Anatoly Legkodymov, co-founder, and primary stakeholder of the Hong Kong-registered virtual currency exchange Bitzlato, admitted guilt in a U.S. court for running a money-transmitting enterprise that handled around $700 million in unlawful funds.
According to Reuters, the guilty plea, entered before U.S. District Judge Eric Vitaliano in Brooklyn, was part of a deal where Legkodymov agreed to forfeit $23 million in assets. The case, brought by U.S. authorities, sheds light on the alleged criminal activities within Bitzlato, a platform that has recently come under scrutiny.
In court, Legkodymov, a 41-year-old Russian national, admitted to being aware that some Bitzlato clients had used the platform to transfer cryptocurrency derived from illicit activities. He specifically acknowledged the presence of ransomware proceeds from Hydra Market on Bitzlato.
Hydra Market, described by prosecutors as an online marketplace involved in drugs, stolen financial information, and money laundering services, was shut down by U.S. and German law enforcement in April 2022. Breon Peace, the top federal prosecutor in Brooklyn, highlighted that Legkodymov knew Bitzlato was being utilised as an “open turnstile by criminals”.
Bitzlato’s website no longer functions, as it has been seized by French authorities as part of an international law enforcement operation. Legkodymov’s guilty plea is the latest development in the U.S. law enforcement’s ongoing efforts to combat fraud and illicit finance in the cryptocurrency markets.
FTX founder Sam Bankman-Fried recently faced conviction on charges of stealing billions, and Binance, a top counterparty of Bitzlato, settled for $4.3 billion, with its CEO pleading guilty to violating U.S. anti-money laundering laws.
An important detail revealed in the case is that Binance was among Bitzlato’s significant counterparties, as per U.S. authorities. The interconnection between these major cryptocurrency exchanges raises questions about the broader implications and interconnected nature of illicit financial activities within the crypto sphere. Bitzlato’s downfall adds to the recent legal troubles faced by prominent figures in the cryptocurrency industry.
Legkodymov, who ran Bitzlato from Shenzhen, could face up to five years in prison pending his sentencing. The sentencing date has not been set. He has been in custody since his arrest in Miami on January 17 and has been held at the Metropolitan Detention Centre in Brooklyn.
Russia’s embassy in Washington had called for Legkodymov’s release in April, emphasising diplomatic tensions surrounding his detention. However, the U.S. State Department revealed on Tuesday that Russia rejected a recent proposal for the release of two Americans, including Wall Street Journal reporter Evan Gershkovich, considered to be wrongfully detained in Russia.