How Anatoly Legkodymov did not become “Russian Tomas Edison”, established one of the biggest Russian cryptocurrency exchange and now faces 5 years in prison for llegal money transmitting.

On the 18th of January the crypto world tensed up after the US Justice Department sent out an urgent message written with Caps Lock: “WE ARE ABOUT TO ANNOUNCE A GLOBAL CRYPTOCURRENCY ENFORCEMENT ACTION”.

The crypto community had two hours to guess what it would be. Tougher rules for stablecoins? The next FTX similar case? Or the real name of Satoshi Nakamoto? The crypto market came down for some time, but in the end news turned out not to be so dramatic. High officials, including the Deputy Attorney General and the FBI’s associate deputy director, announced that the FBI arrested the founder and the majority owner of Bitzlato — one of the largest Russian cryptocurrency exchanges.

He was charged with an illegal money transmitting business.

“Anatoly Legkodymov,” mentioned they his name several times, showing troubles in the pronunciation.

The journalists who came to that press-conference sounded a little bit disappointed. “Did you find any link between Bitzlato and the Russian conflict in Ukraine and did Russian actors used Bitzlato to circumvent sanctions?” — one of them asked.

My investigation revealed:

• who Anatoly Leggodymov actually was and why he used to go by tram;

• who was his Bitzlato partners and why they appointed as a CEO a war veteran;

• what links to Ukraine Bitzlato really had;

• how the Ukrainian part of the team left the project after the full scale war started;

• Legkodymov and his partner followed the activities of a freaky Russian movement that stands for nuclear attack on Washaington.

“When I knew him, he was never interested in money so much”

In March, 2011, 30 years old Anatoly Legkodymov wrote on Bitcointalk the message which shows that by that time he understood a little how bitcoin works.

“I've had disk crash recently, which caused wallet loss. I was 50.04 coins on it But I have backup copy of it with zero balance, so I restored my wallet. To my supprise 50.04 coins appeared again. Is this really possible? Did bitcoin downloaded my coins from network?” — he wrote.

But quickly he got into crypto philosophy and even wrote a short guide on how blockchain works for one Russian social media for coders. His friends describe him as “Kulibin”. Kulibin is a prominent Russian inventor of the 18th century, and his name became a household for ordinary people who try to invent some new technology or device. But they are not always successful in making business from their invention.

So was Legkodymov at that time.

He grew up in Krasnodar — a big city in the south of Russia, 300 km from Sochi where the 2014 Olympic Winter games took place. When bitcoin was invented, he worked as a head of a section at the local state telecommunication company. At the same time he took some part-time jobs for Krasnodar start-ups. “He invented a controlled laser for an interactive architectural layout,” the CEO of one start-up told me. He was shocked that “Kulibin” (as he remembers Legkodymov) launched a cryptocurrency platform and in the end found himself in the US jail.

“When I knew him, he was never interested in money so much,” he added.

Legkodymov was very sceptical about the mining until Bitfury (a blockchain company founded by Latvian citizen Valery Vavilov) presented its own ASIC-chip. “This chip is a bundle of pure energy,” he wrote in the middle of 2013. He started with overlocking of Bitfury chips, but soon turned to inventing his own miner based on samples from the Chinese Bitmain.

In this business he had two partners. One, Anton Shkurenko, was his friend — they both worked at the local state owned telecommunication company. Another — 40 years old Sergey Shakhnov — was also an engineer from Krasnodar.

In 2016 they spent days together in one small room in Krasnodar, designing miners and soldering boards. Legkodymov drove an old car and sometimes went by tram from his home to the office. “I met Legkodymov at some crypto meetup and asked him why the design of the boards of his miner was so bad. It was really very bad, everything broke there with or without reason. He answered that he developed the boards normally, but the Chinese cut out everything that was not necessary for its functioning,” one Russian crypto entrepreneur told me.

“I remember him with sunken cheeks and sleepy,” he added.

In 2014-2015 they had their own mining farm in Moscow which was also used as a mining-hotel. But after a fire destroyed it, they moved their mining equipment to Abkhazia — a self-declared state recognised by most countries as part of Georgia. Abkhazia is just half a day ride from Krasnodar, and it became one of the regional centres of mining due to cheap electricity.

