United States v. Budovsky

Arthur Budovsky (defendant) was the main founder of Liberty Reserve S.A. (Liberty) (defendant), a Costa Rican company. Budovsky moved to Costa Rica and founded Liberty after having been convicted in New York state court of operating an unlicensed money-transmitting business. The United States indicted Budovsky and Liberty for creating and operating an unlicensed money-transmitting business designed to facilitate illegal financial transactions and launder criminal proceeds. The United States alleged that Liberty operated a virtual currency called LR, which processed approximately 55 million separate financial transactions and helped launder more than $6 billion in illegally obtained money. According to the indictment, Liberty helped users hide their identities by, for example, not requiring identity verification, allowing users to hide their account numbers when making transactions, and requiring users to exchange traditional currency for LR and vice versa through third parties rather than by making direct deposits or withdrawals. The United States further alleged that Liberty (1) had more than 200,000 users in the United States, including criminal rings; (2) moved approximately $13.5 million through a bank account located in the Southern District of New York; and (3) engaged in money laundering with the intent of transferring assets in and out of the United States. Budovsky moved to dismiss the indictment on the grounds that applying United States criminal statutes to his purportedly purely extraterritorial conduct violated due process. Per Budovsky, the indictment did not allege a sufficient nexus between his alleged crimes and the United States, and Liberty’s large user base in the United States could not be enough to satisfy due process because that would mean that any business anywhere in the world would be subject to United States criminal law.