The founder of Liberty Reserve, an online digital currency and payments system based in Costa Rica, has been arrested and charged with money laundering.
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It follows the closure of the system last week and a series of arrests in Costa Rica, New York and Spain, where founder Arthur Budovsky was apprehended.
The authorities allege that the organisation helped criminals to launder some $6bn in "dirty" money over the past seven years in a system that they claimed was "evasive by design".
Liberty Reserve described itself as the internet's "oldest, safest and most popular payment processor... serving millions all around the world".
Prosecutors claim that the business, which was set up in 2006, was "one of the principal means cyber-criminals around the world [can] distribute, store and launder the proceeds of their illegal activity".
The prosecution is one of the largest-ever brought in the US - although global bank HSBC was accused of greater money laundering, but settled by paying a fine.
One law enforcement official described Liberty Reserve as "PayPal for criminals" because it enabled people to transfer money to anyone, anywhere in the world, without having to identify themselves.
According to Bloomberg, "an undercover agent was able to establish a Liberty Reserve account using the alias 'Joe Bogus', listing his address as "123 Fake Main Street" in "Completely Made Up City, New York", said Manhattan US Attorney Preet Bharara.
"Its entire existence was based on a criminal business model," said Bharara in a press conference. "The global enforcement action that we announced today is an important step toward reigning in the Wild West of illicit internet banking," he added.
Liberty Reserve had about one million users around the world and conducted about 55 million transactions, which US authorities say were virtually all illegal. This included some 200,000 in the US, according to Bharara. Investigators say that criminal organisations used Liberty Reserve to launder the proceeds of crimes committed in Vietnam, Nigeria, Hong Kong, China and the US.
How it worked
The system was based on an artificial currency called LR - short for Liberty Reserve - which could be bought and sold in bulk by third parties called "exchangers". These exchangers, in turn, could buy, transfer, receive, and sell the currency in smaller transactions with smaller parties.