In this project Legkodymov and his friends found a very strong partner — Genesis Mining, one of the world’s leading providers for cloud mining. Genesis Mining was the main client of the Abkhazia farm, an ex-employer of Legkodymov’s company told me. This partnership can be traced in public records: Legkodymov and Shakhnov were directors of a Russian company Guaru LLC that was owned by German citizen Yakov Dolich — one of the beneficiaries of Genesis Mining.

But Abkhazia is not only famous for its cheap electricity. As all self-declared states, it is a kind of Wild West territory. “One day people in uniform and masks came to us. This was a real “masks show” [a Russian term for a police pressure on a company to take somebody’s business],“ the ex-employer of Legkodymov’s remembered. In about 2017 Legkodymov and his partners moved their main mining equipment to Irkutskaya oblast — a Siberian region of Russia, on the border with China. It has the lowest electricity fees in the country, and thus became an unofficial Russian capital of mining. One of the legal entities that operated the farm was ironically called “Blockchain”.

Their partnership with General Mining continued in attempts to invent a new miner with liquid cooling. One of the places where they tested it was in the Chinese city Shenzhen which is sometimes regarded as Silicon Valley of China. Legkodymov settled there in the end. For the next several years he spent half a year in Krasnodar, while another half of the year he lived in China.

The mining business faded into the background when the Bitzlato cryptocurrency exchange started working. In 2019 they officially closed their Russian partnership with Genesis Mining.

Legkodymov seemed not to be interested in mining anymore.

How Bitzlato appeared

The first cryptocurrency exchange project in Legkodymov’s company was BTC Banker — a Telegram-bot where people could change bitcoins and other coins without any verification. Telegram is popular in Russian not only as a messenger, but also as a platform for media (some Telegram-channels have more than 1 mln subscribers) and services that sell personal data or cryptocurrency.

BTC Banker appeared in 2016, and was the first service of such kind. It quickly became popular among the Hydra clients, as the Russian investigative outlet “Dossier” found out. Until 2022 Hydra was the main dark web marketplace for drugs, guns and documents. Although BTC Banker was profitable, for Legkodymov and his partners it was a side project, and its team was very small.

In 2018 the Russian government started blocking Telegram. The messenger worked with problems, and most business projects in Telegram were paused. At the same time, the main developer who was responsible for BTC Banker quit the company, so Legkodymov and his friends decided to establish a p2p platform that will work not only in Telegram. Thus Bitzlato appeared.

Its name is a combination of words “bitcoin” and “zlato” that is gold in old-Russian. The new service was also far from any KYC policy standards and inherited the client base from BTC Banker. The FBI report shows that Legkodymov and his partners were not only aware who were their clients, but regarded it as a competitive advantage of the service.

The application for Legkodymov’s arrest warrant contains excerpts from Buzltato administrative chat. In October, 2018 one of the Legkodymov’s partners (either Shkurenko or Shakhnov) advocated going easy on drug dealers: “[I]f we seriously announce the fight against drug traffickers, they will just be dumped on another platform. My suggestion is to fight them nominally, ie, block once a month when they can clearly be found.” Legkodymov responded by noting that the proceeds from drug dealers’ seized cryptocurrency wallets was potentially “a bonus” to Bitzlato’s coffers.

Several months later, Shkurenko or Shakhnov again warned his colleagues that “bitzlato clients are addicts who buy drugs at the hydra site and 14 similar resources”. Lekgodymov — without any hesitation — responded that Bitzlato could expand by offering anonymous financial services to run-of-the-mill individuals, such as taxi drivers. “[E]veryone wants to keep their [identity] cards out of sight,” he added. Bitzlato became the main part of their business by that time, although the mining farm in Irkutsk region worked until 2022.

The revenue of their main Russian legal entity A-XBT in 2021 was about 1 mln dollars, but it is just a small part of the whole cash flow. Hydra Market users exchanged more than $700 million in cryptocurrency with Bitzlato, the US Ministry of Justice informed. It is estimated that the crypto exchange platform has received a total of assets worth €2,1 billion, the Europol calculated. Traders could provide identity cards, but Legkodymov clearly understood that “they all (I think 90%) do not trade on their [identity] cards”. “All traders are known to be crooks. Trading on ‘drops,’ etc,” he added.

