Co-founder of Bitzlato avoids extra jail time in $700m money laundering case

Bitzlato’s Russian founder has been sentenced to prison for facilitating over $700 million in illegal cryptocurrency transactions.

Anatoly Legkodymov, the Russian co-founder of Hong Kong-based cryptocurrency exchange Bitzlato who traded $700 million worth of illegal cryptocurrencies on the dark web, was sentenced to 18 months in prison but will not receive additional time because he previously served time for running an unlicensed money transfer business.

On July 18, Judge Eric Vitaliano in New York District Court sentenced Anatoly Legkodymov after he pleaded guilty in December 2023 to facilitating transactions connected to the dark web, including the infamous Hydra Market, which was shut down in 2022.

Prosecutors from Brooklyn U.S. Attorney Breon Peace’s office argued that Legkodymov deserved a minimum of four years in prison for “creating a clearinghouse for dirty money,” while the judge called the Metropolitan Detention Center, where Legkodymov is being held, a “horrific place,” considering the harsh conditions and citing two recent inmate murders as reasons against further sentences.

The U.S. Department of Justice alleged that Bitzlato was a primary provider for dark market buyers and sellers, as well as a “safe haven for ransomware criminals.” Under the agreement, Legkodymov dissolved Bitzlato and released claims related to the crypto exchange’s seized assets of over $23 million.

Bitzlato is believed to be linked to the online drug marketplace Hydra Market, which prosecutors say is linked to criminal activity including money laundering, drug trafficking, the sale of illegally obtained financial information and fake identities.

The US Treasury Department’s FinCEN revealed that Bitzlato’s transactions were heavily linked to Binance, a cryptocurrency exchange whose founder Changpeng Zhao resigned in late November 2023 as part of a $4.3 billion settlement with US regulators. Zhao was later sentenced to four months in prison after pleading guilty to violating US law.