Saying it was the world’s largest international money laundering prosecution in history, federal authorities announced charges against the operators of Liberty Reserve, an online currency exchange that prosecutors say enabled more than a million people worldwide to launder about $6 billion.
The investigation of the Costa Rican based company involved law enforcement officials from 17 countries, highlighting the complexity and globalization of illicit financing systems that have gone digital. With Liberty Reserve, any user could open an online account from anywhere in the world, without providing identification, and then trade virtual currency anonymously through an easily accessible online banking infrastructure.
No real currency was exchanged among users. Rather, users bought and transferred among themselves Liberty Reserve’s digital currency. Instead of funding their accounts by transferring to Liberty Reserve directly, users were required to make any deposits or withdrawals through the use of third-party exchangers, which maintained direct financial relationships with Liberty Reserve.
U.S. Attorney Preet Bharara stated, “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.”
According to the Department of Justice, “Liberty Reserve is alleged to have had more than one million users worldwide, including more than 200,000 users in the U.S., who conducted approximately 55 million transactions – virtually all of which were illegal – and laundered more than $6 billion in suspected proceeds of crimes including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking.”
Seven of Liberty Reserves’ principals and employees have been charged with money laundering and operating an unlicensed money transmitting business, with five defendants having already been arrested. Two other defendants remain at large in Costa Rica.
In addition to the criminal charges, five domain names were seized, including the one used by Liberty Reserve. Officials also seized or restricted the activity of 45 bank accounts affiliated with the exchange.
IRS-CI Chief Richard Weber said: “We are now entering the cyber age of money laundering. Liberty Reserve and its principals have been charged with operating a sophisticated and complex system for structuring financial transactions which catered to those engaged in criminal activity. What they did not anticipate was our robust partnerships with domestic and foreign law enforcement that allowed us collectively to follow the cyber money trail in the United States and around the world.”