The Justice Department shuts down crypto exchanges that processed illegal funds
The US Department of Justice and French authorities on Thursday shut down an alleged money laundering destination for cryptocriminals.
On January 19, the Justice Department charged Anatoly Legkodymov, a Russian citizen and top executive at Bitzlato, a Hong Kong-registered cryptocurrency exchange that operates globally, with “operating a money transfer business that transported and transferred illegal funds and failed to meet. US regulatory safeguards, including anti-money laundering requirements.”
The Justice Department says Bitzlato promoted itself to criminals as a “no-questions-asked cryptocurrency exchange,” resulting in it reaping hundreds of millions of dollars in deposits.
Although Bitzlato said it did not accept users from the United States, the Department of Justice claims that the crypto platform did a significant amount of business with US-based customers, and the company’s customer service representatives repeatedly told users that they could transfer funds from US financial institutions.
Bitzlato’s largest trading partner in cryptocurrency transactions was Hydra Market, an anonymous online marketplace for illegal goods such as drugs, stolen financial information and money laundering services, according to the Justice Department.
Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shut down by US and German law enforcement in April 2022, the DOJ reports.
In the Justice Department’s press release, the Federal Bureau of Investigation claims Legkodymov knowingly allowed Bitzlato to become a “perceived safe haven for funds” that were both used for and the result of a variety of criminal activities. The FBI adds that Bitzlato promoted how users needed to provide little identification to use the platform and specified that “neither selfies nor passports [are] necessary.”
Cryptocriminals relied heavily on Bitzlato for money laundering services, according to Chainalysis. The research shows that the exchange received over $2.3 billion in cryptocurrency between 2019 and 2023.
The shutdown of the platform could represent a decisive blow to the crypto-crime industry.
“If cybercriminals cannot reliably convert the cryptocurrency generated by their activities into cash, the incentives to commit these crimes decrease,” Chainalysis reports.
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