Internet bank laundered more than $6 billion for underworld criminals
On May 28, federal prosecutors and law enforcement around the world announced the arrest of the founders of Liberty Reserve, a bank that laundered more than $6 billion for drug dealers, child pornographers, identity thieves, hackers, cyber criminals and other underworld miscreants around the globe. U.S. officials said the enterprise was staggering in scope: Over roughly seven years, Liberty Reserve processed 55 million illicit transactions worldwide for 1 million users, including 200,000 in the U.S.
The news comes only four days after libertyreserve.com suddenly went offline. On May 24, the domain name servers for Libertyreserve.com were changed and pointed to sites used by law enforcement to redirect malicious Internet traffic so that “it can be captured and analyzed by experts and/or law enforcement officials.” According to research done by cybercrime expert Brian Krebs it appears that several other dubious Internet banking programs are under investigation including at least four other currency exchanges that worked closely with Liberty Reserve. In addition, a civil action was filed against 35 exchanger websites seeking the forfeiture of the exchangers’ domain names.
The network “became the bank of choice for the criminal underworld,” U.S. Attorney Preet Bharara said in announcing the unsealing of an indictment against the defendants, including Liberty Revenue founder Arthur Budovsky, an American who renounced his U.S. citizenship after deciding to set up in Costa Rica. According to the indictment Liberty Reserve “touted itself as the Internet’s largest payment processor and money transfer system. When they realized that authorities were looking into operations, the bank pretended to close and used numerous shell companies around the world to move tens of millions of dollars.
Liberty Reserve allowed users to open accounts using fictitious names, including “Russian Hacker” and “Hacker Account.” One undercover investigator was able to register using the name “Joe Bogus” and the address “123 Fake Main Street” in “Completely Made Up City, New York,” and actually conduct transactions he recorded as “ATM skimming network” and “for the cocaine.”
A notice pasted across Liberty Reserve’s website Tuesday morning said the domain “has been seized by the United States Global Illicit Financial Team.” Attempts to reach Liberty Reserve by phone and email were unsuccessful.
“As alleged, the only liberty that Liberty Reserve gave many of its users was the freedom to commit crimes — the coin of its realm was anonymity, and it became a popular hub for fraudsters, hackers and traffickers,” said Preet Bharara, U.S. Attorney for the Southern District of New York, in a statement. “The global enforcement action we announce today is an important step towards reining in the ‘Wild West’ of illicit Internet banking.”
“The ‘merchants’ who accepted LR currency were overwhelmingly criminal in nature,” the government’s indictment alleges. “They included, for example, traffickers of stolen credit card data and personal identity information; peddlers of various types of online Ponzi and get-rich-quick schemes; computer hackers for hire; unregulated gambling enterprises; and underground drug-dealing websites.”