Digital Funds Transfer Service Shuttered on Money-Laundering Charges
Federal law enforcement closes the Liberty Reserve online money-transfer service following the arrest of its two founders and three other employees on charges of money laundering.U.S. law enforcement shut down online money-transfer service Liberty Reserve and arrested its two founders and three other employees on charges that they operated the service primarily to serve criminals' need to launder money, according to a statement issued May 28 by the U.S. Attorney's Office for the Southern District of New York. The five defendants, arrested May 24, in Spain, Costa Rica and Brooklyn, N.Y., are charged with one count of conspiracy to commit money laundering and one count of the operation of an unlicensed money-transmitting business, each which carries a maximum penalty of five years in prison. Two remaining defendants are at large in Costa Rica, according to a statement issued by the U.S. Attorney's Office in the Southern District of New York. Liberty Reserve allegedly had at least 1 million customers worldwide and processed more than $6 billion in transfers. Approximately 55 million transactions were processed, transferring what were thought to be the proceeds of credit-card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking, according to the statement. "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," U.S. Attorney Preet Bharara said in the statement. "The global enforcement action we announce today is an important step toward reining in the 'Wild West' of illicit Internet banking."
Liberty Reserve rose to popularity following the shutdown in 2007 of the then-popular E-Gold service, which allowed customers to buy and transfer gold online, but which quickly turned into a way for cyber-criminals to transfer money. Liberty Reserve was incorporated in Costa Rica in 2006 and operated an exchange currency known as the Liberty Reserve, or LR.