Russian Cryptocurrency Exchange Founder Arrested in Miami, Accused of Working with Dirty Money in ‘High-Tech Crypto-Crime Axis’

Washington – The founder and chief executive of cryptocurrency exchange Bitzlato was arrested Tuesday in Miami and charged with running a company that intentionally funneled funds obtained through cybercrime and other illegal activities, Justice Department officials said Wednesday.

Anatoly Legkodimov, a Russian citizen living in China, is accused of using Bitzlato to create a financial safe haven for criminals, requiring little identifying information for its customers and allowing transactions to be virtually untraceable and shielded from investigators. According to prosecutors, the company even allowed users to submit fake registered identities to avoid detection. Investigators said anonymity made it easy for Lechdymov and his company of drug and cybercriminals who wanted to exchange their illicit money.

Announcing the arrest, Deputy Attorney General Lisa Monaco said Bitzlato’s illegal transactions amounted to more than $700 million in direct and indirect exchanges between 2018 and 2022. The company’s executives, including Legkodimov, allegedly reported that drug dealers and other criminals were using their platform to hide. their profits, the investigators said, and even identified some of the income transferred through their portals as “dirty money”.

The year-long investigation into Legkodimov’s alleged criminal activities was the result of coordination between federal prosecutors, the US Treasury Department and French law enforcement, Monaco said Wednesday, and culminated in the seizure of Bitzlato servers across Europe and the cryptocurrency. The exchange also faces further regulatory action from the U.S. Treasury Department, officials said, because of its suspected ties to Russian-affiliated ransomware groups.

Bitzlato’s downfall marked the second and latest takedown of what Monaco called a “high-tech crypto-crime axis,” an alleged partnership between the crypto exchange and Hydra, the world’s largest and longest-running darknet marketplace.

In April, the Justice Department seized the platform, which officials estimate has accounted for roughly 80% of all darknet-related cryptocurrency transactions since 2015, worth $5.2 billion.

Using cryptocurrency, Hydra users, mostly in Russian-speaking countries, bought and sold illegal drugs, stolen financial information and forged identification documents, prosecutors allege. Most of the money used to facilitate these illegal transactions, Monaco said Wednesday, was stored on Bitzlato’s servers.

“Today marks the elimination of the Hydra-Bitzlato crypto-criminal axis,” Monaco said. “Such coordinated operations against Bitzlato – using all tools and designed for maximum impact – are the basis of international success in the fight against cybercrime.”

According to a criminal complaint unsealed Wednesday in the Eastern District of New York, Bitzlato did business with customers in the United States, and its employees advised users that they could transfer funds to American banks. Legkodimov is believed to have run the exchange as a senior executive and majority owner from Miami since 2023. He faces a maximum of 5 years in prison if convicted, but federal authorities stressed Wednesday that the investigation is ongoing and more charges could be filed.

In announcing the charges and arrest, Assistant Attorney General Kenneth Polite, who oversees the Justice Department’s criminal division, said the international effort was an important step in the federal government’s efforts to combat illegal activity in the cryptocurrency ecosystem.

“We’re just getting started,” Polite added.