The United States Treasury Department has designated Bitzlato, a Hong Kong-based cryptocurrency exchange, as a primary money-laundering concern and charged its founder for allegedly facilitating money laundering for criminals, according to a report from WSJ.
According to the U.S. Justice Department, Bitzlato allegedly exchanged more than $700 million in cryptocurrency with Hydra Market, a darknet marketplace that was the largest in the world before it was shut down in April 2022.
Bitzlato also received more than $15 million of ransomware proceeds. The founder and majority owner of Bitzlato, Anatoly Legkodymov, was arrested in Miami and faces a charge of operating an illegal money-transmitting business, which carries a prison sentence of up to five years if convicted.
Concurrent with the U.S. action, French authorities have also taken enforcement steps, including closing Bitzlato's digital infrastructure and seizing its cryptocurrency. U.S. prosecutors stated that Bitzlato lacked effective know-your-customer procedures to check users' identity as required by U.S. anti-money-laundering laws and did substantial business with U.S.-based customers despite claiming not to accept users from the U.S.
The significant growth of crypto over the years has been marked by a sharp rise in money laundering activities. Overall, cybercriminals have laundered over $33 billion worth of cryptocurrency since 2017, with most of the total overtime moving to centralized exchanges.