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Liberty Reserve indicted for $6 billion in money laundering

Joab Jackson | May 29, 2013
Almost all of Liberty Reserve's business was illegal in nature, US law enforcement officials assert.

The DoJ has indicted Liberty Reserve for allegedly laundering $6 billion in a series of global transactions
The DoJ has indicted Liberty Reserve for allegedly laundering $6 billion in a series of global transactions

The U.S. Department of Justice has indicted online payment processor Liberty Reserve for laundering US$6 billion in a series of global transactions, which the agency charges may be the largest international money laundering prosecution in history.

"Liberty Reserve was intentionally created and structured to facilitate criminal activity. It was essentially a black market bank," said Preet Bharara, U.S. attorney for the Southern District Court of New York, in a press conference Tuesday. "As alleged, it deliberately operated in a way to attract and aid criminals who wish to use digital currency to break the law and launder the proceeds of their crimes."

Liberty Reserve founder Arthur Budovsky was arrested in Brooklyn, New York, on Friday for operating an unlicensed money transmitting business, along with six other company principals who were arrested in Brooklyn, Spain and Costa Rica.

The DOJ has shut down the Liberty Reserve service, seizing $25 million in funds. The law enforcement agency also seized five Internet domain names, including LibertyReserve.com and four related currency exchange sites. The LibertyReserve.com site went offline Thursday, with traffic first being redirected to a DOJ banner on Tuesday. In addition, 45 bank accounts were restrained or seized and a civil action was filed against 35 third-party exchange websites that operated on behalf of Liberty Reserve.

Helping the DOJ pursue the case were the U.S. Secret Service, the Internal Revenue Service, the Department of Homeland Security's U.S. Immigration and Customs Enforcement (ICE) and the Department of the Treasury, as well as 17 law enforcement agencies from other countries.

"Our efforts shatter the belief among money launderers that what happens in cyberspace stays in cyberspace. No longer should they lull themselves into a false sense of security, thinking that the Internet provides absolute anonymity," said David Cohen, the Treasury Department's undersecretary for terrorism and financial intelligence, also at the press conference.

Incorporated in Costa Rica in 2006, Liberty Reserve S.A. billed itself as a currency exchange, a service to send and receive payments from anywhere in the globe. It charged 1 percent of the money being exchanged as a fee, up to $2.99. Registering for the service required only a valid email address, along with a name and birthdate, which Liberty Reserve did not verify. The service had more than 1 million users worldwide, including 200,000 in the U.S. It processed more than 12 million transactions yearly, amounting to a value of more than US$1.4 billion.

 

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