The United States Department of Justice (DOJ) has charged Anatoly Legkodymov, the Founder of China-based cryptocurrency exchange, Bitzlato, with processing over $700 million of illicit funds in cryptocurrency for darknet criminals between 2018 and 2022.

The DOJ disclosed on Wednesday that Legkodymov, a 40-year-old Russian national who resided in China, was arrested on Tuesday night in Miami by agents of the Federal Bureau of Investigation. Additionally, the federal executive department accused Legkodymov, who is the majority owner of the Hong Kong-registered crypto exchange, of operating an unlicensed money-transmitting business in the country.

The Justice Department noted that the founder ran the exchange from Miami in 2022 and 2023, adding that the platform “did substantial business" with customers in the United States. Moreover, the crypto exchange generated high internet traffic from the United States, gaining as much as over 250 million visits in July last year.

The department noted that Legkodymov was scheduled to be arraigned before a Florida court on Wednesday and could spend up to five years in prison if found guilty.

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DOJ Accuses Bitzlato of Working with Hydra Market Criminals

According to the DOJ, Bitzlato operated with a weak know-your-customer (KYC Know Your Customer (KYC) Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Read this Term) procedures and marketed its platform as a “no-questions-asked” crypto exchange to criminals, generating “hundreds of millions of dollars’ worth of deposits as a result.”

“Bitzlato’s largest counterparty in cryptocurrency transactions was Hydra Market (Hydra), an anonymous, illicit online marketplace for narcotics, stolen financial information, fraudulent identification documents, and money laundering services that was the largest and longest running darknet market in the world,” the DOJ said.

Furthermore, the department noted that Bitzlato processed over $700 million in cryptocurrency for Hydra users until the Russia-based darknet marketplace’s operation was shut down in April last 2022. The crypto exchange got over $15 million in ransomware proceeds during the period, the DOJ said.

Meanwhile, the federal executive department pointed out that the US Department of the Treasury’s Financial Crimes Enforcement Network is taking simultaneous enforcement actions on the case. In addition, the DOJ said French authorities are working on the case in partnership with the European Union Agency for Law Enforcement Cooperation and partners from Portugal, Spain and Cyprus. The authorities have already "dismantled Bitzlato’s digital infrastructure, seized [its] cryptocurrency, and took other enforcement actions."