Federal prosecutors have indicted seven individuals for operating Liberty Reserve, an online currency exchange that served only to help criminals launder billions around the globe.
Liberty Reserve "has emerged as one of the principal means by which cyber-criminals around the world distribute, store, and launder the proceeds of their illegal activity," according to the indictment, which was filed in New York district court. "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."
According to details released by Manhattan US Attorney Preet Bharara's office, Liberty Reserve had about 1 million users worldwide. Between 2006 and May 2013, the company processed 55 million financial transactions and laundered more than $6 billion (£4 billion) in criminal proceeds.
Liberty Reserve was the brainchild of founder Arthur Budovsky. After facing money laundering charges in 2006 over a failed online currency business known as E-Gold, Budovsky turned to Liberty Reserve, which specialised in untraceable and anonymous transactions.
Those who opened accounts with Liberty Reserve were not required to provide any proof about their identities. The company charged a one per cent transaction fee, plus a 75-cent (50 pence) "privacy fee," which would hide account numbers and make it difficult for even Liberty Reserve to keep track of what was going on. Deposits were handled by a third-party "exchanger," which were often located in little-regulated countries like Malaysia, Russia, Nigeria, and Vietnam.
As noted by the indictment, the criminals were pretty confident that their activities were not being tracked, using brazen account names like "Russia Hackers" and "Hacker Account."
Liberty Reserve was "designed to help criminals conduct illegal transactions and launder the proceeds of their crimes," the indictment said. "The defendants deliberately attracted and maintained a customer base of criminals by making financial activity on Liberty Reserve anonymous and untraceable."
The clientele was "overwhelmingly criminal in nature" – including traffickers of stolen credit card data and personal identity information; peddlers of various types of get-rich-quick schemes; computer hackers for hire; unregulated gambling enterprises; and underground drug-dealing websites.
In an effort to evade US law enforcement, Budovsky renounced his US citizenship in 2011 and became a citizen of Costa Rica. The company tried in vain to get approval from Costa Rican authorities to operate in the country. Eventually, they lied and said Liberty Reserve had been acquired by an international firm and would be shutting down. But they simply went underground and started transferring funds to other countries. Costa Rican officials were able to thwart this effort and seize about $19.5 million (£13 million), the indictment said.
According to the New York Times, Liberty Reserve helped facilitate a recent, coordinated ATM heist that landed criminals approximately $45 million (£30 million) in cash. Budovsky and two other associates were arrested in Spain, while another conspirator was arrested in Brooklyn. Two others are still at large in Costa Rica, the Times said.
At this point, the LibertyReserve.com website carries a note that says it has been seized by the US Global Illicit Financial Team.