Federal authorities said on Wednesday that a Russian national who operated a cryptocurrency exchange that the justice department claims turned into a shelter for the proceeds of illegal activity had been detained.
China-based Anatoly Legkodymov was detained in Miami on Tuesday evening and was scheduled to appear in court on a charge of operating an unlawful money transfer firm.
It is alleged by the prosecution that Legkodymov’s cryptocurrency exchange, Bitzlato Ltd, of which he was the majority owner, did not put in place the necessary anti-money laundering safeguards and only required minimal identification from its users, even allowing them to provide information belonging to “straw man registrants,” people acting as a cover for the users.
“The result was that Bitzlato became a safe haven for criminals, like drug dealers and ransomware groups. They knew that when the police traced their funds to Bitzlato, Bitzlato would not be able to turn over its users’ true identities,” said Breon Peace, the US attorney in Brooklyn.
The firm was established in 2016 and has its headquarters in Hong Kong.
According to the law department, Bitzlato exchanged more than $700 million in cryptocurrencies with customers of Hydra Market, a darknet marketplace for illicit goods like narcotics and phony identifications. Last year, the justice department shut down that market by seizing it.
“Operating offshore or moving your servers out of the continental US will not shield you,” deputy attorney general Lisa Monaco said at a Wednesday news conference. “And whether you break our laws from China or Europe or abuse our financial system from a tropical island, you can expect to answer for your crimes inside a United States courtroom.
The mention of a tropical island by Monaco seems to reference Sam Bankman-Fried, the former CEO of the failing cryptocurrency company FTX, who was apprehended in the Bahamas last month.
Legkodymov, 40, was being held on Wednesday, and it wasn’t known if he had a representative who could speak for him.
The treasury department collaborated with French law enforcement to pinpoint Bitzlato’s alleged illicit activity, which US officials claimed was evidence of international collaboration to remove dishonest players from the cryptocurrency marketplaces.