Founder of Bitzlato Cryptocurrency Exchange Sentenced to 18 Months
On July 18, Judge Eric Vitaliano sentenced the founder of the Bitzlato cryptocurrency exchange to 18 months in prison for operating an unlicensed money-transmitting business. Anatoly Legkodymov had already served the time while awaiting trial.
Illegal Activity Involving $700 Million
Anatoly Legkodymov pleaded guilty to running an operation that helped hide over $700 million in proceeds from illegal gambling and drug transactions. This illegal activity was brought to light last year.
Harsh Conditions at Metropolitan Detention Centre
While acknowledging the harsh conditions at the Metropolitan Detention Centre in Brooklyn where Legkodymov was detained, Judge Vitaliano commented on the terrible nature of the place. Despite this, Legkodymov had to serve his time there.
Similar Cases in the Cryptocurrency Industry
It is worth noting that Sam Bankman-Fried, the founder of FTX, also spent time at the Metropolitan Detention Centre before being convicted on fraud charges and sentenced to 25 years in prison. The cryptocurrency industry has seen several cases of illegal activities and subsequent legal actions in recent years.
Seizure of Crypto Assets
As part of his plea deal, Legkodymov agreed to give up any claim to $23 million in crypto assets seized by French authorities during a global operation that led to the shutdown of Bitzlato on January 23. This highlights the risks and consequences of engaging in illegal activities within the cryptocurrency space.
The Rise and Fall of Bitzlato: A Crypto Exchange Founder’s Downfall
In 2023, a shocking revelation rocked the crypto world as prosecutors accused Legkodymov of facilitating illegal transactions through the Russian dark web black market Hydra Market. It was alleged that he had turned a blind eye to users trading under false identities and failed to implement proper monitoring measures.
The evidence against Legkodymov was damning, with Bitzlato users frequently seeking help with transactions on Hydra Market and openly admitting to engaging in shady dealings. In a message from May 2019, Legkodymov himself admitted that many of his users were “known to be crooks.”
During his trial, Legkodymov expressed regret, acknowledging that he could have done more as the founder of the company. His arrest in Miami on January 17, 2023, was part of a global effort to crack down on Bitzlato, involving authorities from the United States, Spain, Portugal, Cyprus, and Europol.
Europol revealed that a staggering 46% of assets processed by Bitzlato, totaling $1.09 billion, were under scrutiny. The case serves as a stark reminder that efforts to regulate the crypto industry are intensifying, with authorities worldwide working together to combat illicit activities.
US Justice Department Cracks Down on Criminal Use of Cryptocurrency
A recent investigation by the US Justice Department has revealed that a significant number of cryptocurrency transactions, occurring over a period of time, were linked to illegal activities. Authorities have identified that a majority of these suspicious transactions were connected to entities sanctioned by the Office of Foreign Assets Control (OFAC), with others involving cyber scams, money laundering, ransomware, and child abuse material.
Initiative to Combat Cryptocurrency-Related Crimes
The case against Legkodymov is just one part of a larger effort by the US Justice Department to combat the criminal use of cryptocurrency. The National Cryptocurrency Enforcement Team has been established to track down illegal activities and recover proceeds from such crimes.
Increased Scrutiny on Crypto Industry
This crackdown on criminal use of cryptocurrency comes at a time when the crypto industry is facing increased scrutiny. Last year, Binance Holdings Ltd. and its CEO, Changpeng Zhao (CZ), reached a settlement with authorities. CZ admitted to charges of anti-money laundering and US sanctions violations, while Binance was allowed to continue its operations.
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