Illegal $700 million Transaction Detected by Virtual Curency Exchange

The principal shareholder and Co-Founder of the virtual currency exchange Bitzlato Ltd, which is registered in Hong Kong, was detained, according to U.S. officials, on Wednesday. He is accused of handling $700 million (or around Rs. 5,700 crore) in illegal funds.

Russian national Anatoly Legkodymov, who resides in China, was detained on Tuesday in Miami on suspicion of running an unlawful money exchange operation that “in his own words, catered to known thieves,” according to a top Justice Department official.

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According to the prosecution, Bitzlato traded more than $700 million (roughly Rs. 5,700 crore) in cryptocurrency with Hydra Market, which they described as an illegal online market for drugs, stolen financial information, phoney identification documents, and money-laundering services that was shut down by German and American law enforcement in April 2022.

At a news conference at the Justice Department, Deputy Attorney General Lisa Monaco warned reporters that “you may expect to answer for your crimes inside a United States courtroom, whether you break our laws from China or Europe or misuse our financial system from a tropical island.”

According to the prosecution, Bitzlato also got more than $15 million (or about Rs. 122 crore) via ransomware. It was not feasible to get in touch with Hydra Market for feedback right away.

According to Chen Arad, the chief operating officer of Solidus Labs, a crypto market surveillance firm, “Despite having a minor name, it carries a lot of weight.”
Small actors don’t bear any less danger than any well-known exchange or platform, he claimed.

The 40-year-old Russian helped administer the business from the Chinese city of Shenzhen, according to the authorities, who identified Legkodymov as a co-founder of the bitcoin exchange. Questions sent to Legkodymov through email did not receive a prompt response, while messages left on Bitzlato’s automated Telegram support chat service were met with the response “Oops, sorry.”

According to prosecutors, Bitzlato has handled cryptocurrency transactions totaling $4.58 billion (approximately Rs. 37,300 crore) since May 3, 2018, with a significant amount being “the proceeds of crime.”

Authorities claimed that it also failed to comply with standards meant to prevent money laundering and violated regulations mandating extensive customer verification. Customers could register on Bitzlato’s website using “just your email,” according to archived copies of the page.

According to the prosecution, Bitzlato deliberately used American online infrastructure to interact with American-based exchanges and service American customers. It was run by the defendant when he was in the United States for at least a short term, they claimed.

The accusations were made in conjunction with the Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department, which declared Bitzlato Ltd to be a “primary money laundering concern” associated with Russian illicit finance and said it has prohibited certain transmittals of funds involving Bitzlato by any covered financial institution.

Deputy Treasury Secretary Wally Adeyemo remarked at the press briefing that designating Bitzlato as a key money laundering concern practically makes the exchange a pariah on the international stage.

Adeyemo claimed that Bitzlato had frequently facilitated transactions for ransomware organisations with ties to Russia, including as the group behind Conti, which he claimed is tied to the Russian government and darknet markets.

The sanctions imposed are comparable to those under Section 311 of the U.S. Patriot Act and will render Bitzlato untouchable by U.S. and foreign banks, according to Cari Stinebower, a former Treasury Department official who is currently a partner at the law firm Winston & Strawn.

A company recognised as a top money laundering concern won’t be dealt with by any of the major financial institutions, she said.

While U.S. banking institutions won’t do business with Bitzlato, other financial institutions are likely to follow suit, she continued. “The effect will be to almost quickly freeze Bitzlato out of the global banking sector.”

By noon on Wednesday, a notice stating that the service had been taken offline by French authorities “as part of a coordinated international law enforcement action” had replaced Bitzlato’s website.

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