Liberty Reserve - a Costa Rican-based
digital currency service - has been shut down
after the reported arrest of its founder.
Authorities in the Central American country
said Arthur Budovsky had been taken into
custody in Spain on suspicion of money
laundering, following an investigation which
also involved the US.
They added that police had raided several of
Mr Budovsky's properties and seized his
computer servers.
The site went offline on Thursday.
Liberty Reserve had described itself as being
the internet's "oldest, safest and most
popular payment processor... serving millions
all around a world".
It had allowed users to open accounts and
transfer money, only requiring them to
provide a name, date of birth and an email
address.
Cash could be put into the service using a
credit card, bank wire, postal money order or
other money transfer service. It was then
"converted" into one of the firm's own
currencies - mirroring either the Euro or US
dollar - at which point it could be transferred
to another account holder who could then
extract the funds.
The service promised that payment transfers
were "instantaneous" and it charged a
maximum of $2.99 (£1.98) for each
transaction. It also offered a private
messaging facility which it said was "much
more private and secure than email or instant
messenger services".
Security expert Bryan Krebs said Liberty
Reserve's features had made it a popular
among cybercriminals who wanted to move
funds and make payments anonymously.
However, others said they had used the
service for legitimate means, viewing it as a
cheaper alternative to PayPal. They fear they
will now lose money still sitting in its
accounts.
Refused licence
Costa Rica state prosecutor Jose Pablo
Gonzalez announced news of the raids on
Saturday. He said that in addition to Mr
Budovsky's arrest, 10 other suspects were
being investigated in connection with
international money laundering.
Mr Gonzalez said that Costa Rica's financial
regulator, Sugef, had refused to issue a
licence to Liberty Reserve in 2011 after
raising concerns about how it was being
funded.
Although the company Liberty Reserve
subsequently closed and dismissed its
employees, the prosecutor said Mr Budovsky
had continued operating his money exchange
service by running it through five other Costa
Rican businesses.
The same year, he said, New York based
officials asked Costa Rica to investigate.
Mr Gonzalez said offices and houses linked
to Mr Budovsky had been raided last week,
and that documents and three vehicles -
including a Rolls Royce - were seized.
The US Department of Justice's website says
that in 2006 Mr Budovsky was found guilty of
operating a separate illegal money
transmittal business - GoldAge - from a
Brooklyn apartment when he used to live in
New York.
However, when asked about the latest arrest,
a spokeswoman said she could "not provide
any guidance" at this time.
The BBC has also asked the Spanish police
for more details.
Lost money
According to Mr Krebs' security blog, the
closure of Liberty Reserve has the potential
to "cause a major upheaval in the cybercrime
economy".
He said there had been "anxious discussions"
about the news on several internet forums
after fraudsters and malware sellers found
themselves unable to access their accounts.
But others say they used the service for
legitimate reasons, and are concerned about
the lack of information.
They include Mitver Holdings, the firm behind
a facility called ePay Cards. This allows
consumers outside the US to buy goods from
stores in the country as if they owned a
locally-issued Visa or Mastercard credit
card.
The company - which has offices in London
and Texas - used Liberty Reserve as a way
for its customers to charge up their "virtual
credit cards".
Co-founder Mitchell Rossetti said he had
about $28,000 sitting in his business's
Liberty Reserve account at the time the site
went offline.
"We used Liberty Reserve because it was
quick, efficient and secure," he told the BBC.
"Now, we - and thousands of others who
were dependent on it - have been left with
nothing to look at except a blank webpage,
and nothing more to go on than reports from
the Costa Rican press.
"We need to know if our assets have been
seized and what would be the requirements
to get the funds returned."
source:bbc
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