The US Department of Justice announced a “major international cryptocurrency enforcement action” against crypto firm Bitzlato and the arrest of its founder, Anatoly Legkodymov.
In a Jan. 18 announcement, US Assistant Attorney General Lisa Monaco said authorities, in coordination with France, had taken enforcement action against Bizlato, seizing Bitzlato’s website and labeling the company a “primary money laundering problem” related to illicit Russian finances. According to Monaco, the Justice Department worked with the Treasury Department and French law enforcement agencies to take action against Bitzlato for allegedly “operating a money-transmission business that transported and transmitted illegal funds and failed to comply with US regulations.”
As part of Bitzlato’s case, FBI officials arrested Legkodymov, a Russian citizen based in China, on January 17 in Miami. He is scheduled to face charges in the US District Court for the Southern District of Florida.
US authorities said the criminal complaint against Bitzlato stems from the firm being a “critical financial resource” for the Hydra darknet marketplace, allowing users to launder funds, including those from ransomware attacks:
“Hydra Market users traded more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shut down by US and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.”
The enforcement action was a coordinated effort across Europe and the US to seize many of Bitzlato’s resources – including the company’s servers – and place the founder in custody. Monaco called the case the “most significant enforcement action” against an exchange since the National Cryptocurrency Enforcement Team was formed in October 2021.
Related: Cleaning Up Crypto: How Much Enforcement Is Too Much?
Assistant Attorney General Kenneth Polite of the Justice Department’s Criminal Division indicated that US authorities are “just beginning” to crack down on similar firms involved in aiding money laundering. Although no official commented directly on the ongoing lawsuit against crypto exchange FTX and its former CEO Sam Bankman-Fried, Monaco cited crimes against the US financial system “from a tropical island.”
This story is evolving and updated.