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NY Indictment Filed in $6 Billion Money-Laundering Case

Tuesday, May 28, 2013

Writing code on a computer (Almonroth/Wikipedia Commons)

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 last week 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, 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 percent fee on

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."

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."

 

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