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Crime United States

Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting (justice.gov) 31

Posted by msmash from the moving-forward dept.
Department of Justice: A complaint was unsealed this morning in federal court in Brooklyn charging Anatoly Legkodymov, a Russian national and senior executive of Bitzlato Ltd. (Bitzlato), a Hong Kong-registered cryptocurrency exchange, with conducting a money transmitting business that transported and transmitted illicit funds and that failed to meet U.S. regulatory safeguards, including anti-money laundering requirements. Legkodymov was arrested last night in Miami and is scheduled to be arraigned this afternoon in the U.S. District Court for the Southern District of Florida. French authorities and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) are taking concurrent enforcement actions.

According to court documents, Legkodymov is a senior executive and the majority shareholder of Bitzlato Ltd. (Bitzlato), a Hong Kong-registered cryptocurrency exchange that operates globally. Bitzlato has marketed itself as requiring minimal identification from its users, specifying that "neither selfies nor passports [are] required." On occasions when Bitzlato did direct users to submit identifying information, it repeatedly allowed them to provide information belonging to "straw man" registrants. As a result of these deficient know-your-customer (KYC) procedures, Bitzlato allegedly became a haven for criminal proceeds and funds intended for use in criminal activity. Bitzlato's largest counterparty in cryptocurrency transactions was Hydra Market, 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. Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, either directly or through intermediaries, until Hydra Market was shuttered by U.S. and German law enforcement in April 2022. Bitzlato also received more than $15 million in ransomware proceeds.
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Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting More

Founder and Majority Owner of Bitzlato, a Cryptocurrency Exchange, Charged with Unlicensed Money Transmitting

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  • If anyone is wondering why (Score:5, Interesting)

    by rsilvergun ( 571051 ) on Wednesday January 18, 2023 @12:29PM (#63220066)
    The authorities are going after these small fry instead of the big fish it's because they're building up legal precedence that allows them to regulate. Because it's a new market if they went after big guys like Binance they would have the lawyers needed to fool a jury or even a judge into thinking that these aren't securities and therefore can't be regulated as such.

    These smaller actions will establish the case law needed to go after the big guys in the near future.

    • It's a sound legal strategy.

      Do you think they're not securities and shouldn't be regulated as such?

      • While I think they are essentially securities and should be regulated as such, it sounds a bit ex-post-facto to turn around and punish someone for not obeying regulations that had not been determined to apply. What a company does while Congress and the SEC are mulling over how to view their product should not be subject to retroactive punishment if it is decided that regulations do apply.

    • Also the Small Fry are not as good at hiding there illegal actions. A bribe from a big company compared to a small company could is the difference between a financial error in the books, vs easy to spot issue with their finance reporting. Or the fact they can afford to to operate in different states and countries, with a set of laws which may be in conflict with each other, and just to show the illegal activity happens only in the country where it was legal, can create more complexity.

      There are also cases

    • Re: (Score:3, Informative)

      by backslashdot ( 95548 )

      Uh no, they are going after the small fry to make it look like they are taking action. They can't go after the big guys with fat lawyers and layers of misdirection, not unless the big guys get late on payments. Think about it, what would you do? Waste time chasing a whale like you're Moby Dick, or catch some small fries and return home with a catch? Why do you think many crimes unsolved unless they receive media attention? It's all about wins and public perception. Why do you think DHS catches the illegal i

      • when CITI group got their asses handed to them? Yeah, they got a slap on the wrist, but it was also made crystal clear the next time wouldn't be a slap.

        It takes time for law enforcement to adapt to stuff like this. Crypto companies don't have nearly enough money to bribe enough people to get the heat off (like Uber did with labor law) and even if they did the 1% are prone to falling for their scams so they're going to want regulations to protect themselves.

        Crypto isn't going to survive because the r

        • Yeah, they got a slap on the wrist, but it was also made crystal clear the next time wouldn't be a slap.

          Yeah I am sure Citi executives are shivering in their boots fearing the reception of a sternly worded letter.

      • The the big guys really "big"? Most of their value is not realized income so is difficult to spend.

    • I always find it interesting that people assume when a small player is prosecuted that they are doing it instead of the big guys. The small ones tend to be easier and faster but it is not usually done INSTEAD OF the big guys, it is done while they arre still sorting through the hugely complex mess of the big guys. It is not like there is just a couple guys in a basement that say "look there are these 50 criminal orgs, which 1 will we go after"

  • That sounds like a stupid BS law. Fuck governments for putting a law against transmitting money, politicians should be charged. It's criminal, don't you get how stupid that is? Call it something else, tax evasion .. money laundering .. eating a dick .. etc.

    • Transmitting money beyond certain limits has been a crime for a long long time. This is nothing new, its just enforcing existing laws to cover crypto assets. Ironically Money transfers were the only thing crypto was good for, because again these laws were not being enforced. Welp. Good by crypto.
      • But it's more than the rules weren't being enforced, it's that they had not yet been determined to apply. You can't turn around and tell someone that you've decided they have to follow some rule and then punish them retroactively for breaking a rule they weren't required to follow at the time.

        Of course, I don't know the specific timeline here, but ex-post-facto punishments are Constitutionally prohibited.

        • Nope. The law has been on the books. Selective enforcement is not against the law and is a primary way in which minorities continue to be discriminated against. At every level of law enforcement there are decisions on which crimes to investigate and ultimately prosecute, with the understanding that they can't prosecute all crime. These laws are written to be inclusive of any asset, not just currency. You could be arrested for money laundering by transferring lima beans internationally, it doesn't matter wh
  • It's a little hilarious that all the laws about money laundering etc. apply, and yet for taxation purposes, it's not money.

    Shouldn't governments get their story straight?
    • I'm not sure if you've ever been involved in organized crime, but they are shockingly not dumb. Money laundering can be done with any asset that is convertible to money and has been. This does not make the asset magically currency. For taxation purposes, you must pay in the currency and type they decide and surprisingly each government decides what currency that is. So you can't pay the US government directly in pesos or euros, but USD in a method of their choosing. When you think you've caught the governm
      • Specifically, they are charged with unlicensed MONEY transmitting, for transmitting cryptocurrency tokens.
        So while your argument about generalized money laundering being possible with any asset is true, it doesn't apply to the particular charges used here. Some jurisdiction is charging them specifically with transmitting MONEY across borders, not with transmitting WIDGETs or running shoes which can later be converted to money. It is the use of this particular law which is inconsistent with government classi

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