Chief technology officer of Liberty Reserve pleads guilty to operating system to transmit criminal proceeds

NEW YORK — The former chief technology officer of Liberty Reserve pleaded guilty Thursday in Manhattan federal court to conspiring to operate an unlicensed money transmitting business that he knew involved the transmission of funds derived from criminal activity.  This plea follows an investigation by U.S. Immigration and Customs Enforcement's (ICE) Homeland Security Investigations (HSI), the U.S. Secret Service, the Internal Revenue Service-Criminal Investigation, Department of Justice's Criminal Division, and the U.S. Attorney for the Southern District of New York.

Mark Marmilev, 35, of Brooklyn, was principally responsible for designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world's most widely used digital currency services. Marmilev was arrested in Brooklyn in May 2013.

According to allegations contained in court documents filed against Liberty Reserve, Marmilev, and six other individual defendants, 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. It emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their 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.

Before being shut down by the U.S. 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.

Marmilev was an associate of Liberty Reserve founder Arthur Budovsky and served as Liberty Reserve's chief technology officer. In that role, Marmilev was principally responsible for designing and maintaining Liberty Reserve's technological infrastructure.

Marmilev pleaded guilty to one count of conspiring to operate an unlicensed money transmitting business that failed to comply with federal registration requirements.  Marmilev knew the transmission of funds derived from criminal activity, which carries a maximum sentence of five years in prison. A sentencing date has not yet been scheduled. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Marmilev and Budovsky were among seven individuals charged in the indictment, which was unsealed on May 28, 2013, and two co-defendants – Vladimir Kats and Azzeddine el Amine – previously pleaded guilty and 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 following agencies assisted in the investigation: U.S. 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 Spanish National Police, Financial and Economic Crime Unit, the Cyber Crime Unit at the Swedish National Bureau of Investigation, and the Swiss Federal Prosecutor's Office.