Prosecutors File Sentencing Memo in Case of Crypto Exchange CEO Implicated in Money Laundering

News | June 11, 2024 By:

On Monday, June 3, 2024, the US government filed a sentencing memorandum in the case of Anatoly Legkodymov, who pleaded guilty to operating an unlicensed money-transmitting business.

Legkodymov, a Russian national, was the founder and CEO of Bitzlato, a cryptocurrency exchange that facilitated transactions between buyers and sellers of digital currencies. In its filing, the prosecution argued that Bitzlato played a key role in enabling criminal activity by allowing anonymous transactions and not properly vetting users.

The memorandum outlined evidence that Bitzlato was widely used for illicit purposes. It was the top exchange linked to Hydra Market, once the largest darknet marketplace for drugs, hacking tools, and counterfeit documents. Bitzlato users directly traded over $290 million in cryptocurrency with Hydra, and over $700 million when indirect transactions were included. The exchange was also used to launder over $1.2 million paid to ransomware hackers targeting US businesses.

Prosecutors said Legkodymov was aware from the start in 2016 that Bitzlato attracted many criminal clients. In chats from 2018, he and an executive jokingly discussed how drug dealers were important users. In 2019, an employee warned Legkodymov that most clients were “addicts” buying drugs on Hydra. Blockchain analytics also found 20% of Bitzlato activity in early 2022 was linked to Hydra, which Legkodymov acknowledged.

While claiming to want reforms, Legkodymov never implemented proper know-your-customer and anti-money laundering checks, the filing asserted. Bitzlato allowed “drop accounts” registered under false identities and facilitated straw transactions. Legkodymov continued operating even after being told the exchange faced legal risks. He only pleaded guilty in December 2023 after his January 2023 arrest in Miami.

The memorandum calculated sentencing guidelines of 60 months, the statutory maximum. Prosecutors argued 48–60 months was appropriate. Despite the defense dispute over calculation methods, prosecutors maintained any plausible figures would still result in guidelines of 60 months.

Please contact BlockTribune for access to a copy of this filing.