The founder of Bitzlato, sentenced to prison for facilitating money laundering

On July 18, Judge Eric Vitaliano sentenced the founder of cryptocurrency exchange Bitzlato to 18 months, time already served, for running an unlicensed money transmission business.

Anatoly Legkodymov pleaded guilty last year to running an operation that facilitated the concealment of more than $700 million from illegal gambling and drug transactions.

Bitzlato’s founder admits he could have done more

Judge Vitaliano acknowledged the harsh conditions at the Metropolitan Detention Center (MDC) in Brooklyn, where Legkodymov was held, saying, “It’s a terrible place, and the court does consider that.”

It is interesting to note that FTX founder Sam Bankman-Fried also served time at MDC before being found guilty of seven counts of fraud and sentenced to 25 years in prison.

As part of his settlement, Legkodymov agreed to waive any claim to $23 million in crypto assets seized by French authorities during a global operation that shut down Bitzlato on January 23, 2023.

Prosecutors alleged that Legkodymov facilitated the exchange of crypto through the Russian black market Hydra Market and failed to implement measures to monitor users.

The evidence included Bitzlato users requesting help with transactions on the Hydra marketplace and openly supporting trading under false identities. In a May 2019 message, Legkodymov acknowledged to a colleague that many Bitzlato users were “known to be thieves.”

Reflecting on his actions, he told the court: “I realize now that, as the founder of the company, I could have done more.”

Crypto crackdown efforts have been on the rise

Legkodymov was arrested in Miami on January 17, 2023, as part of a coordinated international effort to shut down the Bitzlato exchange. The United States, Spain, Portugal, Cyprus and the European Union’s Law Enforcement Cooperation Agency (Europol) have participated in this operation.

Europol reported that approximately 46% of the assets processed by Bitzlato, valued at $1.09 billion at the time, were related to illicit activities. They added that most of the suspicious transactions were linked to entities sanctioned by the Office of Foreign Assets Control (OFAC), with others related to cyber scams, money laundering, ransomware and child abuse material.

In particular, the case against Legkodymov is part of a broader initiative by the US Department of Justice to combat the criminal use of cryptocurrency and recover the proceeds of such crimes through the National Cryptocurrency Enforcement Team .

This crackdown comes amid heightened scrutiny of the crypto industry, exemplified by last year’s deal with Binance Holdings Ltd. and CEO Changpeng Zhao (CZ). CZ pleaded guilty to anti-money laundering violations and US sanctions while allowing the cryptocurrency exchange to continue operating.

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