Four former-Soviet immigrants appear to be at the center of what federal prosecutors in the United States are calling a $6 billion money laundering operation conducted entirely on the internet, according to an indictment made public by the US Attorney for the Southern District of New York.
On May 28, the court announced the arrest of Arthur Belanchuk Budovsky, 39, Vladimir Kats, 41, Mark Marmilev, 33, and Maxim Chukharev, 27, along with a fifth suspect, Azzedine El Amine 46, on May 24 in New York, Spain, and Costa Rica, in connection with a digital money transfer site known as Liberty Reserve. The site, whose domain www.libertyreserve.com has also been seized by authorities, was used to conduct some 55 million transactions to transfer proceeds obtained largely from criminal activity such as “credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking,” the indictment alleges.
Two factors made the service particularly enticing to criminals, according to the Financial Times and other sources. The site did not require any identification as part of its user registration, meaning that anyone with an e-mail account could become a Liberty Reserve customer, including under a name like Joe Bogus, as the FBI apparently did to test out the system as part of its investigation. The site also operated only using its own currency, the LR, which could be deposited into a user’s account via a third-party money-exchanger, providing no direct link between Joe Bogus’s LR account and his real-life bank information in a transaction marked “for the cocaine.”
Seven suspects, two of whom remain at large in Costa Rica, are facing formal charges of money laundering and operating an unlicensed money-transmitting business in the United States, based on a joint investigation by the US Department of Justice (DOJ), the CIA, the Internal Revenue Service (IRS) and the Immigration and Customs Enforcement’s Homeland Security Investigations (HIS). The company, which is the heir to a virtual money exchanger called GoldAge that was liquidated after Budovsky and Kats pled guilty of transmitting money without a license in 2006, had been based near San Jose, Costa Rica, where local authorities first began looking into its dealings in 2009.
Budovksy, the company’s founder, has been identified as a former Kiev, Ukraine, resident, whose family emigrated to Germany. (“Mr Budovsky renounced his US citizenship in 2011, telling immigration officials that the ‘software’ his company had developed "might open him up to liability in the US, according to court filings,” writes the Financial Times, noting that Costa Rica does not have an extradition agreement with the United States.) But there is more than just their names to tie the suspects to the Soviet motherland.
Russia is listed as one of the main locations of user activity for the site, presumably due to hacker use, while the company also possessed accounts in Cyprus, a major hub for off-shore Russian banking before its collapse this spring, Latvia and Russia itself. The company also appears to have had service centers in Siberia, as well as Singapore, a detail gleamed from the recent bust of a ring of alleged Dominican Republic-based crooks who stole money from debit accounts in the Middle East before depositing thousands of dollars of cash at these centers.
More than a million users worldwide used Liberty Reserve, mostly for illicit transactions, US officials believe.