Arthur Budovsky, the founder of the now defunct notorious cryptocurrency service Liberty Reserve, has pleaded guilty to one charge of conspiring to run a money laundering service.
The guilty plea before the U.S. District Judge Denise L. Cote of the Southern District of New York occurred Friday and followed Budovsky’s arrest in Spain back in 2013.
Liberty Reserve, at its zenith, was a massive online money exchange that used its own virtual currency, known as the Liberty Reserve, or simply “LR”, to provide anonymous payment processing services for online customers.
Customers were able to open an account anonymously using nothing more than an email address, and unlike Bitcoin it didn’t have a public ledger, meaning it quickly became a haven for thousands of cyber criminals across the world.
“After a prior conviction for operating an unlicensed money transmitting business, Budovsky developed Liberty Reserve, which quickly became a premier service used by criminals around the world to launder their criminal proceeds,” Assistant Attorney General Leslie R. Caldwell said in a statement. “As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”
“Arthur Budovsky founded and operated Liberty Reserve, an underworld cyber-banking system that laundered hundreds of millions of dollars in illicit proceeds for criminals around the world,” U.S. Attorney Bharara added. “The only liberty that Budovsky and Liberty Reserve promoted was the freedom to commit and profit from crime. Thanks to this truly global investigation that included cooperation from 17 countries, Liberty Reserve has been shut down, and its founder Arthur Budovsky stands convicted in an American court of law, facing the loss of his own liberty.”
One of the more concerning aspects of the Department of Justice’s case against Liberty Reserve rests on the growing overreach of American justice into countries to which they should have no jurisdiction, and this case is no different.
The DoJ itself specifies that Budovsky ran the business from Costa Rica, where he eventually became a citizen, then he was ultimately arrested in Spain; if indeed Liberty Reserve was operating legally in Costa Rica, is it fair that such as business is then treated under American laws?
Another concern from the case was allegations by the DoJ that “virtually all” of Liberty Reserve’s business is derived from suspected criminal activity, despite the fact it had over five million customers, or as SiliconANGLE’s Mike Wheatley wrote at the time:
Now excuse me, but “virtually all”?!
If that isn’t an exaggeration, I don’t know what is…
While there’s little question that the service certainly attracted some dubious customers, it’s highly unlikely five million of them were, and at the time many legitimate users of the site complained that they had unfairly lost their funds when the DoJ closed the site down.
Four co-defendants, Vladimir Kats, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev, have already pleaded guilty, with Marmilev and Chukharev were sentenced to five years and three years in prison, respectively. Kats and El Amine await sentencing.
Budovsky is scheduled to be sentenced on May 6, 2016.