MIAMI – Federal agents in Miami arrested the founder of a cryptocurrency exchange Tuesday night, accusing him of running a “vast” money laundering operation, the U.S. Department of Justice announced Wednesday.
Anatoly Legkodymov, 40, a Russian national who resides in Shenzhen, China, was set to be arraigned in federal court in Miami Wednesday afternoon.
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Legkodymov is a senior executive and majority shareholder of the Hong Kong-based crypto exchange Bitzlato, which prosecutors said “became a haven for criminal proceeds and funds intended for use in criminal activity.”
The company not implement required anti-money laundering safeguards and required only minimal identification from its users, even permitting users to supply information belonging to “straw man registrants,” people serving as cover for the users, prosecutors said.
They said Legkodymov ran Bitzlato from Miami in 2022 and 2023.
Prosecutors allege that Bizlato’s largest counterparty in crypto transactions was Hydra Market, which prosecutors described as “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.”
Hydra users, according to prosecutors, exchanged more than $700 million in cryptocurrency with Bizlato, either directly or through intermediaries, until U.S. and German authorities shuttered Hydra last April.
Prosecutors also said Bizlato received more than $15 million in ransomware proceeds and said its customers “routinely used the company’s customer service portal to request support for transactions with Hydra, which Bitzlato often provided and admitted in chats with Bitzlato personnel that they were trading under assumed identities.”
“Legkodymov and Bitzlato’s other managers were aware that Bitzlato’s accounts were rife with illicit activity and that many of its users were registered under others’ identities,” federal prosecutors said in a news release. “For instance, on May 29, 2019, Legkodymov used Bitzlato’s internal chat system to write to a colleague that Bitzlato’s users were ‘known to be crooks,’ using others’ identity documents to register their accounts. Legkodymov was repeatedly warned by colleagues that Bitzlato’s customer base consisted of ‘addicts who buy drugs at Hydra’ and ‘drug traffickers.’”
One senior executive stressed that Bizlato should only “nominally” combat drug dealers, in order to avoid “hurting the company’s bottom line,” officials said.
Prosecutors said while Bizlato claimed not to accept users from the U.S., it did “substantial business” with American customers.
Legkodymov was charged with conducting an unlicensed money transmitting business. He could face up to five years in prison.
“Today’s actions send the clear message: 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,” Deputy Attorney General Lisa Monaco said in a statement, an apparent reference to the arrest last month in the Bahamas of Sam Bankman-Fried, the former CEO of failed cryptocurrency firm FTX.
Authorities in France are also taking their own enforcement actions, according to the DOJ.