Banking and Finance Law Daily Liberty Reserve founder sentenced to 20 years in prison
Monday, May 9, 2016

Liberty Reserve founder sentenced to 20 years in prison

By J. Preston Carter, J.D., LL.M.

Arthur Budovsky was sentenced to 20 years in prison for running a massive money laundering enterprise through his company Liberty Reserve, a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity. Budovsky was arrested in Spain in May 2013 and extradited to the United States in October 2014. He pled guilty to one count of conspiring to commit money laundering on Jan. 29, 2016, three days before his trial was scheduled to begin, according to a Department of Justice press release.

Judge Denise L. Cote, of the United States District Court for the Southern District of New York, imposed the sentence, noting that Budovsky did not express any “genuine remorse,” and that his crimes caused “widespread harm” and led to “countless victims of fraud around the world.”

Manhattan U.S. Attorney Preet Bharara stated that “Despite all his efforts to evade prosecution, including taking his operations offshore and renouncing his citizenship, Budovsky has now been held to account for his brazen violations of U.S. criminal laws.” Assistant Attorney General Leslie R. Caldwell said the sentence “shows that money laundering through the use of virtual currencies is still money laundering, and that online crime is still crime.”

Internet’s largest money transfer system. Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system” and operated one of the world’s largest and most widely used digital currencies, which could be used to send and receive payments, via the Internet, to and from people all over the world. According to court filings, Liberty Reserve allowed criminals, involved in Internet investment schemes called high-yield investment programs (HYIPs), which Budovsky allegedly knew to be online Ponzi schemes, to operate. He was also aware that digital currencies were used by other online criminals, such as credit card traffickers and identity thieves.

Budovsky designed Liberty Reserve to appeal to these online criminals in order to capture their business. Among other things, he set up Liberty Reserve with weak anti-money laundering controls and allowed users to move money anonymously through Liberty Reserve’s system, regardless of the volume or origin of the funds. Budovsky also marketed Liberty Reserve specifically to HYIP operators and other criminal clientele.

During the time period from 2009 to 2013, Liberty Reserve reached the height of its activity. At its peak in late 2012, it handled a transactional volume of over $300 million per month, a significant portion of which came from users in the United States. Liberty Reserve ultimately grew into a financial hub for cybercriminals around the world who used it to amass, distribute, store, and launder criminal proceeds derived from HYIPs, credit card trafficking, stolen identity information, and computer hacking.

By May 2013, when it was shut down as a result of the government’s criminal investigation, Liberty Reserve had more than 5.5 million user accounts worldwide, and had processed more than 78 million financial transactions with a combined value of more than $8 billion.

Companies: Liberty Reserve S.A.

MainStory: TopStory BankSecrecyAct CrimesOffenses EnforcementActions NewYorkNews

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