URGENT >> BULLETIN >> MOVING: Liberty Reserve, Founder, Others Indicted In New York

breakingnews72URGENT >> BULLETIN >> MOVING: (15TH UPDATE 2:31 P.M. EDT U.S.A.) Liberty Reserve, its founder and several others have been indicted in U.S. District Court for the Southern District of New York (Manhattan).

The charges, which include conspiracy to commit money-laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business, were confirmed this morning by the office of U.S. Attorney Preet Bharara.

Liberty Reserve founder Arthur Budovsky was using the aliases “Eric Paltz” and “Arthur Belanchuk,” according to the indictment.

Co-conspirators, according to the indictment, include Vladimir Kats, also known as “Ragnar”; Ahmed Yassine Abdelghani, also known as “Alex”; Allan Esteban Hildago Jimenez, also known as “Allen Garcia”; Azzeddine El Amine; Mark Marmilev, also known as “Marko”; and Maxim Chukharev.

Marmilev also is known as “Mark Halls,” according to an affidavit that accompanies the indictment.

Budovsky and El Amine were arrested Friday in Spain, Bharara’s office said today. Kats and Marmilev were arrested Friday in Brooklyn. Chukharev was arrested Friday in Costa Rica. Hildago and Abdelghani are “at large” in Costa Rica.

“As alleged, 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,” Bharara said. “The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking. As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth.”

Added Steven G. Hughes, special agent in charge of the U.S. Secret Service. “These arrests are an example of the Secret Service’s commitment to investigate and apprehend criminals engaged in the misuse of virtual currencies to conduct global monetary fraud. Cyber criminals should be reminded today that they are unable to hide behind the anonymity of the Internet to avoid regulated financial systems.”

The IRS and the U.S. Department of Homeland Security (U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI)) also are involved in the probe, as are multiple nations, Bharara’s office said.

Liberty Reserve and its co-conspirators “intentionally created, structured, and operated Liberty Reserve as a criminal business venture, one designed to help criminals conduct illegal transactions and launder the proceeds of their crimes,” according to the indictment.

The United States has seized the Liberty Reserve domain name along with several others, according to an affidavit that accompanies the indictment. The others include: ExchangeZone.com; SwiftExchanger.com; MoneyCentralMarket.com; and Asianagold.com. As part of the seizure process, a federal judge ordered the U.S. Secret Service to point the domain nameservers to a “sinkhole” URL at ShadowServer.org.

News about the seizures destroys various examples of wishful thinking advanced by online HYIP hucksters at forums such as TalkGold and MoneyMakerGroup since LibertyReserve’s domain went offline Friday. On Saturday, reports surfaced that Budovsky had been arrested in Spain and that Liberty Reserve was under investigation in Costa Rica and the United States.

Seizure notices are expected to appear on the domains, although the timing was not clear.

The indictment ties Liberty Reserve to the crimes of “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”

Among other things, the indictment alleges that “virtually all of Liberty Reserve’s business derived from suspected criminal activity” and that the scope of the fraud is “staggering.”

Between 2006 and May 2013, according to the indictment, Liberty Reserve processed an estimated 55 million transactions and is believed “to have laundered more than $6 billion in criminal proceeds.”

Supporting affidavits in the case show that the indictment was returned under seal on May 20 and that prosecutors applied for an injunction barring Amazon Web Services Inc. from providing services to Liberty Reserve. The affidavit also shows that the United States is seeking forfeiture of sums on deposit in at least 42 accounts in various countries

These banks are in countries such as Costa Rica, Cyprus, Russia, Hong Kong, China, Morocco, Spain, Latvia, Australia and the United States. Tens of millions of dollars are being sought in forfeiture actions, although the final sum is unclear.

Liberty Reserve, according to the indictment, used “exchangers” in countries with little oversight, including Malaysia, Russia, Nigeria and Vietnam. The process was part of a criminal scheme to bury evidence of fraud while providing anonymity for the fraudsters.

The enterprise, according to the indictment, functioned “in effect as the bank of choice for the criminal underworld.”

Link to documents posted by Bharara’s office. Read statement by Bharara’s office.

