US Charges Bitzlato’s Founder with Processing $700M in Crypto for Criminals

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.

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. The federal executive department also
accused Legkodymov, who is the majority owner of the Hong Kong-registered
crypto exchange, of operating an unlicensed money transmitting busienss 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. The crypto exchange also 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.

Watch the recent FMLS22 session on the future of cryptocurrencies.

According to 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 involved with maintaining a business relationship. KYC processes are also utilized by companies for the purpose of ensuring their proposed customers, agents, consultants, or distributors are anti-bribery compliant. In an age of identity theft and myriad hacking, KYC has become a major emphasis by regulators.As such, banks, insurers, export creditors and other financial institutions are increasingly demanding that customers provide detailed due diligence information. These regulations had initially been imposed only on the financial institutions, having now extended to the non-financial industry, fintech, virtual assets dealers, and many non-profit organizations.Regulators Taking No Chances with Identities Regulated brokers in the retail industry are very stringent when applying appropriate KYC verifications after financial watchdogs worldwide have become stricter in monitoring their compliance with the procedure in recent years. Not only brokers use KYC, the procedure is also widely used by banks, and any financial companies that provide insurance or credit and require appropriate due diligence. Most major jurisdictions in the financial space mandate KYC requirements as well as all regulated brokers.The vast majority of these countries have adopted KYC standards as mandatory only during the past two decades. This has helped curb illicit behavior and has become a fixture of the industry.

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 involved with maintaining a business relationship. KYC processes are also utilized by companies for the purpose of ensuring their proposed customers, agents, consultants, or distributors are anti-bribery compliant. In an age of identity theft and myriad hacking, KYC has become a major emphasis by regulators.As such, banks, insurers, export creditors and other financial institutions are increasingly demanding that customers provide detailed due diligence information. These regulations had initially been imposed only on the financial institutions, having now extended to the non-financial industry, fintech, virtual assets dealers, and many non-profit organizations.Regulators Taking No Chances with Identities Regulated brokers in the retail industry are very stringent when applying appropriate KYC verifications after financial watchdogs worldwide have become stricter in monitoring their compliance with the procedure in recent years. Not only brokers use KYC, the procedure is also widely used by banks, and any financial companies that provide insurance or credit and require appropriate due diligence. Most major jurisdictions in the financial space mandate KYC requirements as well as all regulated brokers.The vast majority of these countries have adopted KYC standards as mandatory only during the past two decades. This has helped curb illicit behavior and has become a fixture of the industry.
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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.”