Anton Shkurenko is “sewn” by cryptocurrency fraud
In mid-January, the owner of the Bitzlato crypto exchange was arrested in Miami. Anatoly Legkodymov. This Krasnodar programmer created a financial center with a turnover of $5 billion and, together with partners, controlled 1% of the entire Bitcoin network. Legkodymov knew that he was helping to legalize money for not the most law-abiding people, and therefore, in recent years, he lived with his family in China, a very tolerant place for such a business.
After the closure of the darknet site for the sale of drugs Hydra, with which Bitzlato worked, and it was time to lay low. But instead, Legkodymov went to the United States, the country that had the most claims against him. And he didn’t even take the minimal precautions of installing a VPN while continuing to operate Bitzlato from his Miami apartment.
As Baza found out, Legkodymov transferred his share in Bitzlato to his partner a year ago and resigned from the post of general director of the exchange. But an attempt to protect himself by legally exiting the business did not save him from arrest. Why did he go to the USA, knowing that he was facing a huge sentence, who now owns Bitzlato and why Legkodymov smiled during his arrest – read in our investigation.
Gandalf and the FBI
As follows from the arrest warrant, Legkodymov used the pseudonym Gandalf – that was the name of the wizard from Tolkien’s The Lord of the Rings. Well, both have, for example, a beard and magical abilities. For Legkodymov, this is the ability to turn dirty money into clean money.
A significant portion of Bitzlato’s operations “comprise the proceeds of crime, as well as funds intended for use in criminal activities,” the FBI says. We are talking about the sale and purchase of drugs and other illegal goods on the dark web. The US Department of Justice believes that the owners and employees of Bitzlato knew about these illegal operations: in correspondence, Legkodymov called users fraudsters with fake documents, and the exchange team warned him that the client base consisted of drug dealers and “drug addicts who buy drugs on Hydra.”
The largest shadow marketplace on the dark web, Hydra, was liquidated in April 2022, according to court documents, was the main “counterparty” of Bitzlato. This FBI claim is backed up by downloads from tech support chats. Clients asked if they would be blocked due to the transfer of money from Hydra to exchange wallets or vice versa. Technical support answered that there were no restrictions, and sometimes even helped users restore access to blocked wallets without conducting any verification procedures.
Bitzlato’s second-largest counterparty in terms of transaction volume, according to the US Financial Crimes Enforcement Agency (FinCEN), was the world’s largest crypto exchange Binance. It processed the equivalent of $345.8 million in bitcoin transactions for Bitzlato. According to Reuters, Binance has processed 205,000 transactions for Bitzlato clients. Moreover, a significant part – already after it announced the tightening of data verification to combat financial crimes.
Also, funds received from a scam passed through Bitzlato (a type of fraud when a person is promised super profits, but his investments are taken away. – Note by “Base”), hacking, ransomware viruses, etc. In total, according to the FBI, $715 million “dirty” crypto coins. And Europol later reported that this amount was even more – € 1 billion. At the same time, since 2018, Bitzlato users have carried out transactions in the amount of $ 4.58 billion. Considering that the exchange has been operating since 2017, we can safely round this amount up to $5 billion.
After transactions made through Bitzlato, users could immediately turn the “dirty” crypt into much more “clean” rubles or dollars on a bank card.
US Deputy Secretary of the Treasury Wally Adeyemo, commenting on the Bitzlato case, emphasized its connection with politics and sanctions. According to him, Bitzlato has repeatedly carried out transactions, including those of the Conti hacker group, “which has ties to the Russian government.”
Legkodymov is charged with managing a non-US registered financial services business. Among the accusations is mediation in the transfer of funds received by clients from criminal activities. The maximum term under this article is 5 years in prison.
In a motion for arrest, federal agent Ryan Rogers provided the following evidence of Legkodymov’s guilt:
Improper customer identity verification (KYC). The administration of the exchange did not check the passports of customers and did not require a selfie. Many users worked through the so-called drops, using stolen scans of other people’s passports.
Improper transaction purity check (KYT). For example, the exchange withdrew funds without question to addresses associated with a shadowy illegal business (including the Hydra marketplace).
Legkodymov knew about illegal operations, but did not take any countermeasures. As proof, Legkodymov’s personal correspondence is cited: his partner wrote to him that if “illegal immigrants” are blocked too often, the exchange will lose revenue, so the procedures must be applied formally.
