Co-Founder Of Liberty Reserve Will Spend Up To 75 Years In Prison

Vladimir Kats pleads guilty to money laundering and unlicensed money transmitting charges

Vladimir Kats, a 41 year old New York resident who helped co-found the anonymous payment service Liberty Reserve, has pleaded guilty to being part of a $6 billion money laundering operation.

Liberty Reserve, based in Costa Rica, was popular among hackers since it only asked for a name, date of birth and email to set up an account.

The case has been described by the US authorities as the “largest ever international money laundering prosecution”. Kats is the first out of five people arrested in connection with the case to admit his guilt, and is looking at a prison term of up to 75 years.

“With his guilty plea today, we take a significant step toward punishing those responsible for creating and running this international den of cybercrime,” said Manhattan US Attorney Preet Bharara.

Criminals need banking too

According to the US Department of Justice, Kats helped set up and run the “financial hub of the cyber crime world” between 2006 and 2009. The prosecution alleges that over the course of its existence, Liberty Reserve attracted more than a million users, including 200,000 in the US.

SmitKats was arrested in May 2013 along with co-founder Arthur Budovsky Belanchuk and three more people that were working for the shady company. Another two members of the team are currently hiding from the authorities.

He originally pleaded not guilty, but changed his mind halfway through the proceedings, admitting money laundering and operating an unlicensed money transmitting business.

Kats is also accused of receiving and distributing child pornography, and organising a fake wedding to help a woman obtain US citizenship.

“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 in a statement.

“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.”

“It is most likely that fraudsters will migrate again to a different e-currency service, as happened in the past,” warned Idan Aharoni, head of cyber intelligence at RSA’s Anti-Fraud Command Center. In May, a contact working the underground forums told TechWeekEurope that the Perfect Money service, operated out of Panama, was an early favourite.

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