Authorities seized the company and imprisoned the co-founder after charging the cryptocurrency exchange Bitzlato with sponsoring a "high-tech nexus of crypto crime."
Anatoly Legkodymov, a Russian citizen who was then residing in China, was accused by the US Department of Justice of operating a company that catered to "crooks."
According to their allegations, Bitzlato broke laws to prevent money laundering by handling about $700 million (£567 million) in illicit funds.
US Attorney Breon Peace announced the arrest at a press conference on Wednesday, adding, "Institutions that trade in Cryptocurrency are not above the law and its owners are not beyond our grasp."
“As alleged, Bitzlato sold itself to criminals as a no-questions-asked cryptocurrency exchange and reaped hundreds of millions of dollars worth of deposits. The defendant is now paying the price for the malign role that his company played in the cryptocurrency ecosystem.”
The complaint states that since 2018, the Hong Kong-based exchange has handled bitcoin transactions totalling around $4.5bn.
Prosecutors claimed the company was a “haven for criminal proceeds and funds intended for use in criminal activity” since it required minimal user identification.
In support of their claims, they cited an internal document that identified Bitzlato as handling “dirty money” without regular customer-vetting procedures, suggesting that the company was aware of the problems.
Hydra Market was a dark web marketplace for drugs, money laundering, and stolen financial information that was taken down last year by international authorities.
Prosecutors believe Bitzlato did “substantial” business with Americans, despite the company’s claims that it did not accept customers from the United States.
The US government coordinated with French and international police to carry out the operation.