Beginning on February 28, 2022, Bitzlato began requiring new users to self-verify. But the application for Legkodymov’s arrest warrant shows that sometimes Bitzlato support was loyal to users who hid behind drops.

The Ukrainian part of the team

The main team of Bitzlato worked from Krasnodar, although the service had an office in the Federation Tower, a shiny skyscraper in the financial district called “Moscow-City”. The Moscow office was basically used for cash operations — people could bring suitcases with roubles and dollars and change them into cryptocurrency. Bitzlato was not the only cryptocurrency exchange platform that operated in the Federation Tower which Bloomberg once called the Tower “a Cybercriminal Cash Machine”.

The Bitzlato legal entity was registered in Hong Kong. Its shares were divided between Legkodumov, Shkurenko and Shakhnov. As a CEO they appointed a drop — 43 years old Maxim Breev who used to be a handyman in their Abkhazia mining farm. But the real CEO of the service was young Ukrainian Michail Lunev who first worked in the company as a coder, then he was appointed as a team lead and in the end headed the service. He used to come to Krasnodar from time to time. There were other coders from Ukraine in the Bitzlato team, and when the project was announced the first currency mentioned on its site was the Ukrainian hryvnia, but not the Russian ruble, as OSINT-investigator Alei Graytskikh found out.

When the full-scale Russian-Ukrainian war started this year, the service officially announced that the CEO would leave the project taking part of the team with himself. There were no details why it happened, except for a diplomatic phrase “considering the current situation”. But the war divided not only companies, but even families, so no wonder that the Ukrainian part of the team did not want to have anything in common with former Russian partners anymore.

Besides Legkodymov, several other Bitzlato employees were arrested in Europe on 17th or 18th of January. And some of them were Ukrainians, the Portuguese police revealed.

Lunev did not respond to my message on Telegram — he was not online since Legkodymov’s arrest.

A nuclear attack on Washington

Part of the Bitzlato Russian team really shares the pro-Kremlin position over reasons of this war.

Its official CEO Maxim Breev served in the war in Chechnya in the late 1990s (Chechnya is a part of Russia, but there was a strong independence movement there). After the war with Ukraine started, Breev wrote in the social media that he was ready to “fight” again.

Sergey Shakhnov and Anatoly Legkodymov were interested in activities of the Russian pro-Kremlin and freaky “The National Liberation Movement” (NOD). The NOD members believe that Russia is a US colony, and the sovereignty should be restored. One of the ways to do it is a preventive nuclear attack on Washington. I am not joking: the movement members even organised a rally “To Washington” in the centre of Moscow at the end of 2022.

Shakhnov discussed the NOD ideas with his friends and registered at its site in 2017. Legkodymov registered there in 2015, but it did not stop him from visiting the US in 2017. In October, 2022, he again arrived in the United States at John F. Kennedy Airport in New York. He was interviewed by a U.S. Customs and Border Protection officer, who asked him about his employment. Legkodymov did not disclose his connection to Bitzlato. However, the CBP officer conducted a border search of Legkodymov’s mobile devices and found that they contained numerous recent communications related to Bitzlato, including a recent chat titled in part “bitzlato.com admin chat,” and a second recent chat titled “Bitzlato Support Chat”.

“I do not know why he went to the US,” told Shakhnov to one of his friends when Legkodymov was arrested in Miami in January, 2023. He read news headlines about Bitzlato in the safest place in such a situation — in Russia. The third partner, Anton Shkurenko, went to Turkey after prezident Vladimir Putin had launched the mobilization in Russia, as the Telegram-channel “Infobomba” found out.

“Legkodymov might think that there was nothing illegal in his business,” thus one Russian crypto entrepreneur answered me on a question why the Bitzlato founder took a risk to go to the US and was not threatened by a request to show his phone.

Now Legkodymov faces a maximum penalty of five years in prison.