Bitzlato co-founder to plead guilty to $700 million money laundering scheme

Anatoly Legkodymov, co-founder of the seized crypto exchange Bitzlato, is expected to plead guilty in a U.S. court on Wednesday, after facing charges of allegedly processing millions of dollars in money laundering schemes. If convicted, Legkodymov could face a maximum penalty of five years in prison.

According to a Reuters report, the Hong Kong-based Bitzlato was accused of facilitating over $700 million in illicit funds over four years on Hydra Market, a darknet marketplace that was shut down by U.S. and German law enforcement in April 2022. In addition, the exchange reportedly received over $15 million in proceeds from ransomware activities.

Legkodymov was later arrested in Miami in January 2023 and charged with conducting an unlicensed money-transmitting business. Following his arrest, French authorities took down Bitzlato’s digital infrastructure, confiscated its cryptocurrency holdings, and carried out other enforcement measures.

Federal court records in Brooklyn indicated that Anatoly Legkodymov, Bitzlato’s majority owner and co-founder, was scheduled to appear before U.S. District Judge Eric Vitaliano at 2:30 p.m. EST (1930 GMT) for a “criminal cause for pleading,” typically signaling an intention to plead guilty, Reuters reported.

Legkodymov’s lawyer had not responded to a Reuters’ request for comment at the time of reporting.

U.S. officials allege that Legkodymov, 41, ran Bitzlato from the Chinese city of Shenzhen, operating it as an unlicensed money exchange business. They claim he exchanged hundreds of millions of dollars in cryptocurrency with Hydra Market, described as a marketplace for drugs, stolen financial information, and money laundering services.

In April, Russia’s embassy in Washington called for Legkodymov’s release after Ambassador Anatoly Antonov visited him in jail. This request followed Russia’s denial of a U.S. embassy request to visit detained Wall Street Journal reporter Evan Gershkovich. The U.S. State Department confirmed on Tuesday that Russia had recently rejected a proposal for the release of Gershkovich and Paul Whelan, two Americans considered by the U.S. to be wrongfully detained in Russia.

Meanwhile, Bitzlato’s website has been replaced with a notice stating that the service has been seized by French authorities as part of an international law enforcement action.

The expected guilty plea adds to the recent victories in U.S. law enforcement’s efforts to combat fraud and illicit finance in cryptocurrency markets. It comes on the heels of FTX founder Sam Bankman-Fried’s conviction for stealing billions of dollars from customers and Binance’s $4.3 billion settlement, with CEO Changpeng Zhao pleading guilty to breaking U.S. anti-money laundering laws. Binance was identified as one of Bitzlato’s top counterparties by U.S. authorities.