The US Department of Justice (DOJ) announced the closure of the digital currency exchange Bitzlato, along with the FBI arrest of the exchange’s owner, Anatoly Legkodymov. In a live broadcast held on January 18, a representative of the law enforcement bureau said that the Hong Kong-based exchange is suspected of being part of an illegal cryptocurrency network designed to circumvent sanctions, launder money and hide crimes.
“Legkodymov operated Bitzlato as a high-tech financial hub that, in his own words, catered to ‘known crooks,'” the DOJ statement reads. “Bitzlato failed to implement safeguards required by US law – safeguards that allow authorities to detect and investigate financial crimes.”
In the live stream, officials warned that criminal actors, regardless of their location or whereabouts, must answer to US law enforcement. “Whether you violate our laws from China or Europe or abuse the financial system from tropical islands-you can expect to answer for crimes in the United States,” claims the DOJ, in potential reference to FTX’s embattled Bahamas hub.
Indeed, the announcement about Bitzlato comes at a time of increased scrutiny from law enforcement and regulators. Gemini and Genesis have both been charged by the SEC just in the previous week, along with FTX and all the charges against those involved.
DOJ claims that Bitzlato facilitated more than $700 million in transactions involving illegal funds from 2018-2022, but during the live broadcast, Bitzlatos’ tagged wallet only have $11,000, compared to a peak of $6 million. Even at its peak, the volume of money involved in this event was small compared to the recent collapse of Three Arrows Capital and other related entities, which many considered a scam. This volume of deviations can cause frustration for those who want to apply proper laws to the industry.