The United States has the right to arrest Legkodymov because his business operated under US jurisdiction. The FBI reported millions of US IP addresses from which customers accessed the Bitzlato website. In addition, Legkodymov administered the exchange for three months while in Florida, which means that the crime was committed in the United States.
It is important to note that Legkodymov is not accused of personally laundering money, otherwise he would have faced a much more severe punishment. He simply knew about laundering and did not prevent it. The US Treasury Department’s Financial Crimes Enforcement Agency (FinCEN) has announced that it has seized €1 billion from exchange wallets.
Love for crypto
How did it happen that Gandalf (Legkodymov used this pseudonym in correspondence with partners, and users of blockchain forums knew him under the nicknames legko777 and Tolik. – Note “Base”) began to help all sorts of “orcs” – drug dealers and extortionists? Anatoly graduated from the Kuban State University with a degree in Engineering in Biomedical Practice in 2004. Then he worked at the Southern Telecommunications Company and the IT company Spider Group.
In 2009, the first cryptocurrency, Bitcoin, appeared. Legkodymov immediately fell ill with blockchain and realized that the future lies with mining. He began to develop mining equipment – special powerful computers, the only task of which is to solve the “infinite” equations of the blockchain in order to extract valuable coins. He did this together with his friend Anton Shkurenko, a programmer from the village of Tbilisskaya in the Krasnodar Territory, and another of his acquaintances, Dmitry Kovalenko, who quit his managerial job in the IT department of one of the banks for this.
In the early days of bitcoin, it could be mined on a regular computer, and it cost a penny. The power of the mining equipment that Legkodymov and his team launched was so great that, according to their own data, at some point they controlled 1% of the entire Bitcoin network. In fairness, it should be said that in the early years it was not difficult to take this share: the activity of the network was mainly supported by enthusiastic miners.
It is clear that the founders actively used their opportunities: they not only sold mining equipment, but also mined coins for themselves. By 2011, Legkodymov had 155 military-technical cooperation on one of the platforms, and according to correspondence on the Bitcointalk forum you can understand that this is not all of his savings. However, that year in April, bitcoin was worth $32, so Legkodymov had not yet become a crypto millionaire at that time.
The crypto wizard is still in love with everything related to digital currencies. In his free time, having already become the head of a crypto-exchange, he was engaged in helping to write programs for free – new-generation cryptocurrency miners on microchips instead of video cards, as well as developing a library for managing data storages. There is data about this in the Github community under his nickname legko777.
China for electronics
For the past six years, Legkodymov has lived in China with his wife and children. They settled on the outskirts of Shenzhen, in one of the typical condominiums in the He-Pin-Kang area. Shenzhen was not chosen by chance – it is a Chinese technology center. In the metropolis of 16 million, thousands of international companies have opened their offices and assemble hardware equipment here.
Huaqiangbei, the largest electronics market in the world, is also located here. On it, you can buy all the parts to assemble a smartphone yourself, or 100,000 smartphones to open your own production line. Legkodymov began to collect not smartphones, but mining farms and ASICs. A mining farm is usually called a ready-made assembly of combined video cards and a computing system that allows you to mine cryptocurrencies. Asics (ASICs) are special high-performance processors created for the mining of a specific digital currency. Shenzhen is located in the south of China, linking the mainland with the Hong Kong Special Administrative Region. It was in Hong Kong that Legkodymov registered a company for the assembly of equipment for mining LGK Power Limited in 2015, becoming its sole owner, follows from the register of legal entities in Hong Kong. Later, Legkodymov was joined by his friend Anton Shkurenko, who became the owner of a 14% stake in LGK Power. Friends gave one percent to another fellow countryman – Sergei Shakhnov.
LGK’s sales and earnings are unknown: the Hong Kong registry does not share revenue information. But, as Baza found out, the farms assembled in Shenzhen were delivered to Russia. They are leased and sold by Russian legal entities controlled by Shkurenko and Legkodymov, for example, A-XVT. In 2017-2021, she earned 245 million rubles. Since 2015, partners have been building their own mines – pools assembled from hundreds of small farms for the extraction of cryptocurrency. It looks like this: one mini-farm consists of 8 powerful video cards and occupies one “shelf” on a server rack. In total, the rack accommodates about 10 farms.
One of the first data centers for mining all types of cryptocurrencies was built by Legkodymov’s team in Irkutsk, in an abandoned factory workshop. In total, the LGK group opened five data centers in three countries: three in Russia, one in Abkhazia and one in China. Their total capacity was 4.5 MW.
