Feds Bust Massive Online Money-Laundering Scheme

Calling it perhaps the biggest money-laundering scheme in US history, federal prosecutors charged seven people today with running what amounted to an online, underworld bank that handled $6 billion for drug dealers, child pornographers, identity thieves, and other criminals around the globe. The case was aimed at Liberty Reserve, a currency-transfer and payment-processing company based in Costa Rica that authorities say allowed customers to move money anonymously from one account to another via the Internet with almost no questions asked.

US officials said the enterprise was staggering in scope: Over roughly seven years, Liberty Reserve processed 55 million illicit transactions worldwide for 1 million users, including 200,000 in the US. The network "became the bank of choice for the criminal underworld," US Attorney Preet Bharara said in announcing the unsealing of an indictment against the defendants, including Liberty Revenue founder Arthur Budovsky, an American who renounced his US citizenship after deciding to set up in Costa Rica. The network charged a 1% fee on transactions through middlemen known as exchangers, who converted real currency into virtual funds and then back into cash. Click for why this might be bad news for Bitcoin.)