Bitzlato Founder Evades Additional Jail Time in $700M Dark Web Case

Anatoly Legkodymov, The owner of the now crypto exchange Bitzlato, which is not operating, has escaped an extended prison sentence. Although his exchange has processed illicit transactions of more than $700 million from the dark web of Russia, he managed to evade extra sentences.

On 18 July, Judge Eric Vitaliano in a New York district ruled that Legkodymov’s time in custody was enough, realizing he had been imprisoned for 18 months in Brooklyn Metropolitan Detention Centre (MDC).

Judge Vitaliano’s remarks on MDC

“It’s a terrible place, and the court does consider that,” said Judge Vitaliano about Brooklyn’s Metropolitan Detention Centre. He acknowledged that the harsh environment there has impacted his decision to be more sympathetic in sentencing.

Is the Claim Authentic?

The prosecution has claimed that Bitzlato helped to trade cryptocurrency transactions over $700 million via the dark web black market in Russia named Hydra Market. They have also accused the exchange of not properly monitoring users’ activities.

Prosecutors have emphasized that the exchange’s support service site has been assisting Bitzlato users with transactions on the Hydra market. Many users have acknowledged that it’s true they were using fake identities.

However, in May 2019, Legkodymov informed a colleague that a large number of  Bitzlato users were “known to be crooks.”

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Legkodymov Losses $23 Million in the Worldwide Bitzlato Crackdown

Along with serving his sentence, Legkodymov has agreed to give up any claim related to $23 Million in cryptocurrency that French law enforcement had taken.

The global sting operation that took down the exchange on January 23, 2023, was the root of this forfeiture.

Furthermore, Spain, Cyprus, Portugal, and the European Union Agency for Law Enforcement Cooperation  (Europol) have participated in the operation.

Europol report on Bitzlato’s illegal activities

According to a report by Europol, approximately 46% of Bitzlato’s assets, estimated worth $1.09 billion, were involved in illegal activities during this period.

“The majority of suspicious transactions are linked to entities sanctioned by the Office of Foreign Assets Control (OFAC), with others linked to cyber scams, money laundering, ransomware, and child abuse material,” reported Europol.

Legkodymov Acknowledges Remorse in Court

Addressing the courts, Legkodymov has admitted his mistakes and his company’s failure. He expressed regrets, stating, “I realize now, as the founder of the company, I could have done more.”

After an international effort to close Bitzlato’s operations, Legkodymov was held in Miami on January 17, 2023.

According to the report, FTX founder Sam Bankman-Fried was detained in the same facility before his fraud trial, in which he was found guilty and sentenced to 25 years in jail.

AML Challenges in Cryptocurrency

The Bitzlato case highlights the significance of global collaboration in combating financial crimes. Various nations and agencies needed to work together to shut down Bitzlato’s operations, which promoted assistance in money laundering through cryptocurrency exchange and brought justice to its founder.

This case emphasizes the regulatory challenges the crypto market experiences and the need to ensure its integration by implying strict AML regulations to prevent misuse of cryptocurrency and promote a carpenter and secure financial system.

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