Founder Of Liberty Reserve Arthur Budovsky Extradited From Spain To Face Charges In Manhattan Federal Court

Preet Bharara, the United States Attorney for the Southern District of New York, and Leslie R. Caldwell, Assistant Attorney General for the Justice Department’s Criminal Division, today announced the extradition of ARTHUR BUDOVSKY from Spain to face charges related to his alleged operation of Liberty Reserve, a virtual currency that was used by cybercriminals around the world to launder the proceeds of their illegal activity. BUDOVSKY, 40, a citizen of Costa Rica, was arrested in Spain in May 2013, as a result of an Indictment filed in Manhattan federal court. Following his extradition by Spanish authorities, BUDOVSKY arrived in New York this afternoon. BUDOVSKY will be arraigned before U.S. District Judge Denise L. Cote on October 14, 2014, at 12:45 p.m.

Manhattan U.S. Attorney Preet Bharara stated: “As alleged, Arthur Budovsky founded Liberty Reserve to enable criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds anonymously and beyond the reach of U.S. law enforcement. Budovsky allegedly operated Liberty Reserve from Costa Rica and renounced his United States citizenship to evade the authorities. Now, thanks to the cooperative efforts of our law enforcement partners here and in Spain, Arthur Budovsky has been apprehended and will face justice in an American courtroom.”

Assistant Attorney General Leslie R. Caldwell stated: “Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities. He even renounced his U.S. citizenship to try to escape facing justice in an American courtroom. With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”

According to allegations contained in the Indictment filed against Liberty Reserve, BUDOVSKY, and six other individual defendants, and statements made in related court proceedings:

Liberty Reserve was born out of BUDOVSKY’s unsuccessful experience running a third-party exchange service, called Gold Age, Inc., for another digital currency, called E-Gold. In or about 2006, BUDOVSKY was convicted in New York State of operating Gold Age, Inc., as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business,, and subsequently ceased doing business. In the wake of his own criminal conviction, BUDOVSKY set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States. Accordingly, BUDOVSKY emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.

Liberty Reserve billed itself as the Internet’s “largest payment processor and money transfer system.” Liberty Reserve was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. BUDOVSKY devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities. At all relevant times, BUDOVSKY directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.

Liberty Reserve emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions. BUDOVSKY was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”

Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.

BUDOVSKY is among seven individuals charged in the Indictment, which was unsealed on May 28, 2013. Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pled guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.

Mr. Bharara praised the outstanding work of the United States Secret Service, the Internal Revenue Service-Criminal Investigation, and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, which worked together in this case as part of the Global Illicit Financial Team. Mr. Bharara also thanked the United States Secret Service’s New York Electronic Crimes Task Force for its extraordinary assistance with the investigation. Additionally, Mr. Bharara specially thanked all the international law enforcement agencies that assisted in the investigation, in particular, Interpol, the Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor’s Office.

This case is being prosecuted jointly with the Department of Justice’s Asset Forfeiture and Money Laundering Section (“AFMLS”), which is overseen by Assistant Attorney General Leslie R. Caldwell. Mr. Bharara thanked AFMLS for its partnership and also thanked the Department of Justice’s Office of International Affairs and Computer Crime and Intellectual Property Section for their support.

The prosecution of this case is being handled by the Office’s Complex Frauds and Cybercrime Unit and Money Laundering and Asset Forfeiture Unit. Assistant United States Attorneys Serrin Turner, Andrew Goldstein, and Christine Magdo of the Southern District of New York and Trial Attorney Kevin Mosley of AFMLS are in charge of the prosecution, and Assistant United States Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

The charges contained in the Indictment against BUDOVSKY and certain of BUDOVSKY’s co-defendants remain pending and are merely accusations. Those defendants are presumed innocent unless and until proven guilty.