US authorities shuttered the Hong Kong-based crypto exchange's services, alleging that it laundered millions tied to illicit Russian finances.
Getty Images
US authorities announced the arrest of the founder and majority shareholder of a little-known crypto exchange called Bitzlato on Wednesday for allegedly processing millions in illicit funds.
Authorities shuttered the platform's services as well, calling the move "a significant blow to the crypto crime ecosystem," Deputy Attorney General Lisa O. Monaco said in a press conference.
The Justice Department and Treasury Department allege that the Hong Kong-registered platform laundered more than $700 million, some of which were tied to illicit Russian finances. Authorities say that the company's founder Anatoly Legkodymov and other execs were aware of the high volume of criminal funds.
"Overnight, the Department worked with key partners here and abroad to disrupt Bitzlato, the China-based money laundering engine that fueled a high-tech axis of cryptocrime," Monaco added. "Today's actions send the clear message: whether you break our laws from China or Europe – or abuse our financial system from a tropical island – you can expect to answer for your crimes inside a United States courtroom."
The Financial Crimes Enforcement Network (FinCEN) deemed Bitzlato a "primary money laundering concern" after authorities saw that almost 50 percent of Bitzlato's recorded transactions involved illicit Russian finances or other suspicious sources, according to Deputy Treasury Secretary Wally Adeyemo said.
Adeyemo added: "Bitzlato was particularly active in facilitating illicit activity, but it is ultimately part of a larger, larger ecosystem of cyber criminals that are allowed to operate with impunity within Russia."
Bitzlato is a small crypto exchange, which hasn't received mainstream attention until Legkodymov's arrest. The website offered users peer-to-peer transaction services that Justice Department officials allege were tied to criminals buying and selling illicit goods.
A slew of investigations have been conducted into crypto firms including Sam Bankman-Fried's FTX, crypto brokerage Genesis, and exchange Gemini over the past year.
"While FinCEN's action against Bitzlato may not appear to accomplish much more than DOJ's action in shutting down the website, the FinCEN order prohibits transacting with all successor entities of Bitzlato as well," Braddock Stevenson, Of Counsel at Paul Hastings and previous Deputy of FinCEN's Enforcement Division, told Insider.
Braddock added: "This would address difficulties in previous investigations in which the entity moved the crypto assets to another entity and reopened its doors."
