Bitzlato also received more than $15 million in ransomware proceeds (Photo: Unsplash)

US authorities have arrested cryptocurrency exchange co-founder Bitzlato for managing $700 million in illicit funds.

On Tuesday, Anatoly Legkodymov, a Russian national living in China, was arrested in Miami on charges of operating the exchange as an unlicensed money exchange company that “claimed to target ‘known outlaws’.”

Prosecutors said Bitzlato exchanged more than $700 million in cryptocurrency with Hydra Market, an illegal online marketplace selling narcotics, stolen financial information, fraudulent identification documents and money laundering services that US and German law enforcement shut down in April 2022.

“Whether you break our laws from China or Europe, or abuse our financial system from a tropical island, you could be tried for your crimes in a courtroom in the United States,” Assistant Attorney General Lisa Monaco told reporters during a press conference. at the Ministry of Justice.

Bitzlato also received more than $15 million in ransomware proceeds, according to prosecutors.

Officials said Bitzlato has repeatedly facilitated transactions for Russia-linked ransomware groups (Photo: Anna Moneymaker/Getty Images)

“Though it’s a small name, it carries a lot of weight,” said Chen Arad, chief operating officer at Solidus Labs, a crypto market watchdog company.

“Small players are not safe and carry as much risk as any other big name platform,” he said.

Legkodymov, 40, co-founded the cryptocurrency exchange and helped run the company from the Chinese city of Shenzhen.

Messages left by Reuters on Bitzlato’s automated Telegram chat service were answered with the phrase “Oops, sorry.”

Bitzlato has processed $4.58 billion in cryptocurrency transactions since May 3, 2018, prosecutors said, adding a significant portion as “proceeds of crime.”

It also violated rules requiring thorough customer screening and failed to meet anti-money laundering requirements, authorities said.

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Bitzlato exchanged more than $700 million in cryptocurrency with Hydra Market, an illegal online marketplace (Photo: Getty Images)

Bitzlato reportedly served US customers and processed transactions with US-based exchanges and was operated in the United States by Legkodymov for at least some time.

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) said it banned certain money transfers involving Bitzlato after identifying it as a “primary money laundering concern” related to illicit Russian financing.

Officials said Bitzlato has repeatedly facilitated transactions for Russia-affiliated ransomware groups, including the gang behind Conti, believed to have ties to the Russian government and Russian-affiliated dark web markets.

On Wednesday, Bitzlato’s website was replaced by a message that the service had been seized by French authorities “as part of a coordinated international law enforcement effort.”