Renting a server rack in Russia in 2017 cost about 30 thousand rubles per year. Based on the number of racks, the income of the Irkutsk center alone could amount to 2.43 million rubles a year, the Abkhazian center – 5 million. This is a full-fledged passive income: ASICs do not ask for porridge and can stand unattended for months, fire safety is controlled by an alarm, voltage is automatic , and a separate fee was charged for server maintenance.
By the way, while Legkodymov lived in China, he regularly flew to Russia on business. Since 2020, his Moscow address in the documents of the Hong Kong registry appears in a rather modest apartment with an area of about 40 square meters. m in one of the towers of the residential complex “Savelovsky City” and cost about 14 million rubles.
Gandalf in Moscow City
The Bitzlato exchange was founded by Legkodymov and Shkurenko in 2017. It grew out of the Telegram-bot for the exchange of BTC banker cryptocurrencies, which appeared in 2016 and allowed transactions between individuals, acting as a guarantor. The legal entity of the exchange – Bitzlato Limited – was registered in Hong Kong. The same Sergey Shakhnov became the minority owner. The shares in 2021 were distributed as follows: 73.44% – from Legkodymov, 24.5% – from Shkurenko, 2.06% – from Shakhnov.
In 2014 over Moscow City lit up virtual “Eye of Sauron”, and it was very symbolic. Judging by the information of the American company Chainalys, which specializes in investigating illegal cryptocurrency transactions, Moscow City is downright a resident of evil. According to a company study published in February 2022, dozens of offices of cryptocurrency exchanges with a dubious reputation are located there. Among them is the brainchild of our Gandalf – the Moscow office of Bitzlato.
According to Chainalys estimates, from 2019 to 2021, the Legkodymov exchange passed through $2 billion, of which $430 million is illegal funds obtained as a result of criminal activity. In the list of anti-money launderers from City, which was compiled by American analysts, Bitzlato was in second place in terms of turnover. Bitzlato’s Moscow office was located on the 24th floor of the Federation reported by the Dossier Center in December 2022, accepted only those clients who were ready to bring in cash from $100,000 or the ruble equivalent.
A month after the release of Chainalys materials, as Baza found out, Sergey Shakhnov became the sole owner of the company. The partners transferred (or sold) their shares to him. Also, the corporate registry of Hong Kong registered a record that Legkodymov Anatoli is leaving the post of director of the Hong Kong company Bitzlato Limited, and Maksim Breev, a native of Maykop, becomes the new director instead of him.
Before the 43-year-old Breev headed the Hong Kong company, he managed to work at the post office, in the Wimm-Bill-Dann warehouse, where he packed more than one hundred boxes of juice, and established himself as a business partner of Shkurenko. Together they founded the Planet-South construction company in Maykop.
Literally a month before Breev headed the multibillion-dollar crypto-exchange, bailiffs brought enforcement proceedings against him for a ridiculous amount for his future status – 86 thousand rubles. And three years earlier, Breev owed creditors 481 thousand rubles. This indicates that Breev turned out to be an accidental, if not nominal, head of the crypto exchange.
Perhaps Legkodymov, having read Chainalys about himself in the study, decided to lay low. He could be afraid of imposing sanctions on his exchange. The “special military operation” had just begun then, and the funds of many Russians were blocked in foreign jurisdictions. The funds and accounts of Russian citizens were also frozen by the largest exchanges: Coinbase, CEX IO, etc. After leaving the company, the partners did not completely lose control over the business: according to the FBI, they continued to administer the exchange and manage it until Legkodymov was arrested. It cannot be ruled out that they simply agreed with Shakhnov that he would hold an asset for them during this difficult time.
After giving up the shares, Shkurenko went to Turkey to buy a yacht for himself and receive a captain’s certificate. Himself wrote about his plans in the community of Russian-speaking yachtsmen in Turkey, entry dated October 29, 2022, in the midst of mobilization. In the same autumn, the plane with Legkodymov on board landed in New York.
Gandalf the White
The FBI is constantly engaging Chainalys experts to investigate the biggest cryptocurrency crimes of our era. Any release by Chainalys that talks about illegal schemes, and even mentions specific participants, is a direct signal to money launderers: “You are being watched! Get down to the bottom!”
However, Legkodymov had plenty of such signals even without Chainalys. In November 2021 in the Netherlands at the request of the States arrested his neighbor in the Federation Tower Denis Dubnikovwho ran the Eggchange cryptocurrency exchange.
