On December 6, Anatoly Legkodymov, the co-founder and former CEO of Bitzlato, entered a guilty plea to operating an unlicensed money services business. The plea was submitted during Legkodymov's appearance before Judge Eric Vitaliano in the Eastern District of New York Court located in Brooklyn.
During the court session, Legkodymov consented to the dissolution of Bitzlato and the seizure of $23 million in cryptocurrency. The submission of a criminal complaint by Legkodymov indicates his intent to plead guilty. Breon Peace, the U.S. Attorney for the Eastern District of New York, remarked that Legkodymov's admission signifies his awareness that Bitzlato, his cryptocurrency exchange, was exploited by criminals who took advantage of its inadequate controls over illicit currency transactions.
Legkodymov's arrest occurred in Miami on January 17, 2023, as part of an international operation aimed at shutting down the exchange. France blocked Bitzlato's website on the same day, with Spain, Portugal, Cyprus, and Europol, the European Union's law enforcement agency, collaborating in the coordinated action, as per the U.S. Department of Justice.
Bitzlato, a Hong Kong-based non-custodial peer-to-peer cryptocurrency exchange, reportedly possessed deficient know-your-customer and anti-money laundering safeguards. It was identified as a significant financial resource for the Russian darknet market Hydra, leading to the imposition of sanctions by the Justice Department in April 2022. This enforcement action had a temporary disruptive impact on the cryptocurrency market. Europol claimed that approximately 46% of Bitzlato's handled assets, valued at €1 billion ($1.09 billion at the time), were associated with criminal activities. Consequently, Europol seized Bitzlato wallets worth €18 million and froze 100 accounts on other exchanges holding €50 million. Binance serves as Bitzlato's primary counterparty. In late January, the company froze funds in 20 wallets linked to the case. Later in March, the exchange partially unfroze its holdings, permitting users to withdraw up to 50% of their Bitcoin.