In a separate but related action, the U.S. Department of the Treasury announced it had identified Liberty Reserve as a “Financial Institution of Primary Money Laundering Concern.”

“Treasury is determined to protect the U.S. financial system from cyber criminals and other malicious actors in cyberspace, including overseas entities like Liberty Reserve that facilitate online crime and hope to evade regulatory scrutiny,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. “We are prepared to target and disrupt illicit financial activity wherever it occurs – domestically, at the far reaches of the globe or across the internet.”

 

 

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21 Responses to “URGENT >> BULLETIN >> MOVING: Liberty Reserve, Founder, Others Indicted In New York”

  1. So it’s a crime for these guys to launder money, but perfectly acceptable and virtually applauded for HSBC, Goldman Sachs and JP Morgan banks to do it.

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  2. mb: So it’s a crime for these guys to launder money

    Yes. It is.

    mb: but perfectly acceptable and virtually applauded for HSBC, Goldman Sachs and JP Morgan banks to do it.

    Seriously. Who “virtually applauded?” Who said it was “perfectly acceptable?”

    Good grief, mb. What talking points are you going to trot out next? The Evil U.S. government?

    Criminal organizations are reaching into bank accounts globally and stealing billions and billions of dollars. The security risk is untenable. That legitimate banks can become the respository of these funds poses a tremendous danger to legitimate commerce because it undermines confidence in legitimate markets and institutions.

    I read so many conspiracy theories from HYIP players over the weekend that I felt like projectile vomiting. The criminals feed them the story lines and they dutifully try to deflect from the real issue.

    Patrick

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  3. When the two Saudi banks got hacked to the tune of millions where did you think the money went? Not HSBC, Chase, or whatever. It went through Liberty Reserve and from there to parts unknown. (Ref: KrebsonSecurity)

    Would the criminals have tried to use a real bank? Doubt it.

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  4. Quick note: U.S. Department of the Treasury issues statement on Liberty Reserve and identifies it as “Financial Institution of Primary Money Laundering Concern.”

    http://www.treasury.gov/press-center/press-releases/Pages/jl1956.aspx

    Snippet:

    Liberty Reserve is widely used by criminals worldwide to store, transfer, and launder the proceeds of a variety of illicit activities. Liberty Reserve’s virtual currency has become a preferred method of payment on websites dedicated to the promotion and facilitation of illicit web based activity, including identity fraud, credit card theft, online scams, and dissemination of computer malware. It has sought to avoid regulatory scrutiny while tailoring its services to illicit actors.

    Treasury’s regulatory action today was taken in coordination with the unsealing of an indictment by the U.S. Attorney’s Office for the Southern District of New York, which charged Liberty Reserve and seven of its principals – Arthur Budovsky, Vladimir Kats, Azzedine El Amine, Mark Marmilev, Maxim Chukharev, Ahmed Yassine Abdelghani, and Allan Esteban Hidalgo Jimenez – in Manhattan federal court for their alleged roles in running a $6 billion money laundering scheme and operating an unlicensed money transmitting business.

    “Treasury is determined to protect the U.S. financial system from cyber criminals and other malicious actors in cyberspace, including overseas entities like Liberty Reserve that facilitate online crime and hope to evade regulatory scrutiny,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. “We are prepared to target and disrupt illicit financial activity wherever it occurs – domestically, at the far reaches of the globe or across the internet.”

    Patrick

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  5. The story is now on Vulture Central. I didn’t see any new info:
    http://www.theregister.co.uk/2013/05/28/liberty_reserve_titsup/

    Rather than the deflection argument to HSBC etc, I prefer the conspiracy theory mentioned in the other thread – that PerfectMoney is really behind this. PerfectMoney has paid off the BBC, El Reg, & others to get LR closed down. It’s always good to see the ponzi operators/supporters/enablers fighting amongst themselves.

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  6. Associated Press also has the story, via Yahoo:
    http://news.yahoo.com/ny-indictment-filed-6b-money-140225894.html

    In an online chat captured by law enforcement, Katz admitted Liberty Reserve was “illegal” and noted that authorities in the United States knew it was “a money laundering operation that hackers use.”

