Vladimir Kats is well known as one of the co-founders of digital currency service Liberty Reserve. He was arrested for a number of charges including money laundering, marriage fraud and receiving child pornography. Some of the charges related to his role in running Liberty Reserve and its money laundering – at least $6 billion.
The company Liberty Reserve had began its work on 2006 in Costa Rica. The company touted itself as being the Internet’s largest payment processor and offered its services to people across the globe including those in the US. Since then, it operated one of the world’s most widely used digital currencies but company failed to register with the US Department of the Treasury as a money transmitting business.
The company was suspected for helping users launder the proceeds of their crimes. The indictment relating to Kats’ arrest says: “A financial hub of the cyber-crime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”
The U.S. government alleges that Liberty Reserve processed more than 12 million financial transactions per year. It claims that, “Overall, from 2006 to May 2013, Liberty Reserve processed an estimated 55 million separate financial transactions and is believed to have laundered more than $6 billion in criminal proceeds, deliberately attracted and maintained a customer base of criminals by making financial activity on Liberty Reserve anonymous and untraceable.”
Moreover, the government document ordered the defendants forfeit, plus all funds on deposit in 42 accounts in various countries across the world, including Morocco, Greece, Cyprus, Spain and Latvia. On top of this, the government is seizing up to $36,919,884 from three Westpac Bank accounts in Australia. Other domain names have also been seized, like libertyreserve.com, exchangezone.com, swiftexchanger.com, moneycentralmarket.com, asiangold.com and eurogoldcash.com.
“Vladimir Kats, by his own admission, helped to create and operate an anonymous digital currency system that provided cybercriminals and others with the means to launder criminal proceeds on an unprecedented scale,” said acting assistant attorney general Mythili Raman. “His conviction reinforces what we said when Liberty Reserve was first brought down: banking systems that allow criminals to conduct illegal transactions anonymously will not be allowed to stand, and professional money launderers will be brought to justice.”
As a result of the five charges Kats pled guilty to the following:
- One count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison
- One count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison
- One count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison
- One count of receiving child pornography, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of 15 years in prison
- One count of marriage fraud, which carries a maximum sentence of five years in prison.
The charges against the six others are still pending and a sentencing date has not yet been scheduled.