Underworld Banks at Digital Currency Firm, Feds Claim
Five men have been arrested so far in Spain, Costa Rica and New York, including founder Arthur Budovsky
By: Maureen O'Gara
May. 29, 2013 07:00 AM
Federal prosecutors have accused the Costa Rica-based digital-currency firm Liberty Reserve and its founder of running a $6 billion money-laundering operation that authorities say made it a "bank of choice for the criminal underworld," the Wall Street Journal reported Tuesday.
Five men have been arrested so far in Spain, Costa Rica and New York, including founder Arthur Budovsky. Two others are still sought.
They have been charged with money laundering and running an unlicensed money-transmitting business as well as using accounts for credit-card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking.
Prosecutors said they seized 45 bank accounts and five Internet domain names allegedly used for the operation, including the domain name of Liberty Reserve. Police in 17 countries were involved.
According to an unsealed indictment it's supposed to be one of the biggest money-laundering operations ever uncovered and was set up solely for that purpose. It allegedly laundered money through 55 million transactions for at least a million users globally.
Budovsky was previously convicted of a similar scheme in 2006 for running E-Gold, another digital money-transmitting business. He gave up his American citizenship and moved to Costa Rica, where authorities also grew concerned so he "went underground" according to the indictment, but continued to operate through a shell company.
Regulators said recently that digital-currency exchanges should follow traditional anti-money-laundering rules. Other virtual currencies may now be investigated.
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