Reuters
Authorities have seized cryptocurrency exchange Bitzlato, and arrested its co-founder, accusing the firm of fuelling a "high-tech axis of crypto crime".
The US Department of Justice charged Anatoly Legkodymov, a Russian national living in China, with running a business that catered to what he once described as "crooks".
They said Bitzlato processed more than $700m (£567m) in illicit funds, breaking rules designed to thwart money laundering.
Mr Legkodymov was arrested in Miami.
"Institutions that trade in cryptocurrency are not above the law and their owners are not beyond our reach," US Attorney Breon Peace said at a press conference on Wednesday, announcing the arrest.
"As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange, and reaped hundreds of millions of dollars' worth of deposits as a result. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem."
Since 2018, the Hong Kong-registered exchange had processed about $4.5bn worth of crypto currency transactions, according to the complaint.
The firm required minimal identification from its users, allowing it to become a "haven for criminal proceeds and funds intended for use in criminal activity", prosecutors said.
They alleged that the firm was aware of the issues, citing an internal document that described Bitzlato as handling "dirty money" without standard customer-vetting procedures.
Authorities said the firm was closely connected to Hydra Market, a darknet marketplace for drugs, money laundering and stolen financial information that international authorities shut down last year.
Bitzlato claimed it did not accept US customers but prosecutors said it in fact did "substantial" business with Americans.
US authorities worked with law enforcement in France and other countries on the operation.
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As an expert in cryptocurrency and blockchain technology, I bring forth a wealth of knowledge and experience in the field, having closely followed developments in the industry, staying abreast of legal implications, and understanding the technical nuances that govern the crypto space.
The recent case involving the seizure of Bitzlato, a cryptocurrency exchange, and the arrest of its co-founder Anatoly Legkodymov underscores the ongoing efforts by authorities to regulate the cryptocurrency ecosystem. This incident serves as a stark reminder that institutions operating in the crypto space are subject to legal scrutiny, dispelling the misconception that they are beyond the reach of law enforcement.
The US Department of Justice's move to charge Legkodymov and seize Bitzlato is grounded in allegations of the exchange processing more than $700 million in illicit funds, violating anti-money laundering rules. This action showcases the commitment of regulatory bodies to combat financial crimes within the crypto industry.
One crucial aspect of this case is Bitzlato's lax user identification requirements, enabling it to attract criminal elements seeking to use the platform for illicit activities. The prosecution highlights an internal document describing Bitzlato as handling "dirty money" without adhering to standard customer-vetting procedures.
The connection between Bitzlato and Hydra Market, a darknet marketplace for illegal activities shut down last year, further deepens the case. This demonstrates the interplay between various elements within the crypto ecosystem and the broader dark web, emphasizing the need for international collaboration in addressing such issues.
The involvement of US authorities working alongside counterparts in France and other countries underscores the global nature of cryptocurrency-related crimes. This cooperative effort is essential for effectively tackling cross-border illicit activities, as exemplified in this operation.
In conclusion, the Bitzlato case sheds light on the importance of regulatory compliance, robust user identification processes, and international collaboration in maintaining the integrity of the cryptocurrency space. It serves as a cautionary tale for other crypto exchanges and highlights the collective efforts of global authorities in ensuring accountability and legality within the rapidly evolving world of cryptocurrencies.
