The U.S. Department of Justice (DoJ) on Wednesday announced the arrest of Anatoly Legkodymov (aka Gandalf and Tolik), the cofounder of Hong Kong-registered cryptocurrency exchange Bitzlato, for allegedly processing $700 million in illicit funds.
The 40-year-old Russian national, who was arrested in Miami, was charged in a U.S. federal court with “conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements,” the DoJ said.
According to court documents, Bitzlato is said to have advertised itself as a virtual currency exchange with minimal identification requirements for its users, breaking the rules requiring the vetting of customers.
This lack of know your customer (KYC) enforcement led to the service becoming a “haven for criminal proceeds” and facilitating transactions worth more than $700 million on the Hydra darknet marketplace prior to its shutdown by law enforcement in April 2022, the complaint alleged.
“The defendant helped operate a cryptocurrency exchange that failed to implement anti-money laundering safeguards and enabled criminals to profit from their wrongdoing, including ransomware and drug trafficking,” Assistant Attorney General Polite stated.
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