URGENT >> 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.”
Before Liberty Reserve and its alleged co-conspirators were indicted in May, the company was involved in several horror-filled propositions. These included laundering $6 billion as part of schemes involving “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking,” federal prosecutors said.
