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Old 29-05-13, 20:52   #1
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Important FBI Seizes Online Bank-Arrests Worldwide=$6 Billion Fraud

Online currency company founder indicted for largest money-laundering scam in history 'after website users carried out millions of criminal transactions worth $6 BILLION'

'Liberty Reserve became the bank of choice for the criminal underworld'
U.S. Attorney Preet Bharara

Trouble ahead? The online currency network is similar to Bitcoin, which has garnered a large community

  • Arthur Budovsky, founder of Liberty Reserve, arrested in Spain on Friday
  • Six others have also been charged in $6 billion money transfer scheme
  • Liberty Reserve allowed users to convert money to online currency
  • Transactions 'hid the proceeds of crimes including credit card fraud, child pornography, identity theft and drugs trafficking'
  • U.S. Attorney: 'It was the bank of choice for the criminal underworld'
By Daily Mail UK, 29 May 2013

The founder of an internet company that allows users to convert money to an online currency has been indicted in the U.S. for a massive $6 billion money-laundering scheme - in what authorities have called the largest case of its kind in history.
Arthur Budovsky, the founder of Liberty Reserve, was arrested in Spain on Friday.

The Costa Rica-based company, which had more than one million users, allegedly helped hide 55 million illegal transactions across the world, authorities said today.

In total, seven people indicted for their alleged part in the cyber network, which authorities said was 'staggering' in scope. Budovsky's partner, Vladimir Kats, is in custody in New York.

Complex: Preet Bharara, U.S. Attorney for the Southern District of New York, explains the global interests of Liberty Reserve during a news conference about the money-laundering arrests of its founders

U.S. shuts digital money system it suspects of criminal links

Budovsky's deputy, Azzedine El Amine was also arrested, as were two technology designers, Maxim Chukarev and Mark Marmilev.

Two more company employees were still at large in Costa Rica according to officials: Ahmed Yassine Abdelghani and Allan Esteban Hidalgo Jimenez.

The investigation involved law enforcement in 17 countries and 'is believed to be the largest money laundering prosecution in history,' the prosecutor's office said.

The suspects were indicted for allegedly facilitating millions of transactions that hid the proceeds of credit card fraud, identity theft, computer hacking, child pornography, narcotics trafficking and other crimes, Manhattan U.S. Attorney Preet Bharara said on Tuesday.
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'.

'The scope of the defendants' unlawful conduct is staggering,' it added.

Press conference: Mythili Raman, left, from the Dept. of Justice, accompanied by Preet Bharara, U.S. Attorney for the Southern District of New York, speaks about the scheme on Tuesday


Liberty Reserve was an online payment network that allowed users to convert dollars or euros into currency that could be exchanged on the internet.
According to the indictment, Liberty Reserve's currency unit was called the 'LR'. Users opened accounts at Liberty Reserve giving only a name, address and date of birth that the company made no attempt to verify.
Customers funded their Liberty Reserve accounts with payments from a bank wire, postal money order or other money transfers. It was then converted to LR.

Funds could then be transferred to or bought by another account holder via third-party exchange merchants. Each transaction cost $2.99.

Liberty Reserve allowed users to open accounts using fictitious names, including 'Russian Hacker' and 'Hacker Account.'
The indictment said Liberty Reserve did not collect any banking or transaction information from the third-party exchange companies. It also let its users hide their Liberty Exchange account numbers when making transactions, which offered another opportunity for the users to mask their true identities.

The company processed around 12 million financial transactions per year. Since it began operating in 2006, the indictment said, Liberty Reserve laundered over $6 billion in criminal proceeds.
Digital currency is made up of transferable units that can be exchanged for cash. Over the past decade, its use has expanded, attracting attention from the media and Wall Street.
The most widely known digital currency is called Bitcoin. Liberty Reserve's currency was not connected to Bitcoin.

In announcing the case on Tuesday afternoon, U.S. Attorney Preet Bharara said the network 'became the bank of choice for the criminal underworld'.

Its digital currency service was designed to shield the identity of crooked users seeking to launder ill-gotten gains, he said.

'The coin of the realm was anonymity,' he said. 'It was the opposite of a know-your-customer policy.'

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'.
Liberty Reserve's demise is likely to send a sharp shock across the Internet.

It allowed users to open accounts using fictitious names, including 'Russian Hacker' and 'Hacker Account.' The network charged a 1 per cent 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 U.S. citizenship, the papers say.

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'.

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.

Explanation: Bharara speaks beside a chart detailing the operation of the Costa Rica-based company

'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.'

Liberty Reserve's ease of use also attracted a thriving community of tech-savvy users in countries with limited access to credit cards, said Mitchell Rossetti, whose Houston-based ePayCards.com was one of several mainstream merchants that accepted the online-only currency.
Rossetti said his business still had about $28,000 tied up in Liberty Reserve accounts. Liberty Reserve's irreversible transactions made it attractive to small merchants worried about fraud.

'The irony of this is I went to them because of the security,' Rossetti said. 'All sales were final.'

He acknowledged that the currency was being used by scammers, but said Liberty Reserve was just like any other currency. 'The U.S. dollar can be donated to a church or it can pay a prostitute,' he said.

Liberty Reserve appears to have played an important role in laundering the proceeds from the recent theft of some $45 million from two Middle Eastern banks, according to legal documents made public by U.S. authorities earlier this month.

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.

The Costa Rica police statement said that they raided three homes and five businesses linked to Liberty Reserve and seized papers and digital documents that will be turned over to U.S. authorities.
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