WASHINGTON — A Russian citizen who ran a cryptocurrency exchange that federal prosecutors say transferred at least $700 million in illicit funds has been arrested in Miami and charged with evading U.S. money laundering safeguards, according to an indictment which was unsealed on Wednesday.
Russian national Anatoly Legkodymov, 40, oversaw the exchange in Bitzlato, Hong Kong, which knowingly enabled criminals to “profit from their misdeeds, including ransomware and drug trafficking,” Kenneth A. Polite Jr., the assistant Attorney General of the Justice Department’s criminal division said at a press conference on Wednesday.
The move was part of an intensified effort by federal law enforcement agencies, in conjunction with European partners, to crack down on international cryptocurrency schemes and illicit transactions. In particular, they have sought to target the activities of companies and people in China and Russia operating in the unregulated corners of cyberspace known as the “darknet.”
Five other men, of Russian and Ukrainian nationality, were arrested in Spain, Portugal and Cyprus in connection with the investigation, officials in Paris told Agence France-Presse.
If convicted, Legkodymov, who lives in Shenzhen, China, could face up to five years in prison. A senior law enforcement official, who spoke on condition of anonymity, said he likely faces other charges, possibly related to money laundering. It was not immediately clear who represented Mr. Legkodymov, the company’s majority shareholder.
Encrypted internal company communications showed that Mr. Legkodymov and other executives acknowledged that the exchange was dealing in “dirty money”, including drug dealer deposits, said Breon Peace, the US Attorney for the Eastern District of New York.
In their chats, colleagues warned Mr. Legkodymov that the exchange’s customer base consisted of “addicts who buy drugs” and “drug traffickers”, a practice that could negatively affect the company’s long-term viability. In a May 29, 2019 post, according to court documents, Mr. Legkodymov told a fellow manager that many of Bitzlato’s users were “known to be scammers”, and admitted that many used fake identity documents to register their accounts.
Investigators have also been able to trace about $15 million obtained from ransomware attacks laundered through Bitzlato.
Mr. Legkodymov has been under surveillance since his arrival at Kennedy International Airport in Queens last October and continued to play a central role in overseeing the exchange until he was arrested in Florida on Tuesday, officials said. He was scheduled to appear in U.S. District Court for the Southern District of Florida later Wednesday.
Lisa O. Monaco, the deputy attorney general, said Bitzlato’s operations were related to the operations of the $5.2 billion Hydra market, which accounted for an estimated 80 percent of all cryptocurrency transactions on the darknet before the department it stopped in April.
Prosecutors have described Hydra as “an online criminal marketplace” that allowed users in primarily Russian-speaking countries to anonymously buy and sell drugs, stolen financial information and fraudulent identification, and money laundering services.
