US authorities arrested a Russian cryptocurrency executive who allegedly oversaw the exchange of hundreds of millions of dollars with drug traffickers and cybercriminals.
Anatoly Legkodymov, 40, was arrested in Miami, the Justice Department said Wednesday.
The US Treasury Department has labeled his cryptocurrency exchange, Bitzlato Limited, a “primary money laundering concern,” a move designed to cripple the exchange and cut off its financing.
His arrest marks the latest effort by President Joe Biden’s administration to crack down on digital currencies that US officials say have for too long been a safe haven for fraudsters and drug dealers. The illicit activity has caused a “crisis of confidence” in cryptocurrency markets, Deputy Attorney General Lisa Monaco told reporters Wednesday while vowing to continue to hold the sector accountable.
Bitzlato allegedly exchanged more than $700 million in cryptocurrency with Hydra, a notorious dark-web market for selling drugs and hacking tools that US and German authorities shut down in April.
French and European authorities seized Bitzlato’s cryptocurrency and its computer servers, Justice officials said.
Legkodymov is set to be arraigned on Wednesday in the US District Court for the Southern District of Florida, according to the Justice Department. Legkodymov could not be reached for comment.
Legkodymov was living in China, which does not have an extradition treaty with the United States. It was not immediately clear why he traveled to Miami.
Bitzlato’s website was down Wednesday. A Twitter account with the exchange’s name did not immediately respond to message seeking comment on the charges.
Monaco has overseen an aggressive effort at the Justice Department to seize some of the billions of dollars in illicit cryptocurrency proceeds that scammers, hackers and drug dealers have reportedly made in recent years. To try to get a handle on the problem, the FBI last year formed a team of cryptocurrency experts that focuses on blockchain analysis and seizing digital money.
In June 2021 Justice officials seized roughly half of the estimated $4.4 million ransom payment that Colonial Pipeline, which provides roughly 45% of the fuel consumed on the East Coast, paid to Russian-speaking hackers. That ransomware attack shut down the pipeline for days and prompted long lines at gas stations in multiple states.
But the cybercriminal economy is still bustling.
Cybercriminals received more than $1.2 billion in ransom payments in 2020 and 2021 combined, according to cryptocurrency-tracking firm Chainalysis.
The disruption of Bitzlato is part of a “very strategic” effort by US authorities to “go after the illicit underbelly of the crypto economy,” said Ari Redbord, head of legal and governmental affairs at TRM Labs, a firm that investigates financial crime.
“These types of regulatory actions send a message to the entire [cryptocurrency] industry: We’re still going after non-compliant exchanges no matter where they are or how large they are,” Redbord, a former senior Treasury and Justice official, told CNN.