The founder of an online currency transfer business was indicted in the United States along with six other people in a $6bn (€4.7bn) money-laundering scheme described as “staggering” in its scope, authorities said.
Arthur Budovsky is the founder of Liberty Reserve, a Costa Rica-based website long favoured by cybercrime scammers. He was arrested in Spain last Friday. A defendant identified as Budovsky’s partner, Vladimir Kats, was in custody in New York.
Authorities say the network processed at least 55m illegal transactions worldwide for 1m users, including 200,000 in the US. They call the money-laundering case the largest ever.
“The scope of the defendants’ unlawful conduct is staggering,” said an indictment unsealed in federal court in Manhattan. Federal prosecutors in Manhattan were expected to detail the charges later.
In a statement, Costa Rica police confirmed that Budovsky had been arrested in Spain on money laundering charges and that several premises linked to his company had been raided. A notice pasted across Liberty Reserve’s website last week said the domain “has been seized by the United States Global Illicit Financial Team”.
The indictment calls the network “one of the principal means by which cyber criminals around the world distribute, store and launder proceeds of their illegal activity . . . including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking”.
Liberty Reserve allowed users to open accounts using fictitious names, including “Russian Hacker” and “Hacker Account.” The network charged a 1% fee on transactions.
Budovsky and Katz have previous convictions on charges related to an unlicensed money-transmitting business, according to court papers. After that case, the pair decided to move their operation to Costa Rica, where Budovsky officially renounced his US citizenship, the papers say.
In an online chat captured by law enforcement, Katz admitted Liberty Reserve was “illegal” and noted that authorities in the US knew it was “a money laundering operation that hackers use”.
Aditya Sood, a computer science doctoral candidate at Michigan State University who has studied the underground economy, described Liberty Reserve as a no-questions-asked alternative to the global banking system, with little more than a valid email needed to open an account and start moving money across borders.
“You don’t need to provide your full details, or personal information, or things like that,” Sood said in a telephone interview. “There’s no way to trace an account. That’s the beauty of the system.”
Liberty Reserve’s ease of use, and rock-bottom processing fees, also attracted a thriving community of tech-savvy users in countries with limited access to credit cards, said Mitchell Rossetti, whose Houston, Texas-based ePayCards.com was one of several mainstream merchants that accepted the online-only currency. Rossetti said his business had about $28,000 tied up in Liberty Reserve accounts. Liberty
Liberty Reserve appears to have played an important role in laundering the proceeds from the recent theft of $45m from two Middle Eastern banks, according to legal documents made public by US authorities this month.
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