Liberty Reserve Employee Pleads Guilty in Bank Scheme

The former chief technology officer of Liberty Reserve SA, described by the U.S. as a “black-market bank” that masked more than $6 billion in criminal proceeds, became the third person to plead guilty to helping run an illegal money remitting business.

Mark Marmilev, 35, of Brooklyn, New York, who helped design and maintain the operation’s technological infrastructure, faces a maximum five-year prison term when he’s sentenced by U.S. District Judge Denise Cote in Manhattan on Jan. 20.

Marmilev told Cote that he provided technical support to the site, helping “to protect it from hackers and identity thieves,” and acknowledged that he suspected that most of the funds coming into Liberty Reserve were the proceeds of a Ponzi scheme.

“I believed a substantial amount of the funds from the U.S. moving through Liberty Reserve came from high-yield investment programs that I believe had a high probability of being fraudulent but I consciously avoided obtaining confirmation,” Marmilev said.

Widely Used

Liberty Reserve, incorporated in Costa Rica, was one of the world’s most widely used digital currency services, according to the U.S. The company was created and structured “as a criminal business venture, one designed to help criminals conduct illegal transactions,” Manhattan U.S. Attorney Preet Bharara said. Federal prosecutors in New York shut down the company last year.

Marmilev, one of seven people charged last year by Bharara’s office, had also been accused of one count of conspiring to launder money, which carries a maximum 20-year prison term and with operating an unlicensed money remitting business, which carries a maximum five-year term.

Azzeddine El Amine, a principal deputy to the company’s founders, pleaded guilty in August to a conspiracy count and Cote said he is cooperating with the U.S.

Marmilev’s lawyer, Seth Ginsberg, said after court that his client is an Israeli citizen and faces deportation after he completes his term. Ginsberg withdrew a request to have Marmilev released on bond.

“I think that the plea is in the best interests of Mr. Marmilev,” Ginsberg said.

Extradition Pending

Another defendant, Arthur Budovsky, is in Spain where his extradition is pending, prosecutors have said. Marmilev had been scheduled to go to trial in April with Maxim Chuckharev, who was Liberty Reserve’s designer, according to the government.

Two others, Allan Hidalgo and Ahmed Yassine, both Costa Rican citizens who the U.S. said acted as Liberty Reserve operators, aren’t subject to extradition and haven’t been arrested, prosecutors said.

In October, Vladimir Katz, who co-founded the digital currency service with Budovsky, pleaded guilty to money laundering and operating an unlicensed money-transmitting business.

“Marmilev designed and maintained a massive criminal infrastructure in cyberspace for one of the world’s most widely used digital currency systems which laundered billions in criminal proceeds,” Assistant Attorney General Leslie Caldwell said in a statement today.

Liberty Reserve had an estimated 1 million users around the world and conducted a total of about 55 million transactions -- virtually all of them illegal -- including 200,000 in the U.S., Bharara said. U.S. investigators have found that criminal rings used Liberty Reserve to distribute illicit proceeds from Vietnam, Nigeria, Hong Kong, China and the U.S.

Illegal Proceeds

The company helped users launder illegal proceeds from crimes or transfer funds among associates, prosecutors said. Liberty Reserve’s digital currency was used by people committing identity theft, credit card fraud, computer hacking, child pornography and narcotics trafficking, prosecutors said.

Liberty Reserve was designed to help evade the scrutiny of U.S. authorities because unlike traditional banks or legitimate online payment processors, it didn’t require users to validate their identity, prosecutors said. Accounts could be opened under fictitious names and residences such as “Joe Bogus,” with an address listed as “123 Fake Main Street,” the U.S. said.

The case is U.S. v. Kats, 13-cr-00368, U.S. District Court, Southern District of New York (Manhattan).

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