Bitzlato Founder Anatoly Legkodymov Sentenced for Unlicensed Money-Transmitting Business

• The founder of the Bitzlato cryptocurrency exchange was sentenced to 18 months on July 18, a duration he had already served, for managing an unlicensed money-transmitting business.
• Anatoly Legkodymov confessed last year to operating a platform that concealed over $700 million in proceeds from illicit gambling and drug-related activities.
• Judge Eric Vitaliano recognized the harsh conditions at Brooklyn’s Metropolitan Detention Centre, where Legkodymov had been held, by stating, “It’s a terrible place, and the court does consider that.”

Anatoly Legkodymov, founder of Bitzlato, receives an 18-month sentence for operating an unlicensed crypto exchange that facilitated over $700 million in illegal transactions.

Sentencing of Bitzlato’s Founder for Unlicensed Crypto Operations

Anatoly Legkodymov, founder of the cryptocurrency exchange Bitzlato, was sentenced to 18 months in prison, a period he has already served. Legkodymov had previously admitted to running an unregistered money-transmitting business that aided in the concealment of over $700 million originating from illegal online gambling and drug transactions.

Harsh Conditions in Detention Center

Judge Eric Vitaliano acknowledged the severe circumstances Legkodymov faced at the Brooklyn Metropolitan Detention Centre (MDC). Describing the MDC as “a terrible place,” Judge Vitaliano took these conditions into account during the sentencing. Interestingly, Sam Bankman-Fried, the founder of FTX, also served time at the same facility, where he faced charges of fraud and was sentenced to 25 years in prison.

Legal Consequences and Asset Seizure

As part of his plea agreement, Legkodymov forfeited his claims to $23 million worth of crypto assets that were seized by French authorities in a global crackdown on Bitzlato. The exchange was dismantled on January 23, 2023, in an international effort involving several countries, including the United States, Spain, Portugal, and the European Union Agency for Law Enforcement Cooperation (Europol).

Failure to Implement User Monitoring

Prosecutors claimed that Legkodymov’s platform facilitated cryptocurrency exchanges on the Russian dark web black market, Hydra Market. They provided evidence showing Bitzlato users frequently sought help with Hydra Market transactions and admitted to trading under false identities. In a message from May 2019, Legkodymov admitted to a colleague that numerous Bitzlato users were “known crooks.” Reflecting on his actions, Legkodymov informed the court, “I realize now, as the founder of the company, I could have done more.”

Broader Crypto Crackdown Initiatives

Legkodymov’s arrest on January 17, 2023, in Miami occurred as part of an international operation to shut down Bitzlato. Europol reported that roughly 46% of assets processed by Bitzlato, valued at approximately $1.09 billion, were linked to illegal activities. They noted that many of the suspicious transactions were related to entities under sanctions from the Office of Foreign Assets Control (OFAC) and others connected to cyber scams, money laundering, ransomware, and child exploitation materials.

U.S. Justice Department’s Cryptocurrency Enforcement

This case is part of a larger initiative by the U.S. Justice Department to combat the criminal misuse of cryptocurrency, spearheaded by the National Cryptocurrency Enforcement Team. The crackdown reaches beyond Bitzlato, exemplified by last year’s settlement with Binance Holdings Ltd. and CEO Changpeng Zhao (CZ). CZ pleaded guilty to anti-money laundering violations and U.S. sanctions breaches while allowing Binance to continue its operations.

Conclusion

The sentencing of Legkodymov underscores the increasing efforts by international law enforcement to regulate and mitigate illegal activities within the cryptocurrency industry. As regulatory scrutiny intensifies, the crypto sector must adapt to stringent compliance requirements to ensure its credibility and long-term sustainability.