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Justice Department Shuts Down Crypto Exchange That Processed Illicit Funds

The US Department of Justice and French authorities on Thursday shut down an alleged money laundering destination for crypto criminals.

On January 19, the Department of Justice indicted Anatoly Legkodymov, a Russian national and a senior executive at Bitzlato, a Hong Kong-registered cryptocurrency exchange that operates globally, with “conducting a money transmission business that transported and transmitted illicit funds and failed to comply with US regulatory safeguards, including anti-money laundering requirements.”

The Justice Department says Bitzlato marketed itself to criminals as a “no-questions-asked cryptocurrency exchange,” resulting in hundreds of millions of dollars worth of deposits being obtained.

Although Bitzlato said it did not accept US users, the Justice Department alleges that the crypto platform did a substantial amount of business with US-based customers and the company’s customer service representatives repeatedly advised to users who could transfer funds from US financial institutions.

Bitzlato’s largest trading partner in cryptocurrency transactions was Hydra Market, an anonymous online marketplace for illegal products such as narcotics, stolen financial information and money laundering services, according to the Justice Department.

Hydra Market users traded more than $700 million worth of cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shut down by U.S. and German law enforcement in April 2022, the Justice Department reports.

In the Department of Justice press release, the Federal Bureau of Investigation alleges that Legkodymov knowingly allowed Bitzlato to become a “perceived safe haven for funds” that were used for and resulted from a variety of criminal activities. The FBI adds that Bitzlato promoted that users should provide little identification to use the platform and specified that “no selfies or passports [are] required.”

Crypto criminals relied heavily on Bitzlato for money laundering services, according to Chainalysis. Their research reveals that the exchange received more than $2.3 billion worth of cryptocurrency between 2019 and 2023.

The shutdown of the platform could deal a crucial blow to the cryptocrime industry.

“If cybercriminals cannot reliably convert the cryptocurrency generated by their activities into cash, the incentives to commit those crimes plummet,” Chainalysis reports.

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