Indictment in Record Money-Laundering Case Filed

The founder of an online currency transfer business was indicted in the United States along with six other people in a $6 billion money-laundering scheme described as “staggering” in its scope, authorities said Tuesday.

Arthur Budovsky is the founder of Liberty Reserve, a Costa Rica-based website long favored by cybercrime scammers. He was arrested in Spain on Friday. A defendant identified as Budovsky’s partner, Vladimir Kats, was in custody in New York.

Authorities say the network processed at least 55 million illegal transactions worldwide for 1 million users, including 200,000 in the United States. They call the international money-laundering case the largest ever.

“The scope of the defendants’ unlawful conduct is staggering,” said an indictment unsealed in federal court in Manhattan. In announcing the case, U.S. Attorney Preet Bharara said the network “became the bank of choice for the criminal underworld.”

Its digital currency service was designed to shield the identity of crooked users seeking to launder ill-gotten gains, he said.

“The coin of the realm was anonymity,” he said. “It was the opposite of a know-your-customer policy.”

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 Tuesday morning said the domain “has been seized by the United States Global Illicit Financial Team.”

Liberty Reserve’s demise is likely to send a sharp shock across the internet.

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… and narcotics trafficking.”

Liberty Reserve allowed users to open accounts using fictitious names, including “Russian Hacker” and “Hacker Account.” The network charged a 1 percent 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 U.S. citizenship, the papers say.

In an online chat captured by law enforcement, Katz admitted Liberty Reserve was “illegal” and noted that authorities in the United States knew it was “a money-laundering operation that hackers use.”

Budovsky and another man identified by Spanish authorities as Azzeddine el Amine were arrested Friday at Madrid’s Barajas airport while trying to catch a connecting flight from Morocco to Costa Rica. Both men have indicated they will fight any move to send them to the U.S.

This article appeared in print on page 14 of the May 29th, 2013 edition of Hamodia.