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'$6bn money-laundering website' Liberty Reserve kingpin cuffed in Spain

Feds seize 'cyber-crooks' favourite' dot-com, lay charges

Internet Security Threat Report 2014

Shadowy online money exchange Liberty Reserve has been shut down by the US feds, its dotcom website seized - and its founder arrested. He and six others are accused of running a $6bn global money-laundering operation, the biggest of its kind, according to prosecutors.

In a string of dramatic events,

  • On Friday, cops in Costa Rica raided offices linked to the underground payment service, which is alleged to be favoured by cyber-crooks. The police pulled the plug on the Latin America-based website when they grabbed servers during the swoop, effectively freezing all the service's customer accounts.
  • Meanwhile, the website's founder Arthur Budovsky, 39, was cuffed in Spain. Further arrests were made in Costa Rica and New York.
  • Then this afternoon, Budovsky and six others were indicted in the US on charges of money laundering, conspiracy to operate an unlicensed money transmitting business and operating an unlicensed money-transmitting business.
  • And the website's domain name, libertyreserve.com, was seized by the US Global Illicit Financial Team, which has cleared the site and replaced it with a takedown notice and government logos. Before that, the site's DNS records were briefly updated to resolve to Shadowserver.org, a community effort geared to fighting cybercrime.

Liberty Reserve asked for just an email address, a name and a date of birth from its users when they wished to transfer cash electronically: the money was converted into "Liberty Reserve Dollar" or "Liberty Reserve Euro" digital currencies and quickly moved with minimal bureaucracy and transfer fees no higher than $3 a transaction. These features apparently made the service popular with criminals - at least 55 million transactions were carried out - according to US prosecutors who led the investigation into Liberty Reserve.

During a press conference on Saturday, soon after the web money service went dark, Costa Rican state prosecutor Jose Pablo Gonzalez said a number of suspects as well as Budovsky were under investigation over alleged money laundering.

Today's US indictment, issued by the New York's southern district attorney's office, also links Exchangezone.com, Swiftexchanger.com, MoneyCentralMarket.com, AsianaGold.com and EuroGoldCash.com to the Liberty Reserve operation.

The official paperwork claims "the defendants [operated] an international online digital currency service and money transfer system called Liberty Reserve … which was incorporated in Costa Rica in 2006 [and] is extensively used by cybercriminals around the world for distributing, storing and laundering the proceeds of their criminal activity".

The Feds further alleged that Budovsky and his co-conspirators knowingly operated "a criminal business venture" that moved tens of millions of dollars around the world through a network of shell companies - a move to keep the cash beyond the reach of American and European investigators, it is claimed.

Budovsky was indicted in 2006 on similar charges of operating an illegal money business, called GoldAge Inc, from a New York apartment. The Feds alleged that the service transferred $30m during a four-year operation prior to its closure. Budovsky and co-defendant Vladimir Kats were found guilty and sentenced to five years' probation in 2007. However Budovsky failed to see out his punishment and fled to Costa Rica, where he set up Liberty Reserve. He also renounced his US citizenship and became a Costa Rican national.

Today's indictment charges Budovsky, Vladimir Kats, Ahmed Yassine Abdelghani, Allan Esteban Hidalgo Jimenez, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev. The defendants are presumed innocent unless and until proven guilty. ®

Internet Security Threat Report 2014

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