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  7. Quick note: The Securities and Exchange Commission of the Republic of the Philippines has issued a warning on the JSSTripler/JustBeenPaid and ProfitClicking scams.

    The warning was published May 24. Not sure if it has anything to do with the Liberty Reserve matter, but lots and lots of the HYIP/fraud scams use Liberty Reserve.

    The Philippines’ agency posted several warnings on May 24.

    http://www.sec.gov.ph/

    In addition to JSS/JBP/ProfitClicking, the May 24 warnings include:

    * FINANCE GLOBAL MARKETING SERVICES
    * FINASIA GLOBAL
    * 1RIDERSPOWER TEAM INC.
    * EVERGREEN COMPANY
    * OK’S GLOBAL WELLNESS, INC.
    * CARDLINKS TELECONN INSURANCE AGENCY INC. (formerly: Cardlink Teleconn Inc.)

    Patrick

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  8. Tony H: Rather than the deflection argument to HSBC etc, I prefer the conspiracy theory mentioned in the other thread – that PerfectMoney is really behind this. PerfectMoney has paid off the BBC, El Reg, & others to get LR closed down. It’s always good to see the ponzi operators/supporters/enablers fighting amongst themselves.

    As Tony points out, some of the HYIPers were advancing conspiracy theories in the early hours after a newspaper in Costa Rica (The Tico Times) broke the news of the Liberty Reserve investigation on May 24.

    The contention seemed to be that a small newspaper and a local TV station in Costa Rica that also had the story couldn’t be trusted. In essence, “proof” was demanded from larger media outlets. When that didn’t happen instantly — indeed, it was a holiday weekend — the shills declared the story wrong.

    And then some of the shills weaved a conspiracy theory by which PerfectMoney had planted the story and that the media outlets that reported on the LibertyReserve matter were getting paid off.

    The BBC finally did a report, but then the shills moved the goalposts to try to find a way to discredit that story and/or create confusion.

    On a side note, the Liberty Reserve story now has been atop Google News for at least 90 minutes (as of this writing) — this being the first business day in the United States since Friday and the first day the U.S. federal courts have been open since Friday. So, I guess we’ll have to see how the shills try to spin the fact the story is global now — in newspapers and on TV and radio.

    Naturally the early take from the HYIP apologists is that the U.S. government is evil.

    Patrick

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  9. From the U.S. Secret Service this afternoon:

    “U.S. Secret Service, HSI and IRS-CI executed arrest and search warrants in seven countries to include Spain, Costa Rica, the Netherlands and the United States. Assets of Liberty Reserve will also be frozen in Hong Kong, Spain, Morocco and China. Current and former executives of Liberty Reserve are charged with violating numerous anti money laundering statutes and operating as illegal money transmitters.”

    Source:

    http://www.secretservice.gov/press/GPA02-13_Liberty_Dollars.pdf

    Patrick

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  10. Quick note: Someone on the Profitable Sunrise Facebook site now is pitching something called “Dzen-Invest,” which apparently takes only PerfectMoney.

    From the Dzen-Invest pitch:

    “All you need to do is sign up at Dzen-Invest and invest trough [sic] Perfect Money online payment system. You do not need to invest big! The minimum amount you can deposit isonly [sic] $5.”

    Patrick

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  11. I just loved this post from LadyM12 @ MMG in the ProfitClicking thread, and I quote with question marks and exclamation marks:

    “Wow, 3 payment processors with legal issues all in the last two days. Here we go again. The US authorities have been working overtime. PM won’t accept any new registrations from US members. What the????????????????!!!!!!!!!!!!!! I believe US members make up the majority of the membership base in these programs. So, now what happens?!!!!!

    I really was only using STP in programs anyway. I do have accounts in the other processors, but most were just too cumbersome and expensive to get cash in and out of them. So, I didn’t really use them.

    This is deja vu from 2010 with all these processors having issues with the US authorities. They always have to ruin it for US members.

    UNCLE SAM to the RESCUE!!!!!!!!!!!!! NOT!!!!!!!!!!!!!!!!!!!!”

    Says it all doesn’t it.

