Bitzlato Founder Sentenced to Prison for Facilitating Money Laundering

On July 18, Judge Eric Vitaliano sentenced the founder of the Bitzlato cryptocurrency exchange to 18 months, the time he had already served, for running an unlicensed money-transmitting business.

Anatoly Legkodymov pleaded guilty last year to running an operation that facilitated the concealment of over $700 million in proceeds from illegal gambling and drug transactions.

Bitzlato Founder Admits He Could Have Done More

Judge Vitaliano acknowledged the harsh conditions at Brooklyn’s Metropolitan Detention Centre (MDC), where Legkodymov was detained, stating, “It’s a terrible place, and the court does consider that.”

It’s interesting to note that FTX founder Sam Bankman-Fried also served time at MDC before being found guilty of all seven fraud charges and sentenced to 25 years in prison.

As part of his plea deal, Legkodymov agreed to relinquish any claim to $23 million in crypto assets seized by French authorities during a global operation that shut down Bitzlato on January 23, 2023.

Prosecutors alleged that Legkodymov facilitated the exchange of crypto through the Russian dark web black market Hydra Market and failed to implement measures to monitor users.

Evidence included Bitzlato users frequently seeking assistance with transactions on Hydra Market and openly admitting to trading under false identities. In a May 2019 message, Legkodymov acknowledged to a colleague that many Bitzlato users were “known to be crooks.”

Reflecting on his actions, he told the court, “I realize now, as the founder of the company, I could have done more.”

Crypto Crackdown Efforts Have Been Increasing

Legkodymov was arrested in Miami on January 17, 2023, as part of a coordinated international effort to shut down the Bitzlato exchange. This operation involved the United States, Spain, Portugal, Cyprus, and the European Union Agency for Law Enforcement Cooperation (Europol).

Europol reported that approximately 46% of assets processed by Bitzlato, valued at $1.09 billion at the time, were linked to illicit activities. They added that the majority of suspicious transactions were linked to entities sanctioned by the Office of Foreign Assets Control (OFAC), with others connected to cyber scams, money laundering, ransomware, and child abuse material.

Notably, the case against Legkodymov is part of a broader initiative by the U.S. Justice Department to combat the criminal use of cryptocurrency and recover the proceeds of such crimes through the National Cryptocurrency Enforcement Team.

This crackdown comes amid heightened scrutiny of the crypto industry, exemplified by last year’s settlement with Binance Holdings Ltd. and CEO Changpeng Zhao (CZ). CZ pleaded guilty to anti-money laundering and U.S. sanctions violations while allowing the cryptocurrency exchange to continue operating.