September 23, 2015 / 10:31 PM / 4 years ago

Liberty Reserve founder must face $6 bln laundering case in U.S.

NEW YORK, Sept 23 (Reuters) - The accused principal founder of Liberty Reserve SA must face U.S. charges that he helped run a $6 billion worldwide money-laundering operation at the digital currency exchange, after a federal judge on Wednesday refused to dismiss an indictment.

U.S. District Judge Denise Cote in Manhattan rejected several arguments raised by defendant Arthur Budofsky for a dismissal, including that prosecutors overreached by charging him over conduct outside the United States and not covered by that country’s laws.

“While the advent of the web may create a theoretical concern about the extraterritorial reach of U.S. criminal laws, in this case the indictment has sufficiently alleged the conduct of a criminal business with the aim of causing harm to U.S. citizens and U.S. interests,” the judge wrote.

Lawyers for Budofsky did not immediately respond to requests for comment.

Budofsky, a citizen of Costa Rica, was extradited from Spain last October to face charges that he oversaw a seven-year money-laundering scheme at Liberty before its May 2013 closure.

Prosecutors said Liberty once had more than 1 million users, including more than 200,000 in the United States, who processed 55 million transactions through its system, including suspected proceeds from computer hackings, credit card and investment fraud, identity theft and drug trafficking.

Budofsky was charged with one count of running an illegal unlicensed money transmission business and two conspiracy counts.

Among his arguments for dismissal was that Liberty’s “virtual currency” did not qualify as “funds” under U.S. laws against money laundering.

But Cote said another Manhattan federal judge rejected that same argument when it was raised by Ross Ulbricht, who was sentenced in May to life in prison for using his Silk Road website as a marketplace for illegal drug sales with the virtual currency bitcoin.

Budovsky is among seven individuals charged in the May 2013 U.S. indictment related to Liberty Reserve. Four have pleaded guilty, according to public records.

The office of U.S. Attorney Preet Bharara in Manhattan had no immediate comment on the case.

The case is U.S. v. Budovsky, U.S. District Court, Southern District of New York, No. 13-cr-00368. (Editing by David Gregorio)

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