US accuses currency exchange of laundering $6bn
United States prosecutors have filed an indictment against the operators of digital currency exchange, Liberty Reserve, accusing the Costa Rica-based company of helping criminals around the world launder more than $6bn in illicit funds linked to everything from child pornography to software for hacking into banks, Reuters reported.
The indictment unsealed on Tuesday said Liberty Reserve had more than a million users worldwide, including at least 200,000 in the United States, and virtually all of its business was related to suspected criminal activity.
US Attorney Preet Bharara called the case perhaps 'the largest international money laundering case ever brought by the United States.'
'Liberty Reserve has emerged as one of the principal means by which cyber-criminals around the world distribute, store and launder the proceeds of their illegal activity,' according to the indictment filed in US District Court for the Southern District of New York.
Officials said authorities in Spain, Costa Rica and New York arrested five people on Friday, including the company's founder, Arthur Budovsky, and seized bank accounts and Internet domains associated with Liberty Reserve.
Switzerland's Federal Office of Justice said the United States had requested legal assistance on May 16. The Swiss said they complied with the request in full by May 21, seizing a computer server used by Liberty Reserve.
The indictment detailed a system of payments that allowed users to open accounts under false names with blatant monikers like 'Russia Hackers' and 'Hacker Account'.
The use of digital currency has expanded over the past decade, attracting users ranging from video gamers looking for ways to buy and sell virtual goods to those who lack faith in the traditional banking system.
Touted by some investors as the future of money, these virtual currencies have gained the attention of US regulators looking to bring them under anti-money-laundering rules.
The US Treasury said on Tuesday it named Liberty Reserve under the USA Patriot Act as 'specifically designed and frequently used to facilitate money laundering in cyber space.'
That designation, a first against a virtual currency exchange, prohibits banks or other payment processors from doing business with Liberty Reserve, even under a new name.
The Treasury also said Liberty Reserve's virtual currency was used to anonymously buy and sell software designed to steal personal information and attack financial institutions.
Liberty Reserve, with around 12 million transactions per year, laundered over $6bn in criminal proceeds since it began operating in 2006, the indictment said.