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  12. As the PP Blog reported on April 15, 2013, some of the cash from the alleged Profitable Sunrise HYIP scheme allegedly made its way to an entity known as Technocash Limited of Sydney.

    http://patrickpretty.com/2013/04/15/bulletin-not-just-europe-court-filings-in-profitable-sunrise-fraud-case-say-some-of-the-money-went-to-entities-in-australia-and-panama/

    The indictment in the Liberty Reserve case released today by Bharara’s office makes THREE references to Technocash Limited, which apparently used Westpac Bank in Australia. There may be more than $36.9 million in the Technocash accounts at Westpac, according to the Liberty Reserve indictment.

    This story in The Australian references the Techocash accounts at Westpac in the context of Liberty Reserve:

    http://www.theaustralian.com.au/business/westpac-caught-up-in-biggest-ever-money-laundering-scheme/story-e6frg8zx-1226652722579

    Patrick

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  13. The BBC has updated their story:
    http://www.bbc.co.uk/news/technology-22699871

    The takedown of the Liberty Reserve digital cash exchange has caused “pain” to criminals who used the facility, according to a leading security expert.
    [snip]
    If you’re running a cybercrime operation and you lose half or three-quarters of your capital that can hurt and put a dent in your overall ability to perpetuate your business or whatever you are doing.

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  14. Well so much for it being “safer offshore”

    From El Pais – in English

    http://elpais.com/elpais/2013/05/29/inenglish/1369853619_003057.html

    “The Paypal of Cybercrime” is a wonderful description of this and other non US registered payment processors.

    It is interesting that the authorities involved are very clear about the less than innocent uses made of these offshore payment processors. Will any of their HYIP member clients wake up to the fact that their money games involve them with some pretty heavy duty criminals?

    Wonder who will be next? Will Canada continue to be a safe haven for those who are running HYIPs?

    On another note: Why is that cyber crooks and their followers are naive enough to think that the world outside the US is happy with internet fraud? For example,in most European countries the authorities take a very dim view of their citizens being defrauded. This isnt the first time that Europe has taken active steps to put the brakes on. You may recall that it was Spain who arrested and jailed German Cardona of EMG/Finanzas Forex and many European countries have far stricter laws that the US on MLMs. Australia is no longer a safe place to promote scams either. Non US does NOT mean “safer than the US”

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  15. Non US means, actually, “not even a chance to get anything back”. All the pimps and shills are crying over their downline lists this week, but how many HYIPs got cleaned out from this? And how many people are finally waking up to he fact that keeping anything in the payment processors isn’t safe, either? If the story I read about STP being underfunded are remotely true, this could cause their customers to draw down balances and that may lead them to collapes in a pile of insolvency.

    The real ironic part to me is that since the “programs” in question are some combination of illegal and/or registered under false names, there won’t be much of a refund process. And anyone trying to redeem their account who has a past history of using it to play illegal games may not get to participate in any refund process.

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  16. And of course, the US government gets the blame for all the “losses” sustained by the HYIPsters. ;)

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  17. The Guardian has a story about how Budovsky is accused of marriage fraud. It also has a photo of his arrest.
    http://www.guardian.co.uk/world/2013/may/30/liberty-reserve-budovsky-marriage

    The woman was quoted by the paper as saying Budovsky paid her $800 to marry him and promised they would get a divorce after two years. She said they were still married.

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  18. Tony H:
    The Guardian has a story about how Budovsky is accused of marriage fraud. It also has a photo of his arrest.
    http://www.guardian.co.uk/world/2013/may/30/liberty-reserve-budovsky-marriage

    Too bad it’s too late for her to divorce him and take him for half of all he had.

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  19. Another story on LR from the Tico Times, this time its about potential high level political connections:
    Costa Rican President Chinchilla denies link to Liberty Reserve attorney
    http://www.ticotimes.net/More-news/News-Briefs/Costa-Rican-President-Chinchilla-denies-link-to-Liberty-Reserve-attorney-_Friday-May-31-2013

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  20. And now to Vietnam
    http://tuoitrenews.vn/society/10230/vietnam-to-probe-possible-laundering-in-virtual-currency-case

    Vietnamese police will investigate Liberty Reserve-related laundering activities by a local company when obtaining evidence of such an offence from their foreign counterparts, said an official at the Ministry of Public Security.

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