Last Friday the Costa Rica based payment processor “Liberty Reserve” has been shut down as a result of a joint investigation of the United States and Costa Rica. Liberty Reserve has been a popular choice for cybercrime and other illegal activity. It also was used a lot for HYIP Ponzi schemes like the recently busted Profitable Sunrise. Thousands of people lost their money in result of the crackdown on Liberty Reserve.
The alleged owner of Liberty Reserve, Arthur Budovsky, has been arrested in Spain on suspicion of money laundering and other charges. In Costa Rica police also raided offices and homes linked to Budovsky in the southwestern San Jose suburbs of Santa Ana and Escazu and Heredia, north of the capital. Budovsky is a Ukrainian-born former U.S. citizen. He left U.S. after he was charged for operating an unlicensed money transmitting business back in July 2006. Budovsky and his partner received five years on probation.
The homes and offices that have been raided on Friday belong to several shell companies that have been set-up by Budovsky and his partners. Those companies are Silverhand Solutions & Technology S.A. (Santa Ana), Worldwide E-Commerce Business S.A. (Escazu), Grupo Lulu Limitada (Escazu), Triton Group A & A, S.A. (Escazu) and Cyberfuel.com (Santa Ana). Costa Rican authorities seized documental proof and digital information that will be turned over to the U.S., according to a prosecutors office statement.
Budovsky, 39, obtained the Costa Rican citizenship by marrying a 39 year old Costa Rican woman with Valerio Vargas in June 2008. According to Costa Rica’s Immigration Administration there are no records of Budovsky entering or leaving the country before May 2011, four years after he received probation in New York because of the charges on operating an illegal money transmitting business called GoldAge Inc.
U.S. authorities have targeted companies like Liberty Reserve and GoldAge for years, saying that they are hotbeds for criminal activity including money laundering, drug trafficking, tax evasion and Ponzi schemes. Liberty Reserve was founded back in 2002 in the United States. It has been relocated to Costa Rica in May 2006, two months before Budovsky and his partners were charged for the operations of GoldAge.
Liberty Reserve was operated without any license or oversight from any global agency. It was a convenient tool for foreign currency brokers for bypassing the local legislation and to avoid exchange rate fluctuations. It was also a popular choice for multilevel marketing (MLM) companies and HYIP Ponzi schemes. According to a press report, Liberty Reserve might have been used to launder money of a recent theft of $45 million from two Middle Eastern Banks.