DOJ drops "international net" on darknet market in coordinated effort
The founder of Bitzlato, a Hong Kong-registered crypto exchange that has allegedly processed more than $700 million worth of illicit funds, was arrested in Miami Tuesday night, part of a sweeping, international effort to crack down on darknet markets.
Driving the news: The Department of Justice during a press conference on Wednesday announced charges against Anatoly Legkodymov, a Russian national. French authorities and the U.S. Treasury department's Financial Crimes Enforcement Network (FinCEN) are taking concurrent enforcement action.
Why it matters: U.S. investigators and regulators have been cracking down on crypto, but the latest action from the DOJ shows how authorities across jurisdictions are working together to corner bad actors and enforce U.S. sanctions.
- Darknet marketplaces facilitate the buying and selling of illegal drugs, stolen financial information, identification documents and mixing services.
What they're saying: Criminals thinking they could hide behind crypto — "this prosecution should put that illusion to rest," Breon Peace, U.S. attorney for the Eastern District of New York, said in a press conference Wednesday.
Details: Legkodymov, 40, who resides in Shenzen, People's Republic of China, is a senior executive and majority shareholder of Bitzlato.
- His arrest is the culmination of more than a year of investigations.
Zoom in: A complaint unsealed Wednesday morning alleges Legkodymov knowingly facilitated illicit activity.
- The founder allegedly used Bitzlato's internal chat to write to a colleague that the platform's users were "known to be crooks," according to press statement by the DOJ.
- Legkodymov's arrest is related to now-shuttered darknet marketplace Hydra Market, Bitzlato's largest counterparty in crypto transactions, according to the DOJ.
Flashback: U.S. and German authorities in April shuttered Hydra and the DOJ seized funds from a Russian oligarch.
The other side: The industry has been bracing for the torrent of enforcement action to come as implied by growth of the Securities and Exchange Commission unit focused on crypto assets announced in May.
- Meanwhile, the SEC has been seeing more assistance from the DOJ, the FBI and the U.S. Attorney's Offices since 2017, according to data compiled by Cornerstone Research.
The big picture: The investigation is "ongoing" and more charges could be filed at a later date, Peace said.