8. February 2023

• Bitzlato was a Hong Kong crypto exchange with strong ties to Russia that was taken down by the US Department of Justice on January 18th.
• The exchange was co-founded by recently arrested Russian national Anatoly Legkodymov, who owned 73.4% of Bitzlato.
• Chainalysis reported that the exchange had received $439.5 million from darknet markets, scams, and other illegal activities.

On January 18th, the United States Department of Justice (DOJ) took action against Bitzlato, a Hong Kong-based crypto exchange with strong ties to Russia. The exchange was co-founded by recently arrested Russian national Anatoly Legkodymov, who owned 73.4% of Bitzlato.

Bitzlato had a long and checkered history in the crypto industry, with Legkodymov’s earliest post on the BitcoinTalk forum dating back to 2011. In 2017, Legkodymov described the process of opening the exchange on an online forum, claiming that his team had analyzed numerous failure scenarios and found a solution for a highly secure exchange.

Despite its low profile, Bitzlato did not go unnoticed before the DOJ action. Last February, Chainalysis reported that the exchange had received $206 million from darknet markets, $224.5 million from scams, and $9 million from other illegal activities, amounting to a total of $439.5 million.

The DOJ’s action against Bitzlato was seen as anticlimactic by many in the crypto community, as the exchange was already known to be engaging in illicit activities. However, the enforcement action serves as a reminder of the need for greater oversight and regulation of the crypto industry. It also highlights the importance of conducting due diligence when selecting an exchange, as illicit activities can occur even with those that have a low profile.