'Black Market Bank' Accused of Laundering $6B in Criminal Proceeds

May 28, 2013— -- Internet bank Liberty Reserve is being charged with laundering $6 billion in suspected crime proceeds, including the illegal profits from credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking.

Prosecutors say it "may be the largest international money laundering case ever brought by the United States."

Liberty Reserve was a "black market bank," created and structured to "facilitate criminal activity," according to Preet Bharara, U.S. Attorney for the Southern District of New York.

Bharara and top officials from the U.S. Financial Crimes Enforcement Network unsealed an indictment against Liberty Reserve and seven of its principals today, charging them with money laundering and operating an unlicensed money transmitting business.

Liberty Reserve is estimated to have had more than 1 million users worldwide, including more than 200,000 users in the United States.

All told, the government charges, Liberty Reserve processed 55 million separate financial transactions and laundered $6 billion in criminal proceeds. According to the indictment, Liberty Reserve operated a digital currency system designed to provide criminals with a way to launder their profits without leaving a trace.

"As alleged, Liberty Reserve deliberately operated in a way to attract and aid criminals who wished to use digital currency to break the law and to launder the proceeds of their crimes," Bharara said. "We have indicted Liberty Reserve itself because, as alleged, its entire existence was based on a criminal business model."

In addition to indicting the company and its principals, the government is restraining more than $25 million in alleged criminal proceeds from the company, forfeiting its domain names, and seizing its servers around the world.

The investigation and takedown involved law enforcement action in 17 countries, including Costa Rica, the Netherlands, Spain, Morocco, Sweden, Switzerland, Cyprus, Australia, China, Norway, Latvia, Luxembourg, the United Kingdom, Russia, Canada and the U.S.

The government charges that Liberty Reserve was so intent on attracting criminal customers, it didn't even bother to ask its clients for basic identifying information, or to validate their identities, all in the interest of keeping transactions untraceable.

Users routinely established accounts under false names, including such blatantly criminal names as "Russia Hackers" and "Hacker Account," according to the indictment.

As part of the investigation, the indictment says, a law enforcement agent opened and executed transactions through an undercover account at Liberty Reserve in the name of "Joe Bogus" and the address "123 Fake Main Street" in "Completely Made Up City, New York."

The government also charges that Liberty Reserve, based in Costa Rica, tried a number of dodges to stay in business, even after the governments of the U.S. and Costa Rica tried to shut them down.

The defendants were allegedly caught lying to anti-money laundering authorities in Costa Rica and pretending to shut down Liberty Reserve after learning the company was being investigated by U.S. law enforcement. They then allegedly continued operating the business through a set of shell companies, and moved tens of millions of dollars through shell company accounts maintained in Cyprus, Russia, China, Hong Kong, Morocco, Spain, Australia and elsewhere.

Liberty Reserve today was also named a "financial institution of primary money laundering concern" under Section 311 of the USA PATRIOT Act. This Treasury Department action includes a notice to the Federal Register proposing to prohibit U.S. banks and financial institutions from opening or maintaining accounts for foreign banks that are being used to process transactions involving Liberty Reserve.

Five defendants were arrested on May 24, 2013, including Arthur Budovsky, the principal founder of Liberty Reserve, who was arrested in Spain; Vladmir Kats, the co-founder of Liberty Reserve, who was arrested in Brooklyn, N.Y.; Azzeddine El Amine, a manager of Liberty Reserve's financial accounts, who was arrested in Spain; and Mark Marmilev and Maxim Chukharev, who helped design and maintain Liberty Reserve's technological infrastructure, who were arrested in Brooklyn and Costa Rica, respectively.

Two other defendants, Ahmed Yassine Abdelghani (Yassine) and Allan Esteban Hidalgo Jimenez (Hidalgo), are at large in Costa Rica.

ABC News' efforts to reach a representative of Liberty Reserve were unsuccessful.

"The global enforcement action we announce today is an important step towards reining in the 'Wild West' of illicit Internet banking." Bharara said. "As crime goes increasingly global, the long arm of the law has to get even longer, and in this case, it encircled the earth."