Liberty Reserve Founder extradited to US
Against the backdrop of payment processors continuing to provide services to the MLM underbelly’s shadiest of schemes, the Liberty Reserve money laundering case continues.
Once describing itself as ‘the oldest, safest and most popular payment processor’, Liberty Reserve was shutdown in mid 2013 for money laundering.
Co-founder Vladmir Kats was the first to accept responsibility, having pled guilty to ‘money laundering and operating an unlicensed money transmitting business’ last November.
Kat’s partner and fellow Liberty Reserve co-founder, Arthur Budovsky Belanchuk, was arrested in Spain. His offices in Costa Rica were also raided.
US authorities have been working to extradite Budovsky, with the Department of Justice announcing the success of those efforts last Friday.
The founder of Liberty Reserve, a virtual currency used by cybercriminals around the world to launder proceeds of their illegal activity, was extradited from Spain and arrived in the United States this afternoon.
The Department of Justice also revealed additional information about Budovsky and his alleged criminal activities:
Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities,” said Assistant Attorney General Caldwell.
“With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”
“For years, Arthur Budovsky allegedly enabled criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds through Liberty Reserve,” said U.S. Attorney Bharara.
Like I said in the beginning of this piece, even today there are still payment processors operating with an open-door compliance policy regarding MLM clients. In the wake of the Liberty Reserve shutdown, Solid Trust Pay is probably the most recognizable.
i-Payout weren’t far behind but appear to have made efforts to clean up their client roster of late.
According to allegations contained in the indictment and statements made in related court proceedings, Liberty Reserve was born out of Budovsky’s unsuccessful experience running a third-party exchange service, called Gold Age Inc., for another digital currency, called E-Gold.
In or about 2006, Budovsky was convicted in New York State of operating Gold Age Inc. as an unlicensed money transmitting business.
In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business.
In the wake of his own criminal conviction, Budovsky set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States.
Accordingly, Budovsky emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.
The belief that registering a company offshore will offer immunity from US regulators is common in MLM underbelly circles.
Liberty Reserve, which billed itself as the Internet’s “largest payment processor and money transfer system,” was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.
The indictment alleges that Budovsky devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities.
At all relevant times, Budovsky directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.
Liberty Reserve emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity.
Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions.
The indictment alleges that Budovsky was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds.
These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.
The operation of pyramid schemes is likely to be found in the list of “other crimes” Liberty Reserve facilitated.
Budovsky is among seven individuals charged in the indictment, which was unsealed on May 28, 2013.
Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pleaded guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
Budovsky arrived in New York this afternoon and will be presented before U.S. Magistrate Judge James C. Francis IV on Oct. 11, 2014, at 2:00 p.m. Budovsky will be arraigned before U.S. District Judge Denise L. Cote on Oct. 14, 2014, at 12:45 p.m.