Justice News

Deputy Attorney General Lisa O. Monaco Delivers Remarks on Founder and Majority Owner of Cryptocurrency Exchange Charged with Processing Illicit Funds
Washington, DC
United States
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Wednesday, January 18, 2023

Remarks as Prepared for Delivery

Good afternoon.  Thank you all for being here.

Today, the Department of Justice dealt a significant blow to the cryptocrime ecosystem. 

Justice Department agents and prosecutors, working in partnership with the Treasury Department and French law enforcement authorities, have disrupted Bitzlato, a China-based cryptocurrency exchange notorious for laundering criminal proceeds from the darknet.  And last night, agents of the FBI arrested Bitzlato’s founder, Anatoly Legkodymov.

I am joined today by the Assistant Attorney General for the Criminal Division, Kenneth Polite, the United States Attorney for the Eastern District of New York, Breon Peace, FBI Associate Deputy Director Brian Turner, and the Deputy Secretary of the Treasury, Wally Adeyemo.

Today’s law enforcement actions serve notice to all those who seek to exploit the cryptocurrency ecosystem.

First, the Department of Justice and our partners will use all tools at our disposal to attack the use of the darknet and cryptocurrencies to promote criminal activity.

And second, we are taking steps to address a crisis of confidence in the cryptocurrency markets, where criminals and fraudsters seek to operate outside the laws and rules that protect our financial system.

Malicious actors working from perceived sanctuaries abroad are exploiting crypto markets and flouting the laws and regulations that guard the integrity of our financial system and, along with it, the earnings and investments of hard-working Americans.

It’s no secret that cybercriminals rely on those bad actors to launder their criminal proceeds from cryptocurrency into fiat currency.

Today, thanks to a coordinated international effort, Justice Department prosecutors and agents have disrupted a busy corner of this criminal ecosystem.

Last night in Miami, FBI agents arrested Legkodymov, a Russian national and founder and majority owner of Bitzlato, a Hong Kong-registered cryptocurrency exchange.

The charges allege that Legkodymov operated Bitzlato as a high-tech financial hub that, in his own words, catered to “known crooks.”

Bitzlato failed to implement safeguards required by U.S. law – safeguards that enable authorities to detect and investigate financial crimes.

Instead, Bitzlato facilitated the transmission of hundreds of millions of dollars in illicit funds fueling darknet marketplaces and laundering the proceeds of ransomware attacks.

For example, as alleged, Bitzlato was a crucial financial resource for the notorious Hydra darknet market, the disruption of which I announced from this podium last April – that time with our German partners.

Hydra was the world’s longest running and largest darknet marketplace responsible for 80% of the world’s darknet transactions.

Hydra and Bitzlato formed a high-tech axis of cryptocrime: Hydra buyers funded illicit purchases — of illegal drugs, stolen financial information, and hacking services — from crypto accounts hosted at Bitzlato, and sellers of these illegal goods and services at Hydra sent criminal proceeds to accounts at Bitzlato – all to the tune of over $700 million in direct and indirect transfers between 2018 and 2022.

I have said before that we would go after the entire ecosystem that allows cyber criminals and illicit actors to flourish.

Today’s action against Bitzlato – as with the disruption of Hydra – reflects another critical step in executing that strategy.

At the time of Legkodymov’s arrest and continuing into today, the Department’s international and domestic partners engaged in a coordinated campaign of disruption, which include enforcement actions in multiple European countries, the seizure of Bitzlato’s servers and cryptocurrency, and regulatory enforcement actions here in the United States.

Today’s actions show not only the broad international scope of the defendant’s alleged crimes—but also the international net that law enforcement used to stop him and his business partners.

Today marks the elimination of the Hydra-Bitzlato cryptocrime axis.

We have also busted the business model of the cybercriminals that Bitzlato supported.

Coordinated operations like this against Bitzlato—using all tools and designed for maximum impact—are the linchpins of international success against cybercrime.

Our actions in this case also mark the most significant enforcement effort by the National Cryptocurrency Enforcement Team against a cryptocurrency platform.

To all those exploiting the cryptocurrency ecosystem to enable cryptocrime, we have a clear message: we will not only target hackers, fraudsters, and criminals that mask their profits in cryptocurrency; we are also unleashing the full force of the Department of Justice on the illicit actors and entities that support cybercriminals – like Legkodymov and Bitzlato.

Operating offshore or moving your servers out of the continental U.S. will not shield you.

Whether you break our laws from China or Europe or abuse our financial system from a tropical island—you can expect to answer for your crimes inside a United States courtroom.

I want to thank the agents, analysts, and prosecutors who worked diligently to investigate this case.

And finally, a tremendous thanks to our foreign partners and the Department of the Treasury for their collaboration in this and many other cryptocurrency and cybercrime cases.

I’ll now turn the podium over to Assistant Attorney General Polite of the Criminal Division.

Updated January 18, 2023