Russian Anatoly Legkodymov pleaded guilty to operating the crypto exchange Bitzlato, which helped ransomware gangs and other cybercriminals launder more than $700 million.
Legkodymov (also known as “Gandalf” and “Tolik”) was a co-founder of Bitzlato and a major shareholder. He agreed to dissolve the service and relinquish all rights to approximately $23 million in seized assets.
Legkodymov, like other administrators of the crypto exchange platform, was allegedly aware of the illegal activity on Bitzlato accounts, as well as that many were using stolen identities to create accounts.
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Furthermore, the Bitzlato platform itself used a userthat required minimal information and identification. For example, it said that “no selfies or passports are required.”
“As a result of these inadequate know-your-customer (KYC) procedures, Bitzlato became a haven for criminal proceeds and funds intended for use in criminal activities,” the Justice Department said.
Chainalysis investigating the illegal activity taking place on the platform and had discovered that Bitzlato raised over $2 billion in crypto transactions from 2019 to 2021. About half of that money ($966 million) was deemed illegal.
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Chainalysis says Bitzlato received $206 million in funds that came from dark web purchases, $224.5 million that came from scams, and $9 million that was obtained from ransomware gangs.
“Hydra Market users transacted over $700 million worth of crypto with Bitzlato, either directly or through third parties, until Hydra Market was shut down due to seizures by U.S. and German law enforcement authorities in April 2022,” the DOJ added.
The charges say that Legkodymov was informed that many of the funds were related to ransomware gang activities and that illegal transactions were generally taking place.
However, French authorities, in collaboration with Europol and partners in Spain, Portugal and Cyprus, managed to dismantle the digital infrastructure of crypto exchange platform Bitzlato and seize its domains in January.
The Financial Crimes Enforcement Network (FinCEN), a division of the US Treasury Department, officially designated the agency as a “primary money laundering concern,” citing its involvement in illegal Russian financial activities.
See also: Russian man admits to money laundering from Ryuk ransomware
“Bitzlato plays a critical role in the laundering of convertible virtual currency (CVC) by facilitating illicit transactions for ransomware operating in Russia, including Conti, a Ransomware-as-a-Service group that has ties to the government of Russia,” FinCEN had said.
“Bitzlato poses a global threat by enabling Russian cybercriminals and ransomware actors to launder the proceeds of their theft,” FinCEN Deputy Director Himamauli Das added on Wednesday.
Anatoly Legkodymov, who pleaded guilty, has been held at the Metropolitan Detention Center in Brooklyn since his arrest on January 18 and now faces a five-year prison sentence.
Legkodymov’s arrest and the seizure of the service show that the implications for crypto exchanges that collaborate with cybercriminals are many. Law enforcement authorities are showing increased interest in the activities of these platforms and are likely to conduct investigations and audits to detect possible violations.
Crypto exchanges involved in money laundering can face legal penalties, such as fines or even a ban on operating. This can have serious financial consequences for the service and its owners.
Source: www.bleepingcomputer.com
