By David Ingram
NEW YORK (Reuters) - A former technology officer was sentenced on Friday to five years in prison for helping to operate Liberty Reserve, a former digital currency exchange that U.S. authorities say was used by drug traffickers and other criminals for money transfers.
The sentence was the maximum allowed under U.S. law for Mark Marmilev, 35, who in September pleaded guilty to one count of conspiring to operate an unlicensed money transmitting business. He was also ordered to pay a $250,000 fine.
U.S. District Judge Denise Cote said at a hearing in Manhattan federal court that there was a need to deter others from going into the same unlawful business.
Marmilev, who was born in Ukraine and raised in Israel, may also face deportation proceedings, said his lawyer, Seth Ginsberg.
Liberty Reserve had more than 1 million users worldwide, including at least 200,000 in the United States, before it was shut down in May 2013, according to the Justice Department.
Marmilev was responsible for designing and maintaining Liberty Reserve's technological infrastructure. He is one of seven people who have been indicted in connection with the exchange.
Prosecutors have said that virtually all of Liberty Reserve's business was processing payments related to criminal activity, including child pornography, drug trafficking and computer hacking.
Ginsberg said in court that prosecutors went too far in their depictions of his client's employer. He said Liberty Reserve tried to operate as a legitimate competitor to payment services such as PayPal, a unit of eBay Inc.
"Liberty Reserve was a pioneering company on the frontier of a new industry," Ginsberg said.
The lawyer said the five-year maximum sentence should be reserved for the most serious violators of money-laundering laws, such as people who handle money for terrorism.
Marmilev made a personal appeal to the judge, telling her how he had worked construction jobs while studying computer programming at Brooklyn College.
"I made mistakes, but I'm trying to take responsibility for them," he said.
Cote rejected the request for mercy. The suggestion that Marmilev did not know the extent to which criminals used Liberty Reserve, the judge said, "I don't find credible."
Andrew Goldstein, one of the prosecutors in the case, had urged the maximum sentence. He said Liberty Reserve "allowed a massive criminal infrastructure to continue" and indirectly hurt victims of those crimes.
The case is U.S. v. Marmilev, U.S. District Court for the Southern District of New York, No. 1:13-cr-368.
(Reporting by David Ingram; Editing by David Gregorio)