Bitzlato Founder Sentenced to Prison for Facilitating Money Laundering

On July 18, Judge Eric Vitaliano sentenced the founder of cryptocurrency exchange Pizzalato to 18 months in prison, time he has already served, for running an unlicensed money transfer business.

Anatoly Legkodimov pleaded guilty last year to running an operation that facilitated the concealment of more than $700 million in proceeds from illegal gambling and drug transactions.

Bitzlato Founder Admits He Could Have Done More

Judge Vitaliano Recognized Legkodimov described the harsh conditions at the Brooklyn Urban Detention Center, where he was being held, saying, “It’s a terrible place, and the court takes that into account.”

It is interesting to note that FTX founder Sam Bankman-Fried also spent time at MDC before being convicted of all seven fraud charges and sentenced to 25 years in prison.

As part of the plea deal, Legkodimov agreed to waive any claim to $23 million in crypto assets seized by French authorities during a global operation that led to the closure of Pizzalato on January 23, 2023.

Prosecutors alleged that Legkodimov facilitated cryptocurrency exchanges through the Hydra Market black market on the Russian dark web, and failed to implement measures to monitor users.

Evidence included Bitzlato users repeatedly requesting assistance with transactions on Hydra Market and publicly admitting to trading under fake identities. In a May 2019 message, Legkodimov admitted to a colleague that many Bitzlato users were “known scammers.”

Reflecting on his actions, he told the court: “I now realise, as the founder of the company, that I could have done more.”

Efforts to combat cryptocurrencies have increased.

Legkodimov was arrested in Miami on January 17, 2023, as part of a coordinated international effort to shut down the Pizzalato exchange. The operation involved the United States, Spain, Portugal, Cyprus, and the European Union’s law enforcement agency Europol.

Europol reported that about 46% of the assets processed by Pizzalato, worth $1.09 billion at the time, were related to illicit activity. The majority of the suspicious transactions were linked to entities sanctioned by OFAC, while others were linked to cyber fraud, money laundering, ransomware and child abuse material, it added.

It is worth noting that the case against Legkodimov is part of a broader initiative by the US Department of Justice to combat the criminal use of cryptocurrencies and recover the proceeds of such crimes through the National Cryptocurrency Enforcement Team.

The crackdown comes amid increased scrutiny of the cryptocurrency industry, exemplified by a settlement reached last year with Binance Holdings Ltd. and CEO Changpeng Zhao (CZ). CZ pleaded guilty to anti-money laundering and U.S. sanctions violations while allowing the cryptocurrency exchange to continue operating.