Bitzlato Founder Sentenced to Prison for Assisting Money Laundering

CoinDesk reports:
On July 18, Judge Eric Vitaliano sentenced Anatoly Legkodymov, the founder of the Bitzlato cryptocurrency exchange, to 18 months in prison, which is the time he has already served, for operating an unlicensed money transmitting business.
Legkodymov admitted to a scheme last year that facilitated over $700 million in proceeds from illegal gambling and drug trafficking to be concealed.
The Bitzlato founder admitted he could have done more
Judge Vitaliano acknowledged the deplorable conditions at the Metropolitan Detention Center (MDC) in Brooklyn, where Legkodymov was detained, saying, “It’s a terrible place, and the court certainly takes that into account.”
It’s worth noting that FTX founder Sam Bankman Fried also worked at the MDC and was later sentenced to 25 years in prison for seven counts of fraud.
As part of the plea agreement, Legkodymov agreed to waive any claims on the $23 million in encrypted assets seized by French authorities during a global operation to shut down Bitzlato on January 23, 2023.
Prosecutors alleged that Legkodymov facilitated cryptocurrency exchanges through the Russian dark web market Hydra and failed to take measures to monitor users.
Evidence included Bitzlato users frequently seeking trading assistance on Hydra Market and openly admitting to using false identities for transactions. In a message from May 2019, Legkodymov admitted to a colleague that many Bitzlato users are “known scammers.”
Reflecting on his actions, he told the court, “I now realize I could have done more as the founder of the company.”
Crackdown on cryptocurrency intensifies
Legkodymov was arrested in Miami on January 17, 2023, as part of coordinated international efforts to shut down the Bitzlato exchange. The operation involved cooperation among U.S., Spain, Portugal, Cyprus, and the European Union’s law enforcement cooperation agency (Europol).
Europol’s report stated that approximately 46% of the assets handled by Bitzlato were connected to illicit activities, valued at $10.9 billion at the time. They added that most of the suspicious transactions were related to entities sanctioned by the Office of Foreign Assets Control (OFAC), with others tied to online scams, money laundering, ransomware, and child abuse material.
It’s worth noting that the case against Legkodymov is part of a broader initiative by the U.S. Department of Justice to combat the illicit use of cryptocurrency and recover proceeds of such crimes through the National Cryptocurrency Enforcement Team.
The crackdown comes at a time of increased scrutiny in the cryptocurrency industry, with last year’s settlement with Binance Holdings Limited and CEO Zhao (CZ) being a case in point. CZ admitted to anti-money laundering and violating U.S. sanctions while allowing the cryptocurrency exchange to continue operating.