Authorities take down crypto exchange Bitzlato, alleging it was a cybercrime ‘safe haven’ – CNET – ApparelGeek

Federal authorities on Wednesday arrested the founder of Bitzlato, a cryptocurrency exchange they say was a financial haven for Russian-aligned criminals engaged in ransomware and illicit drug sales on the dark web.

Anatoly Legkodymov, a 40-year-old Russian national residing in Shenzhen, China, was arrested in Miami on Wednesday, US prosecutors said. Prosecutors alleged that under Legkodymov’s watch, Bitzlato processed approximately $4.58 billion in cryptocurrency transactions and that a “substantial portion of those transactions constitute the proceeds of crime, as well as funds intended to be used in criminal transactions”. Bitzlato is known as a Virtual Asset Service Provider (VASP).

Ransomware and cybercrime bazaars – no questions asked

The U.S. Department of Justice has taken action in conjunction with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), which enforces laws prohibiting domestic and international money laundering, terrorist financing, and other crimes financial. A centerpiece of FinCEN’s agenda is the enforcement of sanctions against Russian entities, including Russian-affiliated ransomware groups.

Ransomware groups that Bitzlato allegedly worked with include (1) the Russian-speaking DarkSide, which was responsible for the 2021 Colonial Pipeline cyberattack that caused gas shortages in the southeastern United States; (2) Phobos, whose ransomware attacked hospitals; and (3) Conti, who pledged allegiance to Russia after its invasion of Ukraine.

“Bitzlato plays a critical role in facilitating transactions for the Conti ransomware group and other global ransomware players, including players that operate outside of Russia,” FinCEN Acting Director Himamauli Das wrote. “As a result, FinCEN believes that Bitzlato serves as a VASP that ultimately enables the profitability of ransomware attacks and, at least in Conti’s case, advances the political and economic destabilization interests of the Russian government.”

Besides these groups, Das said, Bitzlato has also worked with sanctioned cryptocurrency exchange Chatex and Hydra, a massive cybercrime marketplace that has facilitated the sale of more than $5 billion worth of illicit goods and services for whatever. 17 million customers before it closed last year.

“A substantial portion of the cryptocurrency Hydra received was sent directly from Bitzlato wallets,” FBI Special Agent Ryan Rogers wrote in an affidavit. “Hydra was Bitzlato’s largest counterparty for cryptocurrency transactions, and Bitzlato was Hydra’s second largest counterparty. Hydra buyers routinely funded their illicit purchases from cryptocurrency accounts hosted at Bitzlato, and in turn, sellers of illicit goods and services on Hydra’s site routinely sent their illicit proceeds to accounts at Bitzlato.

The affidavit alleged that Legkodymov was personally aware that his exchange was dealing with funds from illicit activities. The court document cited Bitzlato’s website advertising “simple registration without KYC,” short for a requirement called “know your customer,” which requires financial institutions to know the identity of their customers.

Other evidence included part of a chat chat seized in 2019 in which Legkodymov allegedly told a colleague: “All traders are known to be scammers. Trading on “drops”, etc. Do you realize that they (I think 90%) don’t all trade on their [identity] maps.” The colleague would have answered: “Yes”.

Prosecutors also alleged that Bitzlato did significant business with US-based customers and that service representatives repeatedly informed users that they could transfer funds from US-based financial institutions. Legkodymov allegedly administered the company from Miami last year and this year and personally received reports that his website was receiving a large number of visits from US-based IP addresses. Last August, for example, the founder reportedly received an email reporting 264 million visits from these IP addresses, making the United States the fourth most common source of Internet traffic for Bitzlato.

Alongside action taken in the United States on Wednesday, French authorities worked with Europol and partners in Spain, Portugal and Cyprus to dismantle Bitzlato’s domain name and digital infrastructure and to seize Bitzlato’s cryptocurrency. .

Legkodymov is accused of running an unlicensed money transfer business. If found guilty, he faces a maximum sentence of five years in prison. The Russian national was due to make his first court appearance on Wednesday.

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Authorities take down crypto exchange Bitzlato, alleging it was a cybercrime ‘safe haven’ – CNET – ApparelGeek

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