US DOJ Takes Down Crypto Exchange Bitzlato, Co-Founder Arrested

• Bitzlato was a low profile Hong Kong crypto exchange with strong ties to Russia.
• The exchange was co-founded in 2016 by recently arrested Russian national Anatoly Legkodymov, who owned 73.4% of Bitzlato.
• The US Department of Justice took enforcement action against Bitzlato on Jan. 18.

The crypto exchange Bitzlato was a small but influential player in the cryptocurrency market, having strong ties to Russia. It was co-founded by Anatoly Legkodymov in 2016, who held 73.4% ownership of the company. The exchange itself was located in the Federation Tower skyscraper in Moscow, where it accepted trades of $100,000 or more.

Anatoly Legkodymov had a long and established history in the crypto industry, having posted on forums such as BitcoinTalk as early as 2011. In 2017, he described the process of setting up Bitzlato and the security protocols employed to protect users from any potential attacks. He and his team made sure to analyze a variety of potential failure scenarios in order to operate the exchange in a highly secure manner.

Despite Legkodymov’s efforts to keep a low profile, Bitzlato was still noticed by Chainalysis in a report from February 2020. It was stated that the exchange had received $206 million from darknet markets, $224.5 million from scams, and $9 million from ransomware.

The US Department of Justice (DOJ) took enforcement action against Bitzlato on January 18th, 2021. This was seen as anticlimactic by many in the crypto community, as the exchange had kept a relatively low profile until then. Legkodymov was arrested by US officials on the same day and is now facing money laundering and other charges.

Bitzlato’s takedown was seen as an indication of the US government’s increasing focus on crypto related activities. It is yet to be seen how this will affect the crypto industry moving forward, but one thing is for sure – exchanges need to be more careful when it comes to anti-money laundering and other regulatory requirements.