The exchangers would convert the dollars into LRs and deposit them into the person's Liberty Reserve account.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
The Liberty Reserve charges came two weeks after authorities froze an account tied to the largest bitcoin exchange.
Liberty Reserve - a Costa Rican-based digital currency service - has been shut down after the reported arrest of its founder.
Liberty Reserve had described itself as being the internet's "oldest, safest and most popular payment processor... serving millions all around a world".
From there, a criminal could buy narcotics, stolen credit-card numbers or other goods by transferring the LRs to another person's Liberty Reserve account.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
Liberty Reserve is a company that allows users to apply for an account through the Internet by simply supplying a valid email address.
The shutdown has caused problems for legitimate users of Liberty Reserve, said Mitchell Rossetti, head of the EPay Tarjeta service that piggy-backed on LR.
Security expert Bryan Krebs said Liberty Reserve's features had made it a popular among cybercriminals who wanted to move funds and make payments anonymously.
Liberty Reserve charged a 1% fee for LR currency transfers and an additional "privacy fee" of 75 cents per transaction to hide Liberty Reserve account numbers, making the transfer virtually untraceable.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
Police raided three homes and five businesses linked to the Costa Rica-based Liberty Reserve and seized papers and digital documents that will be turned over to U.S. authorities, the statement said.
Liberty Reserve couldn't be reached late Friday for comment.
Once a person signs up for an account, Liberty Reserve gives them a user name and an account number and they can start transferring money around the world, Costa Rican officials said.
Some details about the scale of the Liberty Reserve operation came to light in court documents unsealed by the New York office of the DoJ, which is leading the action against the service.
The Treasury's proposal would prohibit U.S. financial institutions from opening or maintaining accounts for foreign banks that process transactions for Liberty Reserve and require special steps to guard against any transactions involving it.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
On Tuesday, in the first use of the 2001 Patriot Act against a virtual currency, the Treasury Department invoked a section of the law to choke off Liberty Reserve from the U.S. financial system.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
According to Costa Rica police, Budovsky was sentenced in 2007 to five years' probation after pleading guilty in a New York court to charges he operated an illegal financial services business similar to Liberty Reserve.
The digital currency exchange operated by Dominica-based Aurum Capital Holdings, Inc. supports bitcoin as well as Liberty Reserve, Pecunix, Perfect Money, and c-gold and they offer two choices for cashing out into a card-based product.
In addition, it said, 45 bank accounts used by the service have been seized and action has been taken to take over the assets of 35 other sites that fed funds to Liberty Reserve for laundering.
Preet Bharara, the Manhattan U.S. attorney, said at a news conference Tuesday that he believed "virtually all" of Liberty Reserve's customers used it for criminal purposes, though he said legitimate users can seek to recover funds.
WSJ: U.S. Alleges $6 Billion Money-Laundering Operation at Liberty Reserve
Liberty Reserve's origins are obscure, but it had grown into one of the criminal underworld's best known electronic currency systems, used by hackers the world over to discreetly move large sums of money across borders, experts say.
The complaint against one of the Dominican Republic gang members allegedly involved in the theft states that thousands of dollars' worth of stolen cash was deposited into two Liberty Reserve accounts via currency centers based in Siberia and Singapore.
Liberty Reserve, which conducted its transactions in dollars, euros and rubles, operates as an anonymous, no-questions-asked alternative to the global banking system, said Aditya Sood, a computer science doctoral candidate at Michigan State University who has studied the electronic currency.
The loss of Liberty Reserve has the potential to cause a "major upheaval" in the cybercrime economy, said investigative journalist-turned-security researcher Brian Krebbs, who added in a blog post that hackers writing in underground forums were already buzzing with concern over frozen funds.
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