WASHINGTON — A Russian citizen who ran a cryptocurrency exchange that federal prosecutors say transmitted at the very least $700 million in illicit funds has been arrested in Miami and charged with evading U.S. money-laundering safeguards, in keeping with an indictment unsealed on Wednesday.
The Russian citizen, Anatoly Legkodymov, 40, oversaw the exchange based in Hong Kong, Bitzlato, which knowingly enabled criminals “to cash in on their wrongdoing, including ransomware and drug trafficking,” Kenneth A. Polite Jr., the assistant attorney general of the Justice Department’s criminal division, said during a news conference on Wednesday.
The move was a part of an intensifying effort by federal law enforcement agencies, together with European partners, to combat international cryptocurrency schemes and illegal transactions. Specifically, they’ve sought to crack down on the activities of corporations and folks based in China and Russia operating within the unregulated corners of cyberspace generally known as the “darknet.”
Five other men, of Russian and Ukrainian nationalities, were arrested in Spain, Portugal and Cyprus in reference to the investigation, officials in Paris told Agence France-Presse.
If convicted, Mr. Legkodymov, who lives in Shenzhen, China, could withstand five years in prison. A senior law enforcement official, speaking on the condition of anonymity, said he was more likely to face other charges, possibly connected to money laundering. It was not immediately clear who was representing Mr. Legkodymov, the corporate’s majority shareholder.
Encrypted internal company communications showed Mr. Legkodymov and other executives acknowledging that the exchange was trafficking in “dirty money,” including deposits made by drug dealers, said Breon Peace, the U.S. attorney for the Eastern District of Latest York.
Of their chats, colleagues warned Mr. Legkodymov that the exchange’s customer base consisted of “addicts who buy drugs” and “drug traffickers,” a practice that would negatively affect the corporate’s long-term viability. In a message from May 29, 2019, in keeping with court documents, Mr. Legkodymov told a fellow executive that lots of Bitzlato’s users were “known to be crooks,” and admitted that many used false identity documents to register their accounts.
Investigators have also been in a position to track about $15 million obtained from ransomware attacks that were laundered through Bitzlato.
Mr. Legkodymov has been under surveillance since arriving at Kennedy International Airport in Queens last October, and continued to play a central role in overseeing the exchange until he was arrested in Florida on Tuesday, officials said. He was scheduled to look within the U.S. District Court for the Southern District of Florida later Wednesday.
Lisa O. Monaco, the deputy attorney general, said Bitzlato’s operations were connected to the operations of the $5.2 billion Hydra Market, which accounted for an estimated 80 percent of all cryptocurrency transactions on the darknet before the department shut it down in April.
Prosecutors have described Hydra as “an internet criminal marketplace” that enabled users in mainly Russian-speaking countries to anonymously buy and sell drugs, stolen financial information and fraudulent identification, and money-laundering services.