Liberty Reserve Indicted for Laundering $6 Billion

Pulkit Chandna

Largest international anti-money laundering action in history

Last Thursday, the official website of the Costa Rica-based digital currency Liberty Reserve went offline, stirring panic among its million-odd users. It soon became clear that it was no ordinary outage, but a case of the proverbially long arm of the law finally catching up with the notorious website and delivering a death blow.

Thursday’s action, according to a statement issued by Costa Rican authorities, was the result of a money laundering investigation that began in 2011 after the local authorities received a “request from a prosecutor’s office in New York.” The next day, the Costa Rican authorities raided Liberty Reserve founder Arthur Budovsky Belanchuk’s residence and offices in Escazá, Santa Ana, just southwest of the national capital San José.

The 39-year-old Budovsky, who lived in the U.S. until he fled the country following an indictment on money laundering-related charges in 2006, was arrested in Spain the very same day. He is one of seven Liberty Reserve principals indicted in the U.S. District Court for the Southern District of New York for what U.S. authorities allege was a money laundering scheme worth $6 billion. In all, five people named in the indictment have already been arrested, including Liberty Reserve co-founder Vladmir Kats, who was arrested in Brooklyn, New York, while two are still believed to be at large somewhere in Costa Rica.

“As charged, Liberty Reserve operated, on an enormous scale, a digital currency system designed to provide cyber and other criminals with a way to launder their profits without leaving a trace,” Acting Assistant Attorney General Mythili Raman said in a Department of Justice press release which described the crackdown on Liberty Reserve as the “largest international money laundering prosecution in history”

“The company’s very purpose was to launder its users’ criminal proceeds through the U.S. and global financial system.  By indicting Liberty Reserve and its principals, restraining over $25 million in criminal proceeds, forfeiting domain names, and seizing servers in countries around the globe, our message is clear:  money launderers can run, but they can’t hide from the U.S. justice system.”

As massive as this action against Liberty Reserve may be, many people seem more interested in its possible implications for Bitcoin , a decentralized, cyrptocurrency that has drawn plenty of interest from the media and seen its value rise spectacularly over the past couple of years. While there can be no disputing its decentralized nature, the anonymity popularly associated with it seems to be an entirely different matter.

Some experts believe a large part of the anonymity usually associated with Bitcoin transactions is entirely notional , and that the system is actually more transparent than even some of the more conventional online payment systems out there.

This means that unlike their Liberty Reserve-using counterparts, people who only use Bitcoins for legitimate purposes have nothing to worry about. However, make sure that you steer clear of Bitcoin-related services that either lack proper authorization or are widely suspected of abetting illegal activities.

Follow Pulkit on Google+

Around the web