Online currency firm indicted in huge fraud case
Source: Agencies |
May 29, 2013, Wednesday
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Print Edition
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THE founder of an online currency transfer business has been indicted in the United States along with six other people in a US$6 billion money-laundering scheme described as "staggering" in its scope.
Arthur Budovsky is the founder of Liberty Reserve, a Costa Rica-based website long favored by cybercrime scammers. He was arrested in Spain last Friday.
A defendant identified as Budovsky's partner, Vladimir Kats, was in custody in New York.
Authorities say the network processed at least 55 million illegal transactions worldwide for 1 million users, including 200,000 in the United States. They call the international money-laundering case the largest ever.
"The scope of the defendants' unlawful conduct is staggering," said an indictment unsealed in federal court in Manhattan yesterday.
In a statement, Costa Rica police confirmed that Budovsky had been arrested in Spain on money laundering charges and that several premises linked to his company had been raided.
A notice pasted across Liberty Reserve's website last week said the domain "has been seized by the United States Global Illicit Financial Team."
Cyber criminals
The indictment calls the network "one of the principal means by which cyber criminals around the world distribute, store and launder proceeds of their illegal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking."
Liberty Reserve allowed users to open accounts using fictitious names, including "Russian Hacker" and "Hacker Account." The network charged a 1 percent fee on transactions.
Budovsky and Katz have previous convictions on charges related to an unlicensed money-transmitting business, according to court papers. After that case, the pair decided to move their operation to Costa Rica, where Budovsky officially renounced his US citizenship.
In an online chat captured by law enforcement, Katz admitted Liberty Reserve was "illegal" and noted that US authorities knew it was "a money laundering operation that hackers use."
Aditya Sood, a computer science doctoral candidate at Michigan State University who has studied the underground economy, described Liberty Reserve as a no-questions-asked alternative to the global banking system, with little more than a valid email needed to open an account and start moving money across borders.
Offshore centers
"You don't need to provide your full details, or personal information, or things like that," Sood said. "There's no way to trace an account. That's the beauty of the system."
People using Liberty Reserve rely in part on offshore currency centers, generally set up in places beyond the reach of US or European law enforcement, which monitor transactions moving cash in and out of the mainstream financial system. Liberty Reserve has many legitimate users, but the promise of untraceable transactions has long made it attractive to scammers.
Liberty Reserve appears to have played an important role in laundering the proceeds from the recent theft of some US$45 million from two Middle East banks.
The complaint against one of the Dominican Republic gang members allegedly involved in the theft states that thousands of dollars' worth of stolen cash was deposited into two Liberty Reserve accounts via currency centers based in Siberia and Singapore.
Arthur Budovsky is the founder of Liberty Reserve, a Costa Rica-based website long favored by cybercrime scammers. He was arrested in Spain last Friday.
A defendant identified as Budovsky's partner, Vladimir Kats, was in custody in New York.
Authorities say the network processed at least 55 million illegal transactions worldwide for 1 million users, including 200,000 in the United States. They call the international money-laundering case the largest ever.
"The scope of the defendants' unlawful conduct is staggering," said an indictment unsealed in federal court in Manhattan yesterday.
In a statement, Costa Rica police confirmed that Budovsky had been arrested in Spain on money laundering charges and that several premises linked to his company had been raided.
A notice pasted across Liberty Reserve's website last week said the domain "has been seized by the United States Global Illicit Financial Team."
Cyber criminals
The indictment calls the network "one of the principal means by which cyber criminals around the world distribute, store and launder proceeds of their illegal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking."
Liberty Reserve allowed users to open accounts using fictitious names, including "Russian Hacker" and "Hacker Account." The network charged a 1 percent fee on transactions.
Budovsky and Katz have previous convictions on charges related to an unlicensed money-transmitting business, according to court papers. After that case, the pair decided to move their operation to Costa Rica, where Budovsky officially renounced his US citizenship.
In an online chat captured by law enforcement, Katz admitted Liberty Reserve was "illegal" and noted that US authorities knew it was "a money laundering operation that hackers use."
Aditya Sood, a computer science doctoral candidate at Michigan State University who has studied the underground economy, described Liberty Reserve as a no-questions-asked alternative to the global banking system, with little more than a valid email needed to open an account and start moving money across borders.
Offshore centers
"You don't need to provide your full details, or personal information, or things like that," Sood said. "There's no way to trace an account. That's the beauty of the system."
People using Liberty Reserve rely in part on offshore currency centers, generally set up in places beyond the reach of US or European law enforcement, which monitor transactions moving cash in and out of the mainstream financial system. Liberty Reserve has many legitimate users, but the promise of untraceable transactions has long made it attractive to scammers.
Liberty Reserve appears to have played an important role in laundering the proceeds from the recent theft of some US$45 million from two Middle East banks.
The complaint against one of the Dominican Republic gang members allegedly involved in the theft states that thousands of dollars' worth of stolen cash was deposited into two Liberty Reserve accounts via currency centers based in Siberia and Singapore.
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