The Costa Rica-based firm, which handled massive amounts of money outside the control of national governments, is accused of running a $6 billion money laundering scheme and operating an unlicensed money transmitting business, according to the US attorney’s office for New York.
Liberty Reserve’s principals were arrested on Friday in nations including Costa Rica, Spain and the USA, with 45 bank accounts being restrained or seized.
Arthur Budovsky, 39, the principal founder of Liberty Reserve, was arrested in Spain. Co-founder Vladimir Kats, 41, was arrested in Brooklyn while two other defendants, Ahmed Abdelghani, 42, and Allan Jimanez, 28, remain at large in Costa Rica, according to prosecutors.
The investigation has involved law enforcement organisations in 17 countries and is believed to be the largest money laundering prosecution in history, according to the prosecutor’s office said.
Prosecutors added that Liberty Reserve processed at least 55 million illegal transactions for at least one million users and facilitated global criminal conduct.
Preet Bhara, the US Attorney for the Southern District of New York, commented: The only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes – the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers and traffickers.
"The global enforcement action we announce today is an important step towards reining in the Wild West of illicit Internet banking. As crimes goes increasingly global, the long arm of the law has to get even longer and, in this case, it encircled the Earth."
Liberty Reserve was incorporated in Costa Rica in 2006, and marketed itself as the Internet’s largest payment processor and money transfer system, serving millions of customers throughout the world.
It is alleged that the firm was extensively used by criminals, functioning as the criminal underworld’s bank of choice, allowing financial transaction to be made without a trace. Unlike traditional banks, prosecutors believe that Liberty Reserve did not require customers to validate their identities.
Prosecutors said that when US authorities began investigating the company, the defendants pretended to close it down, but continued to move tens of millions of dollars through shell company accounts held in an array of countries, including Australia, Russia, Cyprus, China, Hong Kong, Morocco and Spain.
Prosecutors allege that criminals regularly used blatantly fake identities when dealing with Liberty Reserve, such as ‘Hacker Account’ and Russia Hackers’.
As part of the probe, one agent is said to have created, and carried out transactions with, an account using the name ‘Joe Bogus’ living at ‘123 Fake Main Street’ in ‘Completely Made Up City, New York’.
The seven defendants are charged with conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business and of operation of an unlicensed money transmitting business. Together, the charges carry a maximum jail term of 30 years.
