On Wednesday, January 18, 2013, the U.S. Department of Justice (“DOJ”) released a criminal complaint for the Eastern District of New York indicting Russian national Anatoly Legkodimov, a senior executive at Bitzlato Ltd. (“Bitzlato”). . A cryptocurrency exchange registered in Hong Kong. Legkodimov, also known as “Gandalf” and “Trick”, was responsible for conducting an unlicensed money transfer business that did not comply with necessary controls, such as anti-money laundering requirements, and for processing and processing funds obtained through illicit means. prosecuted for sending Reg Kodimov said he was arrested in Miami on January 17th.thIf convicted, Legkodimov faces up to five years in prison.
Institutions trading cryptocurrencies are not above the law and their owners are beyond our reach. Bitzlato allegedly marketed itself to criminals as a no-questions-asked cryptocurrency exchange, resulting in deposits worth hundreds of millions of dollars. The defendant is now paying for the malicious role his company has played in the cryptocurrency ecosystem.
Breon Peace, US Attorney
Bitzlato was a hotbed of illegal cryptocurrencies. That was the business model of the exchange. It pitched based on its lax Know Your Customer (“KYC”) requirements, or “easy registration without KYC.” No selfies or passports needed. I just need your email. Bitzlato maintained an internal administrative folder containing documents listing the pros and cons of the exchange. This document states: . . Cons: Dirty money. . . ” Bitzlato ensured that even if they implemented “required” validations for new users (I use that term loosely), existing users would not be subject to the new controls. . Bitzlato knowingly accepted false “strawman” information, i.e., information that was forged or stolen, even when the user’s identifying information was actually requested and received. Just a business model.
DOJ claimed that Bitzlato maintains a reciprocal relationship with the Hydra darknet marketplace, which was licensed in April 2022. During Hydra’s life, its users traded about $700 million in cryptocurrency for his Bitzlato, sometimes indirectly through mixers and other intermediaries, but more often directly. exchange. Bitzlato was well aware of this relationship as the user frequently used the customer support chat to request support for his Hydra transaction. Users frequently admitted in these chats that they were using the exchange for illicit purposes, and support didn’t care at all. He said he understood being an “addict” and a “drug trafficker,” but he and other senior executives urged the company to look the other way so as not to hurt its bottom line. According to a recent Chainalysis report, between 2019 and 2021, nearly $1 billion of cryptocurrency received by exchanges was deemed “illegal and dangerous”, representing 48% of the total value of cryptocurrencies on exchanges. %.
Additionally, Bitzlato retained a large number of US customers. The exchange claimed it did not serve US customers, but evidence suggests otherwise. We have received first-hand reports suggesting that US users are visiting the site, including visits to Additionally, Bitzlato customer support has repeatedly advised users that they can transfer funds to and from US financial institutions.
This survey stands out for its international coordination. Cybercrime is notoriously difficult for law enforcement because it takes place in areas that do not necessarily adhere to traditional jurisdictions. Many cybercriminals inevitably commit crimes all over the world, using a variety of tools to hide or obfuscate their real location, but in jurisdictions that do not have an extradition treaty with the United States (usually Russia) still has a port. This is why Bitzlato was able to blatantly ignore KYC laws for a while, as they considered their operations in Russia and China unmanageable. All the while, the law must operate within the norms of sovereign jurisdiction. This requires real-time coordination, which can be difficult if some level of bureaucracy gets in the way. On the U.S. side, the case was jointly prosecuted by her EDNY’s National Security and Cyber Crime Section and the National Cryptocurrency Enforcement Team (“NCET”). International bodies include the Cyber Department of the Paris Public Prosecutor’s Office, the French National Gendarmerie Cyberspace Command, Europol, and the Dutch and Belgian authorities.
Interestingly, after the announcement, there was some backlash without the cryptocurrency community.th, the DOJ issued a statement announcing a “major international cryptocurrency enforcement action.” Instead, most people only knew it for the first time when they listened carefully to the live broadcast later that afternoon. I learned the name of Bitzrat. The announcement initially caused cryptocurrency prices to drop across the board, but most recovered quickly after the release.
Despite initial eye rolls from the community, this accusation is apparently fully justified and the DOJ should be commended for the work it has done to keep the bad guys out here. The case is particularly impressive given that tracking down criminals can be a very difficult task and requires international coordination. By the way, if you run a Russian cryptocurrency exchange that specializes in money laundering and counters darknet markets, ransomware and cybercriminals, I am not your lawyer and this is not necessarily legal advice. not. Partying in the US and continuing to operate an illegal exchange within the jurisdiction of US law enforcement is a bad idea. However, thank you for your continued support.