Crypto exchange moved US$700 million for darknet: DoJ

U.S. authorities arrested and charged the owner of a crypto trading platform for allegedly processing US$700 million in illicit funds for users of the “darknet.”

The Department of Justice (DoJ) announced that Anatoly Legkodymov, founder and majority owner of crypto exchange Bitzlato Ltd., has been taken into custody in Miami. Legkodymov, 40, a Russian citizen who lives in China, has been charged with operating an unlicensed money transmitting business. The allegations have not been proven.

According to the DoJ, Hong Kong-based Bitzlato allowed users to transact on its platform with minimal know-your-client (KYC) requirements. As a result, it “allegedly became a haven for criminal proceeds and funds intended for use in criminal activity.”

The platform’s largest counterparty was Hydra Market, “an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest running darknet market in the world” — whose users processed more than US$700 million in crypto on the Bitzlato platform, until it was shut down by U.S. and German law enforcement in April 2022.

The DoJ “dealt a significant blow to the cryptocrime ecosystem,” U.S. deputy attorney general Lisa Monaco said in a release.

“As alleged, the defendant helped operate a cryptocurrency exchange that failed to implement required anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking,” added assistant attorney general Kenneth Polite Jr. of the DoJ’s criminal division.

Along with the arrest in Miami, French authorities, working with various European law enforcement agencies, “dismantled Bitzlato’s digital infrastructure, seized Bitzlato’s cryptocurrency, and took other enforcement actions,” the DoJ said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.