On Wednesday, the United States Department of Justice (DoJ) announced Anatoly Legkodymov, who also goes by the alias Gandalf and Tolik. Legkodymov, the co-founder of Bitzlato, a Hong Kong-registered cryptocurrency exchange, is allegedly responsible for laundering over $700 million.
Legkodymov, a 40-year-old Russian national, was arrested in Miami and was officially charged by a U.S. federal court with "conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements," a statement released by the Department of Justice.
Several court documents have surfaced that state that Bitzlato advertised itself as a "virtual currency exchange with minimal identification requirements for its users," breaking many laws for identifying customers using fintech products.
Not conducting proper "Know Your Customer (KYC)" procedures quickly led Bitzlato to become a hub for criminal activity and money laundering. The U.S. Department of Justice states that more than $700 million was processed with help from the Hydra darknet marketplace shortly before its shutdown by police in April of 2022.
The United States Assistant Attorney General Polite shared that "the defendant helped operate a cryptocurrency exchange that failed to implement anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking."
Many officials within the DoJ explained that the most troubling aspect was how Legkodymov and other Bitzlato executives all willingly chose to turn a blind eye to activities that were illegal and criminal.
A further breakdown of the source of all funds, thanks to Chainalysis, shows that Bitzlato, as of February 2022, was the recipient of $206 million from various darknet markets, $224.5 million from scammers, and $9 million from ransomware attackers. Between 2019 to 2023, Bitzlato allegedly received over $2.5 billion in cryptocurrency, of which 53% originates from illegal sources.
Since the start of the Russian invasion of Ukraine on February 24, 2022, Bitzlato has also become known as the top cashing-out destination for "Project Terrorism," a terrorist group that looks to use crypto donations to support the Russian-led war in Eastern Ukraine.
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