Liberty Reserve was incorporated in Costa Rica in 2006 by Arthur Budovsky, who renounced his United States citizenship in 2011, and was arrested in Spain on Friday.
The online currency exchange has surfaced as a preferred vehicle to transfer money between parties in a number of recent high-profile cybercrimes, including the indictment of eight New Yorkers for their role in looting $45 million from bank machines in 27 countries.
Liberty Reserve did not take or make payments of actual cash directly. Instead, they used “third-party ‘exchangers,'” according to the indictment.
These exchangers would take and make payments and then credit or debit the Liberty Reserve account. Law enforcement officials seized four currency exchanges that operate with the business and 35 other Web sites.
This allowed Liberty Reserve to avoid collecting any banking information on its clients and not leave a “centralized financial paper trail.”
Liberty Reserve recommended a number of “preapproved exchangers” to its users, which “tended to be unlicensed money transmitting businesses without significant government oversight or regulation, concentrated in Malaysia, Russia, Nigeria and Vietnam,” the indictment said.
The people who accepted Liberty Reserve’s currency were “overwhelmingly criminal in nature,” according to the indictment.
“They included, for example: traffickers of stolen credit card data and personal identity information; peddlers of various types of online Ponzi and get-rich-quick schemes; computer hackers for hire; unregulated gambling enterprises; and underground drug-dealing Web sites,” according to the indictment.