Aditya Sood, a computer science doctoral candidate at Michigan State University who has studied the underground economy, described Liberty Reserve as a no-questions-asked alternative to the global banking system, with little more than a valid email needed to open an account and start moving money across borders.
"You don't need to provide your full details, or personal information, or things like that," Sood said in a telephone interview. "There's no way to trace an account. That's the beauty of the system."
Budovsky and another man identified by Spanish authorities as Azzeddine el Amine were arrested Friday at Madrid's Barajas airport while trying to catch a connecting flight from Morocco to Costa Rica, according to a Spanish National Court official, who spoke on condition of anonymity because court policy forbids him from speaking on the record.
Both men have indicated they will fight any move to send them to the U.S., the official said. The pair were ordered to remain in prison pending an extradition hearing.
Authorities described Liberty Reserve as being rife with criminals, but the site's ease of use, low fees and irreversible transactions that deterred fraud also attracted a thriving community of legitimate tech-savvy users in countries with limited access to credit cards.
Mitchell Rossetti, whose Houston, Texas-based ePayCards.com was one of several mainstream merchants that accepted the online-only currency, said his business still had about $28,000 tied up in Liberty Reserve accounts.
"The irony of this is I went to them because of the security," Rossetti said. "All sales were final."
He acknowledged that the currency was being used by scammers, but said Liberty Reserve was just like any other currency. "The U.S. dollar can be donated to a church or it can pay a prostitute," he said.
Liberty Reserve appears to have played an important role in laundering the proceeds from the recent theft of some $45 million from two Middle Eastern banks, according to legal documents made public by U.S. authorities earlier this month.
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.
A total of 14 premises were raised in Panama, Switzerland, the U.S., Sweden, and Costa Rica, according to Spanish authorities. In Costa Rica, investigators recovered five luxury cars, including three Rolls Royces, Spanish police said. Bharara, the federal prosecutor, said authorities had seized Liberty's computer servers in Costa Rica and Switzerland.