US Justice Dept. Arrests Crypto Exchange Founder

Facts

• The US Dept. of Justice (DOJ) on Wednesday announced it arrested Anatoly Legkodymov, a Russian national who founded the Hong Kong-based crypto exchange Bitzlato. He's been accused of allegedly processing over $700M of illicit funds.
• Bitzlato is accused of transmitting illicit funds and facilitating other crimes through cryptocurrency transactions with Hydra Market — described by DOJ officials as "an anonymous, illicit online marketplace" for activities such as narcotics, money laundering, and stolen financial documents.
• The charges were filed in coordination with actions by the US Treasury Department's Financial Crimes Enforcement Network, which says it had prohibited certain Bitzlato fund transmittals after labeling the company a "primary money laundering concern" related to Russian illicit finance.
• Prosecutors say Bitzlato, run by Legkodymov from the Chinese city of Shenzhen, has reportedly received more than $15M in ransomware proceeds and processed $4.58B worth of cryptocurrency transactions since May 3, 2018.
• Authorities say the company broke customer vetting rules and failed to meet anti-money laundering requirements, with prosecutors alleging the company knowingly serviced US customers and conducted transactions with US-based exchanges using US online infrastructure.
• This comes after US regulators fined crypto exchange Coinbase $50M for failing to conduct adequate background checks. Coinbase reportedly allowed third-party contractors to handle a backlog of over 100K unreviewed transaction monitoring alerts.

Sources: TechCrunch, FOX News, Reuters, and Market Screener.

Narratives

• Pro-establishment narrative, as provided by Finance. With this arrest, the US is making a stand against those who trade in cryptocurrency and believe they’re above — or skating around — the law. Money laundering, terrorist financing, and other illicit finance will not be tolerated by any financial institution, crypto or otherwise. This is a major blow to the murky world of crypto crime.
• Establishment-critical narrative, as provided by Red State. Despite what you may hear in the news or from politicians, the government is not broadening its investigatory and regulatory reach to combat crypto schemes. On the contrary, people who are making their wealth with crypto are such lavish contributors to political campaigns on both sides of the aisle, they’re unlikely to face much in the way of consequences when they commit fraud or other crimes.