DIGITAL CURRENCY SERVICES IT EXEC. TO SERVE 36 MONTHS IN PRISON FOR ROLE IN MONEY LAUNDERING CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, January 30, 2015

Former Liberty Reserve IT Manager Sentenced to 36 Months in Prison
The former information technology manager for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services, was sentenced today to 36 months in prison for conspiring to operate an unlicensed money transmitting business.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.

Maxim Chukharev, 28, of San José, Costa Rica, pleaded guilty in September 2014 before U.S. District Judge Denise L. Cote, who also imposed today’s sentence.

According to allegations contained in the indictment and statements made in related court proceedings, Chukharev was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve’s information technology manager in Costa Rica.  In that role, Chukharev was principally responsible, along with co-defendant Mark Marmilev, formerly Liberty Reserve’s chief technology officer, for maintaining Liberty Reserve’s technological infrastructure.

According to allegations in the indictment and statements made in related court proceedings, Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.”  Liberty Reserve was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of illegal activity.  Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals around the world to conduct anonymous and untraceable financial transactions.

According to court records, before being shut down by the government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds.  These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes.

Chukharev, Marmilev and Budovsky were among seven individuals charged in the indictment, which was unsealed on May 28, 2013.  Three co-defendants—Marmilev, Vladimir Kats and Azzeddine El Amine—previously pleaded guilty.  Marmilev was sentenced to five years in prison in December 2014; Kats and El Amine await sentencing.  The indictment also charged Liberty Reserve with conspiracy to commit money laundering and operation of an unlicensed money transmitting business, and the charges remain pending.

The charges contained in the indictment are merely accusations.  The defendants are presumed innocent unless and until proven guilty.

This case is being investigated by the U.S. Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance from the Secret Service’s New York Electronic Crimes Task Force.  The Judicial Investigation Organization in Costa Rica, the National High Tech Crime Unit in the Netherlands, the Financial and Economic Crime Unit of the Spanish National Police, the Cyber Crime Unit at the Swedish National Bureau of Investigation and the Swiss Federal Prosecutor’s Office also provided assistance.

This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds Unit and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.

Trial Attorney Kevin Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.