- December 8, 2023
- Posted by: [email protected]
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Anatoly Legkodymov, also known as “Gandalf” and “Tolik,” a Russian national and co-founder of the Hong Kong-based crypto exchange Bitzlato, has pleaded guilty in a US federal court in New York to charges related to operating an unlicensed money-transmitting business. This revelation places Bitzlato in the spotlight, exposing its lax controls and association with criminal activities.
Legkodymov acknowledged his role in overseeing Bitzlato Ltd., a crypto exchange that served as a conduit for dark market transactions and a sanctuary for ransomware criminals, according to the US Attorney’s Office for the Eastern District of New York. The charges emphasize Bitzlato’s inadequate controls over illicit money transactions, making it an attractive platform for criminals exploiting its lenient procedures.
As part of his plea agreement, Legkodymov agreed to dissolve Bitzlato, relinquishing any claim to approximately $23 million in seized assets. The guilty plea was made before US District Judge Eric N. Vitaliano, marking a significant development in the legal proceedings against Bitzlato.
The charges shed light on Bitzlato’s limited Know Your Customer (KYC) controls, with the exchange positioning itself as a haven requiring minimal user identification. The lax KYC procedures allegedly turned Bitzlato into a hub for criminal proceeds, notably in dealings with Hydra Market, the largest and longest-running darknet market for narcotics and illicit services.
According to the US Attorney’s Office, Legkodymov’s deficient KYC procedures allowed users, including those associated with the darknet marketplace Hydra Market, to submit information belonging to “straw man” registrants openly. Until Hydra Market’s shutdown in April 2022, users exchanged over $700 million worth of crypto with Bitzlato, highlighting the extent of the exchange’s involvement in facilitating illegal activities.
According to Deputy Attorney General Lisa O. Monaco, the Department of Justice (DOJ) is actively “dismantling and disrupting the cryptocrime ecosystem using all tools available.” The guilty plea follows the earlier takedown of Bitzlato’s infrastructure and the seizure of its digital assets in January. Legkodymov, a 40-year-old Russian national residing in Shenzhen, China, was arrested in Miami in January this year.
The investigation was a collaborative effort by the US Attorney’s Office for the Eastern District of New York and the National Cryptocurrency Enforcement Team (NCET), underscoring the joint commitment to addressing illicit activities within the cryptocurrency space.