Liberty Reserve Accused|of Laundering $6 Billion

     (CN) – Liberty Reserve functioned “as a bank of choice for the criminal underworld,” allowing users to make millions of untraceable transactions with its digital currency and then launder more than $6 billion, according to a federal indictment.
     Prosecutors charged Liberty Reserve, co-founders Arthur Budovsky and Vladimir Kats, and five others with conspiring to commit money laundering and operating an unlicensed money transmitting business, Liberty Reserve S.A., from 2006 through this May.
     The Costa Rica-based company was “designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” according to a criminal indictment unsealed Tuesday in Manhattan Federal Court.
     The defendants are Liberty Reserve, Budovsky (a.k.a. “Arthur Belanchuk” or “Eric Paltz”), Kats (who left the company in 2009 after a falling out with Budovsky), former manager Ahmed Yassine Abdelghani, current manager and part-owner Allan Esteban Hildago Jimenez, Budovsky’s principal deputy Azzeddine el Amine, and associates Mark Marmilev and Maxim Chukharev.
     “The defendants deliberately attracted and maintained a customer base of criminals by making financial activity on Liberty Reserve anonymous and untraceable,” prosecutors say.
     Users of Liberty Reserve’s digital currency, known as “LR,” never had to validate their identities, allowing them to easily create fictitious or anonymous accounts, prosecutors say.
     “Liberty Reserve users routinely established accounts under false names — including such blatantly criminal monikers as ‘Russia Hackers’ and ‘Hacker Account,'” the 27-page indictment states.
     Co-founder Kats, also known as “Ragnar,” allegedly admitted in an online chat recorded by authorities that “everyone in the USA” — including the Justice Department — knows “LR is [a] money laundering operation that hackers use.”
     Account holders could then conduct transactions with other users across the globe, including merchants that accepted LR as payment.
     The digital currency was used by an estimated 1 million people worldwide, 200,000 of whom live in the United States. Liberty Reserve processed about 55 million transactions “and is believed to have laundered more than $6 billion in criminal proceeds,” according to prosecutors.
     “Liberty Reserve’s system was designed so that criminals could effect financial transactions under multiple layers of anonymity and thereby avoid apprehension by law enforcement,” the indictment states. “Not surprisingly, Liberty Reserve was in fact used extensively for illegal purposes, functioning in effect as the bank of choice for the criminal underworld.
     Prosecutors call Liberty Reserve “one of the principal means by which cyber-criminals around the world distribute, store, and launder the proceeds of their illegal activity.”
     “Indeed, Liberty Reserve has become a financial hub of the cyber-crime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking,” the indictment states.
     “The defendants also protected the criminal infrastructure they created by, among other things, lying to anti-money laundering authorities in Costa Rica, pretending to shut down Liberty Reserve after learning the company was being investigated by U.S. law enforcement (only to continue operating the business through a set of shell companies), and moving tens of millions of dollars through shell-company accounts maintained in Cyprus, Russia, Hong Kong, China, Morocco, Spain, and Australia, among other places.” (Parentheses in original.)
     Prosecutors say Budovsky “was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship and became a Costa Rican citizen, telling U.S. immigration authorities that the ‘software’ his ‘company’ was developing ‘might open him up to liability in the U.S.'”
     Budovsky was reportedly arrested this week in Spain.
     Federal prosecutors have shut down the Liberty Reserve website and want the defendants to forfeit $6 billion.
     “By indicting Liberty Reserve and its principals, restraining over $25 million in criminal proceeds, forfeiting domain names, and seizing servers in countries around the globe, our message is clear: money launderers can run, but they can’t hide from the U.S. justice system,” Acting Assistant Attorney General Mythili Raman said at a press conference Tuesday.

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