Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, announced today that ARTHUR BUDOVSKY pled guilty to running a massive money laundering enterprise in connection with his operation of Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity. BUDOVSKY pled guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote.
Manhattan U.S. Attorney Preet Bharara stated: “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. 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.”
Assistant Attorney General Leslie R. Caldwell stated: “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. As a result of this global investigation, however, Budovsky was returned to the United States to face justice once again.”
According to allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants, and statements made in related court filings and proceedings:
Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system.” At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and business strategy. Liberty Reserve was specifically designed by Budovsky to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities.
Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called GoldAge, Inc., for another digital currency, called E-Gold. In or about 2006, BUDOVSKY was convicted in New York State of operating GoldAge as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business. In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other things, locating the business outside the United States. Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve. BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Liberty Reserve subsequently emerged as one of the principal money transmitting services used by cybercriminals around the world to amass, distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve functioned as a financial hub for the online underworld, favored for the ease with which it enabled cybercriminals to conduct anonymous and untraceable financial transactions. Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system. These funds encompassed proceeds of investment fraud, credit card fraud, identity theft, and computer hacking, among other crimes. As part of his plea agreement, BUDOVSKY admitted to laundering more than $250 million in criminal proceeds through his operation of Liberty Reserve.
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BUDOVSKY, 42, faces a maximum sentence of 20 years in prison for conspiring to commit money laundering. This statutory maximum sentence is prescribed by Congress and is provided here for informational purposes only, as any sentence imposed on the defendant will be determined by the judge.
BUDOVSKY’s sentencing is scheduled for May 6, 2016.
Four co-defendants – Vladimir Kats, Azzeddine El Amine, Mark Marmilev, and Maxim Chukharev – have already pled guilty. Marmilev and Chukharev have both been sentenced, to five and three years in prison, respectively. Kats and el Amine await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, the Judicial Investigation Organization in Costa Rica, Interpol, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.
This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.
The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Christine Magdo, Christian Everdell, and Andrew Goldstein of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution.
The charges contained in the Indictment against the remaining defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.