The co-founder of digital currency operator Liberty Reserve, Arthur Budovsky, was sentenced to 20 years in prison for what prosecutors say was a money laundering operation of unprecedented size and scope.
NEW YORK CITY, NEW YORK, UNITED STATES (MARILYN CHURCH SKETCHES) – The co-founder of Liberty Reserve, the operator of what had been a widely-used digital currency, was sentenced to 20 years in prison on Friday (May 06) for conspiring to help cybercriminals launder hundreds of millions of dollars using its services.
Arthur Budovsky, 42, was also ordered by U.S. District Judge Denise Cote in Manhattan to forfeit $122 million (USD), three years after his arrest in connection with what prosecutors say was a money laundering operation of unprecedented size and scope. Budovsky was also fined $500,000.
Prosecutors had sought a maximum sentence of 20 years in prison for Budovsky, who pleaded guilty in January to a charge of conspiracy to commit money laundering.
Liberty Reserve operated what prosecutors called one of the world’s most widely used digital currencies, processing more than $8 billion in financial transactions and earning Budovsky over $25 million.
Much of its business came from criminals seeking to launder proceeds from Ponzi schemes, credit card trafficking, identity thefts and computer hacking, prosecutors said.
The company was shuttered in May 2013 amid U.S. efforts to crack down on the use of digital currencies including bitcoin to evade law enforcement and launder money.
Four other people pleaded guilty in the case, including Liberty Reserve co-founder Vladimir Kats, who is set to be sentenced next week.
Budovsky and Kats, who met as teenagers working as camp counselors in Brooklyn, previously were convicted in 2006 on New York state charges for operating an earlier digital currency business as an unlicensed money transmitting business.
They launched Liberty Reserve in 2005, and after their arrests, moved it offshore to Costa Rica, where Budovsky became a citizen, prosecutors said.
Liberty Reserve users would buy and redeem its digital currency, LR, through third-party exchangers who in turn bought and sold LR in bulk from Liberty Reserve, authorities said.
Liberty Reserve did not require users to validate their identities, prosecutors said, allowing an undercover Secret Service agent to establish an account for a “Joe Bogus” from “Completely Made Up City, New York, United States.”
An analysis of the top 500 accounts found that of $7.26 billion in transactions, $2.6 billion were for investment opportunities, mostly Ponzi schemes, prosecutors said.
The case is U.S. v. Kats et al, U.S. District Court, Southern District of New York, No. 13-00368.