U.S.: Liberty Reserve case no comment on e-currency exchangers

May 29, 2013 at 3:30 AM
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NEW YORK, May 29 (UPI) -- Charging seven men with running a $6 billion online money-laundering business is not an indictment of all digital currency exchangers, U.S. officials said.

Exchange providers that comply with the law "have nothing to fear from Treasury," David Cohen, the U.S. Treasury Department's undersecretary for terrorism and financial intelligence, said at a news conference announcing charges against the operators of the Liberty Reserve SA global currency exchange, which billed itself as the "oldest, safest and most popular payment processor ... serving millions all around a world."

The currency-transfer and payment-processing company's alleged money laundering shielded criminals worldwide trafficking in everything from stolen identities, credit-card fraud and online Ponzi schemes to drug running and child pornography, prosecutors said.

Clamping down on these illegal activities "does not mean that we are trying to eliminate virtual currencies," Cohen said.

Online payment systems and digital currencies held great promise for consumers and for increasing their access to financial services, he said.

But "if Al Capone were alive today, this is how he would be hiding his money," Richard Weber, who heads the Internal Revenue Service's criminal investigation division in Washington, said at the New York news conference.

"Our efforts today shatter the belief among high-tech money launderers that what happens in cyberspace stays in cyberspace," Weber said.

Among the men indicted were Liberty Reserve founder Arthur Budovsky and co-founder Vladimir Kats, as well as five employees.

Their defense attorneys could not be reached or declined to comment.

Budovsky, who renounced his U.S. citizenship in 2011, was arrested in Spain Friday, officials said. Others were arrested in Costa Rica, where Liberty Reserve was incorporated in 2006.

Two of the indicted men remained at large in Costa Rica, authorities said.

All were charged with conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business.

The money-laundering count carries a maximum 20-year sentence, and the two other charges carry a maximum of 5 years each.

Liberty Reserve let customers convert and move money among accounts online anonymously, with almost no questions asked, authorities said.

Accounts could be opened "using fictitious or anonymous identities," including "blatantly criminal monikers" such as "Russia Hackers," the federal indictment states.

One undercover agent easily registered under the name "Joe Bogus" and gave a purported address of "123 Fake Main St., Completely Made Up City, USA."

In his online application, he explained his reason for setting up the account was to rip off cash-machine customers "for cocaine."

That no-questions-asked verification system made Liberty Reserve the premier bank for cybercriminals, prosecutors said.

The company processed 55 million illicit transactions for 1 million users worldwide over seven years, including 200,000 U.S. customers, prosecutors said.

"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," U.S. Attorney Preet Bharara said alongside officials from the U.S. Justice and Treasury departments, Secret Service and Immigration and Customs Enforcement.

"As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the Earth," Bharara said.

The website and four other related domain names were seized and shut down, officials said. Authorities also seized or restricted the activity of 45 bank accounts.

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