In 2013, and international investigation led US prosecutors in the Southern District of New York to charge 7 individuals with money laundering and operating an unlicensed money transmitting business. The defendants ran Liberty Reserve, a digital payment facility, which allegedly laundered more than USD 6 billion in criminal proceeds. Liberty Reserve was shut down by US authorities in May 2013 as a result of the investigation.
Liberty Reserve – incorporated in 2006 in Costa Rica – was a centralized digital currency service. It allowed users to deposit physical currency – Euros or US Dollars - by converting it into a digital currency pinned to the value of the physical one. Once deposited the money, users were allowed to transfer it to other users. The only personal information required to register was a name, e-mail address and birthdate. Liberty Reserve charged a small fee for each transaction.
According to the investigators, Liberty Reserve was operated do facilitate money-laundering. Its structure and high degree of untraceability provided cybercriminals with a perfectly functioning tool to store and transfer the proceeds of their illegal activities. Before its shut down, the overall number of Liberty Reserve’ users worldwide exceeded on million and over 55 million transactions were conducted through its system. Such transactions included the transfer of proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking.
One of the co-founders of Liberty Reserve, Vladimir Kats, an American citizen, pleaded guilty before the Federal Court of the Southern District of New York on 31 October 2013 to conspiring to commit money laundering, conspiring to operate an unlicensed money transmitting business, receiving child pornography and marriage fraud.
The other co-founder, Arthur Budovsky, a citizen of Costa Rica, was arrested in Spain in May 2013 and extradited to the US in October 2014.
The US Secret Service, the Internal Revenue Service-Criminal Investigation and the US Immigration and Customs Enforcement’s Homeland Security Investigations carried out the investigation. International assistance was provided by the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Financial and Economic Crime Unit of the Spanish National Police, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
Arthur Budovsky was arrested in Spain in May 2013 and extradited to the US in October 2014.
US Federal Court
The indictment was unsealed on May 28, 2013. Marmilev, Vladimir Kats and Azzeddine El Amine previously pleaded guilty. Marmilev was sentenced to five years in prison in December 2014; Kats and El Amine await sentencing. The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and the charges remain pending.
Co-founder of Liberty Reserve
Principal founder of Liberty Reserve
Manager of Liberty Reserve's financial accounts
Former chief technology officer of Liberty Reserve
Former information technology manager of Liberty Reserve
Money laundering and operating an unlicensed money transmitting business
Conspiring to operate an unlicensed money transmitting business
Conspiring to operate an illegal unlicensed money transmitting business