Federal prosecutors have shut down Liberty Reserve, an online currency exchange that they say was a $6 billion scam that helped criminals launder incredible sums of money.
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,”reads 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 Manhattan U.S. Attorney Preet Bharara’s office, the online currency exchange network had about 1 million users throughout the globe, 200,000 of which were located in the U.S.
Between 2006 and May 2013,Liberty Reserve carried out more than 55 million financial transactions and laundered more than $6 billion in criminals proceeds.
Liberty Reserve was founded Arthur Budovsky, who launched the service after he faced money laundering charges in 2006 over a failed online currency business known as E-Gold, which specialized in untraceable and anonymous transactions, reports PC Mag.
During the registration on the service one was not required to provide any proof about their identities. The company charged a 1 percent transaction fee, plus a 75-cent “privacy fee,” which hides account numbers and make it difficult to keep track of what was going on.
Deposits were handled by a third-party “exchanger,” which were often located in Malaysia, Russia, Nigeria, and Vietnam.
According to the indictment, the criminals, who used the online currency exchanger, were pretty confident that their activity was 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 indictment, first reported on by Internet security reporter Brian Krebs, and filed in the U.S. District Court for the Southern District of New York, accused Arthur Budovsky and five alleged co-conspirators, of running the illegal money-laundering service.
The five were arrested on Friday in Spain, Costa Rica and Brooklyn, N.Y. The arrests culminated an operation that involved law enforcement agencies form dozens of different countries, making it possibly the largest money laundering prosecution ever, Mashable reports.
In an effort to evade U.S. law enforcement, Liberty Reserve’s founder renounced his U.S. citizenship two years ago and became a citizen of Costa Rica. The company tried in vain to get approval from Costa Rican authorities to operate in the country.
They lied to the officials, telling them that their online currency exchange servie had been acquired by an international firm and would be shutting down.
They simply went underground and started transferring funds to other countries. Spain officials were able to thwart this effort and seize about $19.5 million, the indictment said.