They've got muck; we've got rakes. TPM Muckraker
But Budovsky's move to Costa Rica now looks futile. On Tuesday, authorities in New York announced federal charges against him, his company, and six associates and former associates, and accused them of operating what was, in effect, "the bank of choice for the criminal underworld."
The amount of dirty money Liberty Reserve is accused of handling is remarkable. Since its founding in 2006, Liberty Reserve allegedly processed 55 million illegal transactions for at least 1 million users, and laundered more than $6 billion in suspected proceeds of crimes including identity theft, computer hacking, child pornography, and drug trafficking. The investigation and takedown of the company reached across 17 countries, and was touted by the U.S. Attorney's Office for the Southern District of New York as possibly the largest international money laundering prosecution in history.
"As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes — the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers, and traffickers," U.S. Attorney Preet Bharara said in a statement. "The global enforcement action we announce today is an important step towards reining in the 'Wild West' of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth."
The federal indictment filed against Liberty Reserve offers a glimpse of the company's inner workings. According to prosecutors, Liberty Reserve made its money by charging a one-percent fee every time a user transferred the company's digital currency, called "LR," to another user. An additional 75 cent "privacy fee" would be charged if a user wanted to hide his account number from making a transfer, making the transaction practically untraceable.
To help keep their customers anonymous, Liberty Reserve allegedly did not accept or issue direct transfers of money. Instead, users had to make deposits and withdrawals of LR through third-parties known as "exchangers." Liberty Reserve recommended a number of "pre-approved" exchangers to its customers, many of which operated in Malaysia, Russia, Nigeria, and Vietnam.
Liberty Reserve allegedly did not require users to verify any personal information, and users regularly set up accounts under false names -- the indictment provides examples of usernames including "Russia Hackers" and "Hacker Account." A senior law enforcement official who spoke to The New York Times said that one undercover agent working on the case was able to register accounts under names like "Joe Bogus" and listing "for cocaine" as the purpose for an account.
According to the Times, the take down of Liberty Reserve appeared to have a "chilling effect" on cyber criminals, who took to online forums to express anxiety about how to access seized funds.
Liberty Reserve and the seven individuals named in the indictment were charged with money laundering and operating an unlicensed money transmitting business. Five of the defendants, including Budovsky, were arrested on Friday in Spain, New York, and Costa Rica. Two of the defendants, Ahmed Yassine Abdelghani and Allan Esteban Hidalgo Jimenez, remain at large in Costa Rica.