Today, the Department of Justice (DOJ) announced the arrest of Russian national Anatoly Legkodymov for his role as founder and majority owner of Bitzlato, a high-risk exchange operating primarily in Russia. Concurrent with the arrest announced today, French authorities, working with Europol and partners in Spain, Portugal, and Cyprus, dismantled Bitzlato’s digital infrastructure, seized Bitzlato’s cryptocurrency, and took other enforcement actions. Additionally, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) identified Bitzlato as a primary money laundering concern over illicit Russian financing. As of February 1, 2023, this action prohibits covered financial institutions from transacting with Bitzlato and its corporate officers. The U.S. Government cited Bitzlato’s role as a money laundering destination for ransomware attackers and administrators of the notorious Hydra Market, as well as other cybercriminals, as the impetus for the takedown.
In our 2022 Crypto Crime Report released last year, Chainalysis recognized Bitzlato as one of many examples of a Russia-based cryptocurrency service that has facilitated significant amounts of money laundering on behalf of cybercriminals, including ransomware attackers, scammers, and darknet markets. At that time, we found that a large share of all funds received by Bitzlato between 2019 and 2021 came from risky or illicit sources. Additionally, we reported in July 2022 that Bitzlato is a cashout destination for Project Terricon, a pro-Russia group soliciting cryptocurrency donations in support of Russian militia groups operating in the Donbas region.
Below, we’ll examine Bitzlato’s activity from 2019 to the present in more detail, and talk about why today’s law enforcement action and FinCEN order are victories for the safety of the world financial system and the cryptocurrency industry itself.
What is Bitzlato?
With a presence in the Moscow City neighborhood of Moscow, along with several other cryptocurrency businesses Chainalysis has identified as major money laundering facilitators, Bitzlato is notable for receiving a large share of its funds from addresses associated with illicit and risky activity.
Note: “Risky” refers to funds sent from mixers, high-risk exchanges, and services based in high-risk jurisdictions.
Overall, Bitzlato has received $2.5 billion in cryptocurrency during the time period shown above. Of that total, 26% came from illicit sources, and 27% came from risky sources. Below, we dig deeper into that 26% coming from addresses associated with confirmed illicit activity.
As we see above, the biggest sources of illicit cryptocurrency sent to Bitzlato were entities associated with crypto scams, darknet markets, and sanctioned entities, such as the high-risk exchange Garantex, which was designated by OFAC in early 2022.
We can see from the above that some of the most notorious names in crypto crime relied heavily on Bitzlato for money laundering services, including sanctioned darknet market Hydra, notorious scam Finiko, and ransomware strains like Phobos, AstroLocker, and Dharma.
As we mentioned above, Bitzlato has also been a destination and source of funds for organizations soliciting cryptocurrency donations in support of pro-Russian militia group efforts in Ukraine. The Reactor graph below shows examples of this activity.
Overall, Bitzlato has received over $32,000 worth of cryptocurrency from pro-Russia paramilitary groups. While that dollar figure may sound small in comparison to the sums Bitzlato received from other types of cybercriminals, it’s important to remember that small amounts of money can go a long way toward the purchase of weapons in regions like the Donbas, making these donations especially dangerous both to the Ukrainian people and efforts to foster peace in the region.
Follow the money, disrupt the launderers
We’ve often discussed how important money laundering service providers are to the wider crypto crime ecosystem. If cybercriminals can’t reliably convert the cryptocurrency generated by their activities into cash, the incentives to commit those crimes plummet. Today’s action against Bitzlato represents another disruption of a key money laundering service that was crucial to cybercriminals associated with ransomware, crypto scams, and darknet market sales, as well as the financing of illegal paramilitary activity in Ukraine. Additionally, today’s special measure gives compliance teams across the cryptocurrency industry valuable information that can help them keep their platforms safe from illicit activity. We applaud the FBI, DOJ, FinCEN, and the many international partner agencies involved in today’s actions, and look forward to providing more insights on these matters in the future.
본 자료는 정보 제공만을 목적으로 하며, 법률, 세무, 금융 또는 투자 자문을 제공하기 위한 것이 아닙니다. 수신자는 이러한 유형의 결정을 내리기 전에 본인의 자문가와 상담해야 합니다. 체이널리시스 는 수신자가 본 자료를 이용함에 따라 내린 어떠한 결정이나 기타 행위 또는 부작위에 대해서도 어떠한 책임도 지지 않습니다.
체이널리시스 본 보고서에 포함된 정보의 정확성, 완전성, 시의성, 적합성 또는 유효성을 보장하거나 보증하지 않으며, 해당 자료의 어느 부분에서든 발생하는 오류, 누락 또는 기타 부정확성으로 인해 제기되는 어떠한 청구에 대해서도 책임을 지지 않습니다.
