Anatoly Legkodymov, 40, the majority owner of Hong Kong-registered Bitzlato, was taken into custody in Miami, Florida, on Tuesday evening and charged with conducting an unlicensed money transmitting business, officials said at a press conference at the Justice Department.
Meanwhile, French authorities working with Europol and other European law enforcement agencies took down Bitzlato’s digital infrastructure and seized its cryptocurrency, officials said.
Legkodymov was expected to make his first court appearance in Florida on Wednesday. His attorneys did not respond to queries seeking to confirm his arraignment in time for publication. If convicted, he faces a maximum of five years in prison.
‘A high-tech axis of cryptocrime’
Cybercriminals often operate in the shadows and are rarely caught. Asked why Legkodymov was in Miami at the time of his arrest, Deputy Attorney General Lisa Monaco declined to answer.
“The charges allege that Legkodymov operated Bitzlato as a high-tech financial hub that, in his own words, catered to ‘known crooks,’” Monaco said.
Bitzlato openly boasted about its lax identification requirements, telling its users that “neither selfies nor passports [are] required,” the Justice Department said.
The company’s biggest counterpart in crypto transactions was Hydra Market, a notorious darknet marketplace that sold drugs and stolen financial information before it was shut down by U.S. and German authorities last year.
Prosecutors say Bitzlato exchanged more than $700 million in cryptocurrency for users of Hydra Market between 2018 and 2022. Bitzlato is also accused of receiving more than $15 million in ransomware proceeds.
“Hydra and Bitzlato formed a high-tech axis of cryptocrime,” Monaco said. “Hydra buyers funded illicit purchases — of illegal drugs, stolen financial information, and hacking services — from crypto accounts hosted at Bitzlato, and sellers of these illegal goods and services at Hydra sent criminal proceeds to accounts at Bitzlato.”
A lawyer for Legkodymov did not immediately respond to a VOA request for comment.
Deputy Treasury Secretary Wally Adeyemo said nearly half of all known Bitzlato transactions between 2019 and 2021 involved Russian illicit finance or otherwise risky sources.
Darknet marketplaces almost always demand virtual currency, according to the Treasury Department.
“Bitzlato is particularly active in facilitating illicit activity, but it is ultimately part of a larger ecosystem of cybercriminals that are allowed to operate with impunity in Russia,” Adeyemo said.
In a rare move, the U.S. Treasury Department designated Bitzlato as a “primary money laundering concern” in connection with Russian illicit funds.
Crackdown on crypto
The charges come as U.S. authorities have stepped up a crackdown on cryptocurrency exchanges used by cybercriminals.
Illicit cryptocurrency transactions hit a new high of $20 billion in 2022, up from $18 billion in 2021 and $5 billion in 2017, according to Chainalysis.
U.S. officials say Russia in recent years has emerged as a haven for ransomware actors and other cybercriminals, with Moscow sometimes hiring private hacking groups to carry out international cyberattacks.
Adeyemo said most ransomware incidents reported to the Treasury Department’s Financial Crimes Enforcement Network in the second half of 2021 were conducted by Russia-related ransomware variants.
“At a time when Russia is waging a brutal and unjust war in Ukraine, and as it seeks to circumvent sanctions and governance controls to fill its coffers and sustain its violence, we have no tolerance for criminal enterprises enriching Russia’s malicious interests,” Adeyemo said.
Text: VoA (Voice of America)