Justice Department Closes Down Liberty Reserve Following $6 Billion Laundering Charge

Posted May 29, 2013

The U.S. Justice Department has shut down Liberty Reserve.  Liberty Reserve is one of the largest hubs used for anonymous online banking services.  Liberty Reserve was indicted under charges of running a $6 billion money-laundering scheme.  Earlier this week, the website was replaced by a notice that the domain was seized by the U.S. Global Illicit Financial Team.

Liberty Reserve’s founder Aurthur Budovsky was arrested in Spain.  Another unnamed Russian citizen was arrested in Costa Rica and the Justice Department will extradite both men to the U.S. for a trial.

This was not the first time that Budovsky ran into trouble with the Justice Department.  In July 2006, Budovsky’s company GoldAge was indicted for illegal money transmittal.  Budovsky was sentenced to 5 years of probation.  He renounced his U.S. citizenship and moved to Costa Rica to launch Liberty Reserve after that.

Liberty Reserve was used for converting funds into “Liberty Reserve Dollars,” which can be exchanged anonymously.  Liberty Reserve processed over $1.4 billion in transactions every year.  Liberty Reserve was used for helping facilitate crimes such as identity theft and operating shell companies in Russia, Spain, Australia, and China.

The Liberty Reserve owners told authorities that they were planning to cease operations prior to the raid from earlier this week.  A hacker told researcher Brian Krebs that the shut-down will cost him $25,000.

This is not the first digital currency to get raided by authorities.  Back in 2005, federal agents raided the offices of the Gold and Silver Reserve, which is a Florida-based company that operated a digital currency called E-Gold.  E-Gold founder Douglas Jackson pleased guilty in 2008 for money-laundering.

[Image Credit: Money via Bigstock Photo]