Liberty Reserve Founder Pleads Guilty in Digital Currency Scheme

Updated on
  • Digital money business allegedly laundered over $6 billion
  • Budovsky was one of seven charged; four have pleaded guilty

Liberty Reserve founder Arthur Budovsky admitted that he knew his digital-currency money business was being used by criminals to hide illegal transactions, which U.S. prosecutors said totaled more than $6 billion.

Budovsky faces a prison term of as long as 20 years under a deal he struck with the government. Without the agreement, he could’ve been sentenced to life in prison if convicted at trial, which was scheduled to start Feb. 1.

“I knew what I did was illegal,” Budovsky, who was described by prosecutors as the Costa Rican firm’s supervisor of operations, said at a hearing in Manhattan federal court Friday. He pleaded guilty to conspiring to commit money laundering.

Budovsky was among seven individuals accused of running what the government said was a “black market bank” to facilitate transactions for con artists, hackers, identity thieves, child pornographers and drug dealers. Prosecutors said in 2013 that the money-laundering case against Liberty Reserve was the largest ever brought by the U.S. 

While the case was first announced in May 2013, Budovsky wasn’t extradited to New York from Spain until October 2014.

Liberty Reserve had about 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., Manhattan U.S. Attorney Preet Bharara said when he announced the charges in 2013.

Russia Hackers

The digital-currency company, unlike traditional banks or legitimate online payment processors, didn’t require users to validate their identities and allowed accounts to be opened under fictitious names such as “Russia Hackers” and “Hacker Account,” according to prosecutors. An undercover federal agent was able to establish a Liberty Reserve account using the alias “Joe Bogus,” prosecutors said.

Criminal rings that used Liberty Reserve to distribute illicit proceeds operated from Vietnam, Nigeria, Hong Kong, China and the U.S., according to investigators.

Four others charged in the case have pleaded guilty, including Liberty Reserve’s information technology manager as well as a former top aide to Budovsky. Two other people haven’t been apprehended and are considered fugitives, according to Bharara’s office.