When the website of Liberty Reserve, a Costa Rica-based payment processor popular with cyber criminals, became inaccessible late last week, speculation about what caused were all over underground online forums.
Then, a day later, the DNS servers for the site started pointing towards sinkholes operated by the Shadowserver Foundation, a volunteer group that gathers, tracks and reports on malware, botnet activity and electronic fraud, and Liberty Reserve’s criminal users began worrying that law enforcement agencies might be behind the shutdown.
Finally, the news that the processor’s founder, 39-year-old Arthur Budovsky Belanchuk, had been arrested in Spain following an investigation by Costa Rican and U.S. law enforcement agencies into the claims that Budovsky and his company were involved in money laundering since 2011.
Bukovsky is thought to have financed a number of his businesses in Costa Rica with the proceeds of drug trafficking and child pornography sites.
He was arrested on Friday following raids of his home and offices in San JosÃ©.
According to Brian Krebs, this is not the first time that Budovsky, a Costa Rican citizen of Ukrainian origin, is accused of operating an illegal financial business and money laundering.
In 2006, he and a partner were accused of operating GoldAge, a service similar to Liberty Reserve, from their Brooklyn apartments.
“The defendants had transmitted at least $30 million to digital currency accounts worldwide since beginning operations in 2002. The digital currency exchanger, GoldAge, received and transmitted $4 million between January 1, 2006, and June 30, 2006, as part of the money laundering scheme,” the U.S. Justice Department explained in an account of the case.
“Customers opened online GoldAge accounts with limited documentation of identity, then GoldAge purchased digital gold currency through those accounts; the defendants’ fees sometimes exceeded $100,000. Customers could choose their method of payment to GoldAge: wire remittances, cash deposits, postal money orders, or checks. Finally, the customers could withdraw the money by requesting wire transfers to accounts anywhere in the world or by having checks sent to any identified individual.”
At the time, both Bukovsky and his partners were found guilty of the charges and received five-year prison sentences, but ultimately got probation and didn’t serve them.
Libertyreserve.com is still offline, and it is still unknown what will happen to user accounts and the money on them.