Blockchain & Cryptocurrency , Cryptocurrency Fraud , Fraud Management & Cybercrime

Cryptohack Roundup: Bitzlato Boss Admits to Laundering Money

Also: Judge Accepts Changpeng Zhao Guilty Plea; November's 'Damaging' Hack Numbers
Cryptohack Roundup: Bitzlato Boss Admits to Laundering Money
Image: Shutterstock

Every week, ISMG rounds up cybersecurity incidents in digital assets. This week, a Bitzlato co-founder pleaded guilty to money laundering charges, a federal judge accepted the former Binance chief's guilty plea, criminals stole $363M in crypto this November, KyberSwap looks to compensate hack victims, Platypus hackers walked free, and Velodrome and Aerodrome were hacked again.

See Also: OnDemand | Understanding Human Behavior: Tackling Retail's ATO & Fraud Prevention Challenge

Bitzlato Co-Founder Pleads Guilty

Anatoly Legkodymov, the Russian co-founder of Hong Kong-based crypto exchange Bitzlato, pleaded guilty in U.S. federal court to money laundering charges after prosecutors said he had facilitated more than illegal activity on the massively popular and now-dismantled cybercrime marketplace Hydra.

Criminals took advantage of the cryptocurrency exchange's lax controls on illicit transactions, and Legkodymov was "well aware" of the activities, said Breon Peace, United States attorney for the Eastern District of New York.

As part of the plea agreement, Legkodymov agreed to dissolve Bitzlato and surrender $23 million in seized assets to authorities.

The exchange had been the largest counterpart to the now-shuttered Hydra darknet marketplace, processing around $700 million in illicit crypto. The indictment said Bitzlato also received millions in ransomware proceeds. Bitzlato was designated a "primary money laundering concern" by the U.S. Treasury's Financial Crimes Enforcement Network earlier in the year, and its infrastructure was seized by law enforcement authorities in January.

Legkodymov was arrested in Miami in January and charged with transmitting illicit funds. Former Bitzlato CEO Mikhail Lunev, marketing director Alexander Goncharenko, contractor Pavel Lerner, and an unnamed dev-ops engineer were reportedly arrested in various European countries, according to co-founder Anton Shkurenko, who was interviewed on the Russian-language crypto YouTube channel Satoshkin Live.

Binance

A federal judge accepted Binance founder Changpeng Zhao's guilty plea to charges of money laundering, following the former crypto mogul's entry of a guilty plea on Nov. 21 alongside the exchange's $4.3 billion settlement with U.S. agencies. Zhao pleaded guilty to one count of Bank Secrecy Act violations, stepped down as Binance CEO and agreed to pay $50 million. He is set to be sentenced on Feb 23, and could face a sentence of 18 months in prison. The judge at the U.S. District Court for the Western District of Washington has not decided yet whether Zhao can leave the United States until then, Cointelegraph reported. Zhao sought to return to the United Arab Emirates, where he resides. Prosecutors oppose the request, expressing concerns about securing his return given the absence of an extradition treaty with the UAE.

November Hack Statistics

November was the most "damaging" month for the cryptocurrency industry in terms of scams and exploits. Criminals stole $363 million, CertiK said. Around $316.4 million of the total came from exploits alone, while the $45 million attack on KyberSwap contributed nearly all of the $45.5 million flash loan attack total. The largest hacks of the month were the $131 million Poloniex and $113 million HTX hacks, it said. At the end of November, there was a total of $1.7 billion worth of losses from exploits, exit scams and flash loan attacks in 2023.

KyberSwap

KyberSwap looks to allocate funds from its treasury to compensate victims who lost money in the $48.8 million hack last week. The company said it would provide specific grant details within two weeks. Investigations into the hack revealed that the exploit had stemmed from weaknesses in KyberSwap's concentrated liquidity pools, which allowed an attacker to manipulate liquidity boundaries. It also proposed a 10% reward to the perpetrator for asset return, with KyberSwap recovering $4.7 million through separate channels.

Platypus

Two brothers allegedly responsible for stealing $8.5 million from decentralized finance protocol Platypus reportedly walked free after an acquittal from a French court. Law enforcement arrested Mohammed M and Benamar M in February. Mohammed M was indicted for accessing and maintaining an automated data processing system, fraud and money laundering, and Benamar M was accused of receiving stolen property. In October, Mohammed M claimed in the Paris judicial court to have acted in good faith and defended his actions as those of an ethical hacker, Le Monde reported. He reportedly said he wanted to store the endangered funds from Platypus to return them later, in exchange for a 10% bounty.

Velodrome and Aerodrome

Decentralized exchanges Velodrome and Aerodrome suffered a second front-end compromise in the same week. The Velodrome and Aerodrome teams said that their provider Porkbun was exploited, adding hours later that they had transferred to a new provider and restored access to their websites. The companies are independent and separate entities. Blockchain investigator ZachXBT estimated that the amount stolen is more than $100,000.


About the Author

Rashmi Ramesh

Rashmi Ramesh

Assistant Editor, Global News Desk, ISMG

Ramesh has seven years of experience writing and editing stories on finance, enterprise and consumer technology, and diversity and inclusion. She has previously worked at formerly News Corp-owned TechCircle, business daily The Economic Times and The New Indian Express.




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