A Russian national pleaded guilty this week to operating a cryptocurrency exchange designed to launder illicit gains.
Anatolii Legkodymov, also known as “Gandalf” and “Tolik,” ran Bitzlato, a globally operated cryptocurrency exchange registered in Hong Kong.
In January, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an order that identified the virtual currency exchange as a “primary money laundering concern” in connection with Russian illicit finance.
Bitzlato required minimal identification from its users, specifying that neither selfies nor passports were required. It also allowed clients to openly provide information belonging to “straw man” registrants.
“As a result of these deficient know-your-customer (KYC) procedures, Bitzlato became a haven for criminal proceeds and funds intended for use in criminal activity,” according to the US Department of Justice.
Hydra Market, a now-defunct online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services, was Bitzlato’s largest counterparty in cryptocurrency transactions.
Hydra was the largest and longest-running darknet market in the world. Its users exchanged more than 700 million dollars’ worth of cryptocurrency with Bitzlato, either directly or through intermediaries, until its demise at the hands of US and German law enforcement in April 2022.
Bitzlato also received millions of dollars’ worth of ransomware proceeds, according to the DOJ.
Legkodymov was repeatedly advised that cryptocurrency routed through his shady exchange represented the proceeds of crime and/or was intended for use in illicit transactions, the feds note.
Legkodymov pleaded guilty to all charges and faces a maximum of five years in prison for his role in the laundering scheme.
As part of his plea agreement, the Russian agreed to dissolve Bitzlato and to release any claim over approximately $23 million in seized assets.