HONG KONG—The Russian co-founder of a Hong Kong-based cryptocurrency exchange that facilitated more than $700 million worth of illegal activity on the world's largest cybercrime marketplace is in a Florida jail cell following his arrest by the FBI.
Anatoly Legkodymov, 40, faces one charge in U.S. district court for conducting an unlicensed money-transmitting business, according to prosecutors, who said Legkodymov, also known online as "Gandalf" and "Tolik," transported illicit funds and failed to meet regulatory safeguards, including anti-money laundering requirements. He faces a maximum of five years in prison, Bank Info Security reported.
Darknet Marketplace
His cryptocurrency exchange, founded in 2016 and called Bitzlato Ltd., served as a favored cryptocurrency payments system of the primarily Russian-speaking Hydra darknet marketplace, which was dismantled in April 2022 following a multinational investigation, according to investigators
Legkodymov was the majority owner of Bitzlato, and authorities in France, Spain, Portugal and Cyprus pulled down its infrastructure as part of the operation that led to his arrest.
Officials from the U.S. Department of Justice said Bitzlato for years touted its minimal identification standards, allowing straw man registrations and forgoing "know your customer" practices, according to the report.
"Neither selfies nor passports required," the exchange told prospective customers until last spring when it rolled out a verification policy for new users, Bank Info Security said.
‘Known to be Crooks’
During a May 2019 chat on the Bitzlato internal chat system showcased by prosecutors, Legkodymov allegedly told a colleague that his customers were "known to be crooks," using others' identity documents to register their accounts. He received repeated warnings that a high percentage of activity on Bitzlato came from drugs bought on Hydra, which prosecutors say was responsible for 80% of global darknet transactions, Bank Info Security said.
In addition to $700 million worth of Hydra transactions - made directly and indirectly - the cryptocurrency exchange also allegedly transmitted more than $15 million in ransomware proceeds. Blockchain data cited by prosecutors in the criminal complaint against Legkodymov pegs the total value of transactions processed on Bitzlato since 2018 at $4.58 billion, Bank Info Security said.
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