Liberty Reserve Founder Pleads Guilty To Laundering Charges, Faces 20 Years Imprisonment

The founder of Liberty Reserve, a Costa Rica-based centralized virtual currency service widely used by cybercriminals for money laundering purposes, pleaded guilty to laundering over $250 million through his digital currency business, the US Department of Justice announced on Friday.

Arthur Budovsky, 42 years old, pleaded guilty to one count of conspiring to commit money laundering before U.S. District Judge Denise L. Cote of the Southern District of New York. 

“I knew what I did was illegal,” Budovsky told Judge Cote.

Four co-defendants, Vladimir Kats, Azzeddine El Amine, Mark Marmilev and Maxim Chukharev, have already pleaded guilty.  Marmilev and Chukharev were sentenced to five years and three years in prison, respectively, while Kats and El Amine await sentencing before Judge Cote. 

“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,” said U.S. Attorney Bharara.  “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.”

The Wall Street Journal reported that Budovsky was already convicted in 2006 in New York state court for illegally operating Gold Age Inc., which involved another virtual currency. According to prosecutors, this failure impelled Budovsky to move Liberty Reserve to Costa Rica, far from the reach of U.S. authorities. Moreover, he renounced his U.S. citizenship to become a Costa Rican citizen.

Liberty Reserve was one of the major services used by cybercriminals to amass, distribute, store and launder the proceeds of their illegal activity, including proceeds of investment fraud, credit card fraud, identity theft and computer hacking. It had over 5 million user accounts worldwide, including more than 600,000 accounts associated with users in the US. The U.S. government shut down Liberty Reserve in May 2013.

“He accepts full responsibility for his actions, and that’s why he pleaded guilty,” said Jeffrey Pittell, one of Mr. Budovsky’s lawyers.

Charges remain pending against Liberty Reserve and two individual defendants who are fugitives. Budovsky is scheduled to be sentenced on May 6, 2016 and faces up to 20 years in prison.