Official at digital currency service pleads guilty to money laundering

An official with Liberty Reserve, a popular digital currency service that was based in Costa Rica, has pleaded guilty to money laundering and operating an unlicensed money transmitting business.

Azzeddine El Amine, 47, of San José, Costa Rica, pleaded guilty Thursday in U.S. District Court for the Southern District of New York. El Amine served as a principal deputy to Liberty Reserve founder Arthur Budovsky, the U.S. Department of Justice said.

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The DOJ indicted Liberty Reserve, Budovsky and five other defendants in May 2013 for allegedly laundering US$6 billion in a series of global transactions. At the time, the agency said it may have been the largest international money laundering prosecution in history.

The DOJ shut down Liberty Reserve when it filed charges against the service. The front page at LibertyReserve.com continues to display a notice that the site has been seized by U.S. law enforcement agencies.

Liberty Reserve, incorporated in 2006, billed itself as the Internet’s “largest payment processor and money transfer system,” the DOJ said. The service was created to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and became one of the principal money transfer agents used by cybercriminals around the world to store and launder their illegally gained money, the DOJ alleged.

Before it was shut down, Liberty Reserve had more than 1 million users worldwide, including more than 200,000 users in the U.S., according to authorities. The $6 billion in transactions through the service were connected to credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking, the DOJ alleged.

“Virtually all” of Liberty Reserve’s business was tied to illegal activity, the DOJ said in court documents. Liberty Reserve did not require users to validate their identities when opening accounts, and once establishing accounts, users could exchange digital currency with other users or merchants that accepted the currency, according to court documents.

Liberty Reserve did not hold users’ money, but required the use of third-party exchangers that allowed the service to avoid collecting information about its users, the DOJ alleged. Exchangers covered the digital currency to mainstream currency, sometimes charging 5 percent or more.

El Amine operated a prominent Liberty Reserve exchanger service, and he shared in Liberty Reserve’s profits with Budovsky, the DOJ said. 

El Amine was arrested in Spain in May 2013. He pleaded guilty Thursday to one count of conspiring to commit money laundering, one count of conspiring to operate an unlicensed money transmitting business and one count of operating an unlicensed money transmitting business.  Sentencing has not yet been scheduled.

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In October 2013, Liberty Reserve cofounder Vladimir Kats pleaded guilty to money laundering, operating and conspiring to operate an unlicensed money transmitter business, receiving child pornography and marriage fraud in the same court.

The DOJ continues to move forward with charges against some of the other defendants, including Budovsky.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant’s email address is grant_gross@idg.com.