According to the FBI, Dubnikov helped Ryuk cybercriminals launder illegal funds received from ransomware victims. At the same time, it was reported that Ryuk was responsible for a wave of hacks of US medical organizations. Dubnikov, unlike Legkodymov, faces a much longer term – as much as 20 years, because he is accused of personally laundering money.
In April 2022, the story of the exposure and closure of the darkstore Hydra thundered. Now it is clear that the defeat of Hydra and the arrest of Legkodymov, for whose exchange it was the main counterparty, are links in the same chain.
The FBI has been following Gandalf for a long time. By US Deputy Attorney General Lisa Monaco, the investigation against Legkodymov lasted a year. And he certainly felt at least the interest of the FBI in his person. At the same time, from China, which does not have an extradition treaty with the United States, for some reason Legkodymov went to Miami – directly into the “paws” of the FBI.
When an American border guard officer asked him to unlock his phone to check the contents, Legkodymov calmly showed chats in instant messengers called the “Bitzlato admin panel”. And managed the exchange from Miami for three months even without a VPN. Maybe the crypto wizard realized that he was under a hood, decided that the life of a person hiding from justice and changing personalities and countries did not suit him, and voluntarily made a deal with the investigation?
This version is supported by a rather mild article, which Legkodymov is accused of. The FBI accuses him not of laundering criminal funds (as some Russian media wrote), but of “managing a money transfer business that is not registered in the United States and is associated with non-compliance with anti-money laundering laws.” Investigators are sure that Legkodymov knew about the illegal origin of the funds, but deliberately continued operations and turned a blind eye to mandatory KYC procedures like verifying the user’s passport. Since some of the clients entered the exchange through American IP addresses, from the point of view of the FBI, the business was conducted in the United States, which means that the Legkodymov crypto exchange should have been registered. Now he faces up to 5 years in prison. In the case of a deal, the Russian Gandalf may completely avoid the deadline.
Lawyers consider the version of the crypto-broker’s deal to be quite logical. “In America, the system of deals with the investigation is well developed,” says lawyer Kirill Belsky. – The exorbitant prison sentences imposed in the United States are well compensated by the favorable conditions that the accused can negotiate for himself by making a deal. Such transactions are always preceded by long negotiations. Perhaps the arrival of Legkodymov in the United States is the result of such negotiations.
However, as the lawyer noted, everything can be the other way around: it happens that a person is lured into the country through trusted channels, promising to remove all claims if he gives evidence, but in the end he is detained and subjected to criminal prosecution.
According to Kirill Belsky, in the United States, in a deal with the investigation, the accused can bargain for himself quite a lot: for example, the complete abolition of imprisonment, that is, he will be punished with a fine or a suspended sentence.
“It all depends on what you are willing to give to the authorities,” Belsky said. – Any deal with the investigation is a full-fledged deal. Instead, it is usually required to disclose accomplices in criminal activity. The American authorities, as a rule, are very interested in PEP accomplices (Politically exposed person, politically exposed person. – Approx. Bases), those who are involved in the laundering of funds received from the sale of drugs, etc.”
The risk of a deal with the investigation is revenge on the part of those whom a person has handed over, which may overtake sometime in the future. Whether Legkodymov will take this risky step will show the course of the trial. The other day Gandalf was transported to New York. There will be a main hearing in the case. “Baza” learned that the court of the Eastern District of New York will consider, among other things, the issue of releasing Legkodymov on bail.
In the picture taken during the arrest, Legkodymov’s face did not express any fear or fear of the future at all. He looks calm and even smiles slightly for the camera.
According to Shkurenko, as part of an investigation initiated by the French prosecutor’s office, law enforcement officers “seized” the platform’s hot wallet, which contained “about 35% of user funds in all cryptocurrencies at the time of the operation.” He did not name a specific amount, referring to the change in rates. At the same time, the top manager denied the amount of €1 billion indicated in one of the media materials.
At the moment, Bitzlato is auditing losses and plans to move the company to the jurisdiction of the Russian Federation. “Europol was in a big hurry because they knew that we would move to the Russian Federation. We will move with wallets and absolutely everything, they will literally have nothing, ”Shkurenko added.
Now the company is looking for a contractor for the data center, which will place the equipment. The co-founder noted that “the service will be launched in the form in which it was shut down on January 18.”