After spending 11 months in custody, Legkodymov pleaded guilty to one count of operating an unregistered exchange.
Anatoly Legkodymov, the former CEO of Bitzlato, a cryptocurrency exchange based in Hong Kong, has pleaded guilty to charges of operating an unlicensed money-transmitting business and facilitating the laundering of illicit funds totaling up to $700 million.
According to an announcement on Wednesday, the former Bitzlato CEO, popularly known as “Gandalf” or “Tolik”, appeared before Judge Eric Vitaliano at a United States court in Brooklyn, N.Y., where he admitted the crimes.
The Genesis of the Case
The guilty plea stemmed from criminal charges filed by the United States Department of Justice (DOJ) in January of this year.
The authorities claimed in the complaint that the company, which is registered in Hong Kong and operates on a global scale, failed to implement the mandatory anti-money laundering and Know-Your-Customer rules.
The lack of KYC measures allegedly made Bitzlato a preferred choice for criminals associated with the dark web marketplace Hydra. These individuals used the exchange to launder around $700 million in cryptocurrencies, stemming from illegal activities such as narcotics sales, stolen financial information, credit card fraud, and the use of fraudulent identification methods.
The court documents also revealed that Bitzlato received over $15 million in ransomware proceeds from cybercriminals following the closure of Hydra in April 2022. According to the court document, Legkodymov knew about the exchange assisting criminals from Hydra to launder their ill-gotten proceeds.
“Moreover, Legkodymov and Bitzlato’s other managers were aware that Bitzlato’s accounts were rife with illicit activity and that many of its users were registered under others’ identities. For instance, on May 29, 2019, Legkodymov used Bitzlato’s internal chat system to write to a colleague that Bitzlato’s users were “known to be crooks”, using other identity documents to register their accounts,” reads the complaint.
The DOJ further alleged that Bitzlato serviced US customers and guided users on moving funds from other crypto companies registered in the United States without obtaining proper authorization from relevant authorities.
Legkodymov Pleads Guilty to One Count of Criminal Charges
Legkodymov was arrested in Miami in January on January 17, 2023, the same month he faced charges related to transmitting illicit funds.
Following the arrest, French authorities blocked the company’s website as part of an international effort to dismantle its operation.
After spending 11 months in custody, Legkodymov pleaded guilty to one count of operating an unregistered exchange. As part of the plea agreement, he also committed to dissolving Bitzlato and relinquishing claims over approximately $23 million in seized assets of the exchange.
US Attorney Breon Peace said the guilty pleas confirm the allegation that Legkodymov knew about the company’s illegal operations with criminals from the dark web marketplace.
“Legkodymov’s guilty plea today confirms that he was well aware that Bitzlato, his cryptocurrency exchange, was being used as an open turnstile by criminals eager to take advantage of his lax controls over illicit money transactions. The defendant may have thought he was operating from a safe haven overseas for his ‘No Questions Asked’ clearinghouse, but this prosecution and conviction demonstrate otherwise,” said US attorney Peace.