The US Department of Justice (DOJ) has announced the closure of the Bitzlato cryptocurrency exchange, along with the FBI’s arrest of the exchange’s owner, Anatoly Legkodymov. In a live stream hosted on Jan. 18, law enforcement office representatives revealed that the Hong Kong-based exchange was allegedly part of a large illicit cryptocurrency network designed to evade sanctions, launder money, and hide crime.
“Legkodymov operated Bitzlato as a high-tech financial center that, in his own words, catered to ‘known criminals,'” the DOJ declaration read “Bitzlato failed to implement the safeguards required by US law, safeguards that allow authorities to detect and investigate financial crimes.”
In the live stream, officials warned that criminal actors, regardless of location or residence, must answer to US law enforcement. “Whether you are breaking our laws from China or Europe or abusing our financial system from a tropical island, you can expect to answer for your crimes within a United States court,” the Justice Department states, in a possible reference to FTX’s beleaguered Bahamian hub.
In fact, the Bitzlato announcement comes at a time of increasing scrutiny from law enforcement and regulators. Both Gemini and Genesis have been charged by the SEC in the prior week only, along with the FTX listed and all charges collected against those involved.
The DOJ alleges that Bitzlato facilitated more than $700 million in transactions involving illicit funds between 2018 and 2022, but at the time of the live stream, Bitzlatos’ tagged wallets only had $11,000 in them, up from a peak of $6 million. Even at its height, the volume of money involved in this event is minor compared to the recent collapse of Capital of the three arrows and other related entities, which many claimed to be scams in their own right. This volume discrepancy could potentially frustrate those who want proper enforcement of the industry.
