The U.S. Seizes Russian Cryptocurrency Exchange Bitzlato and Charges Bitzlato Founder Anatoly Legkodymov.
The United States just announced that it seized the Russian cryptocurrency exchange Bitzlato, which was utilised for dark web transactions. Its founder Anatoly Legkodymov was detained last night in Miami.
To announce the seizure of the Russian cryptocurrency exchange Bitzlato, which was used for dark web transactions, representatives from the FBI, the Office of Foreign Asset Control (OFAC), the Financial Crimes Enforcement Network (FinCEN), and the Eastern District of New York joined Deputy Attorney General Lisa Monaco on stage. They also announced that Anatoly Legkodymov, its founder, was taken into custody Friday night in Miami.
This multi agencies operation counted on FinCEN to gather data from financial institutions and keeps an eye out for questionable activities, while OFAC manages the U.S. sanctions programme.
FinCEN and Bitzlato
Today, the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury published an order designating the virtual currency exchange Bitzlato Limited (Bitzlato) as a “primary money laundering concern” concerning illicit Russian finance.
This is the first order made per section 9714(a) of the Combating Russian Money Laundering Act, as amended, and it emphasises how seriously business operations that support and facilitate Russian illicit finance pose a threat to American national security as well as the integrity of the country’s financial system. The order forbids any covered financial institution from transmitting certain amounts of money involving Bitzlato.
According to the ruling, FinCEN assessed that Bitzlato is a foreign financial institution primarily concerned with money laundering in relation to illegal Russian finance. By facilitating illegal transactions for ransomware perpetrators operating in Russia, such as Conti, a ransomware-as-a-service business with connections to the Russian government, Bitzlato plays a crucial part in the laundering of convertible virtual currency (CVC).
“Bitzlato poses a global threat by allowing Russian cybercriminals and ransomware actors to launder the proceeds of their theft,” said FinCEN Acting Director Himamauli Das. “As criminals and criminal facilitators evolve, so too does our ability to disrupt these networks. We will continue to leverage the full range of our authorities to prohibit these institutions from gaining access to the U.S. financial system and using it to support Russian illicit finance.”
Bitzlato is a virtual currency exchange that offers exchange and peer-to-peer (P2P) services, as stated in the order. Through its facilitation of deposits and funds transfers by Russia-affiliated ransomware groups or affiliates, as well as transactions with Russia-linked darknet markets, Bitzlato maintains major operations in and connected to Russia and Russian criminal funding.
According to FinCEN’s investigation, these ties include but are not limited to facilitating deposits, financial transfers, and transactions between Conti and the Hydra darknet market, which is linked to Russia and has been shut down by law enforcement and U.S. sanctions. After Hydra was shut down in April 2022, Bitzlato facilitated trades for developing Russian-connected darknet markets like BlackSprut, OMG!OMG! and Mega.
During its investigation, FinCEN also discovered that Bitzlato had performed minimal action to stop and identify unauthorised use of its services. Bitzlato has advertised the absence of such rules, procedures, or internal controls while failing to establish policies and procedures to prevent money laundering and illicit funding. Bitzlato facilitates a significantly higher percentage of money laundering activity in conjunction with Russian criminal funding than other virtual currency exchanges.
Even after public actions against darknet markets, Bitzlato’s continued support of Russian-related darknet marketplaces shows its persistent involvement with illegal actors and lack of adequate safeguards. A transmittal of funds from or to Bitzlato, or from or to any account or CVC address managed by or on behalf of Bitzlato, is not permitted beginning on February 1, 2023, as stated in the ruling.
Through more transparency, today’s action seeks to strengthen U.S. national security and the integrity of the U.S. financial system. It also makes it easier to find illegal financial behaviour involving digital assets, including CVC. This move illustrates the Treasury using its tools to combat ransomware and target unlawful Russian financial activity. Cybercriminals flock to Russia, where the government frequently uses them for its nefarious ends. Bitzlato is part of a broader ecosystem of Russian cybercriminals that are permitted to operate freely in Russia, as evidenced by the bulk of ransomware attacks reported to FinCEN in the second half of 2021 that were committed by ransomware variants with ties to Russia.
Along with holding an individual accountable, this move underlines the Treasury’s position as the world leader in the fight against the misuse of digital assets. The Department of the Treasury is committed to enhancing the domestic and global financial system’s transparency, as stated in the 2022–2026 Department of the Treasury Strategic Plan. As stated in the Action Plan to Address Illicit Financing Risks of Digital Assets, this involves employing Treasury powers to hold accountable ecosystem participants engaging in or assisting illegal activity and cutting them off from the global financial system.
To Conclude
This just-announced action from the U.S. marks a new era in how U.S. agencies will face cybercrime uncovered by blockchain technologies. As stated in the Department of Justice announcement, from now on, agencies will strengthen their bonds and start working together to fight and pursue bad actors to use blockchain technologies to practice crimes.
~ By Jordano M. Z. ~
