US authorities were “just beginning” to crack down on similar businesses involved in money laundering. While no official directly commented on the ongoing case against crypto exchange FTX and its former CEO Sam Bankman-Fried, Monaco did refer to crimes against the US financial system “from a tropical island.”

This story is growing and will be updated.