Ex-Liberty Reserve exec gets 5 years in prison

AP News
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Posted: Dec 12, 2014 2:59 PM

NEW YORK (AP) — The former technology chief for payment processing company Liberty Reserve was sentenced Friday to five years in prison by a judge who rejected arguments that the firm popular with criminal enterprises was merely aspiring to compete with eBay Inc.'s PayPal payments business before it was shut down.

Mark Marmilev, 35, pleaded guilty earlier this year to conspiring to operate a money transmitting business that failed to comply with federal registration requirements.

"This isn't about online currency, digital currency," U.S. District Judge Denise Cote told Marmilev as she imposed the maximum sentence he could have faced.

Marmilev told the judge he was "truly sorry."

Prosecutions are still pending against two company founders.

Marmilev's attorney, Seth Ginsberg, portrayed the government as dismissive of the difficulties faced by Liberty Reserve as it tried to be a pioneer on the digital currency frontier that emerged in the last decade. He said the company was formed to compete with PayPal, particularly in markets worldwide where millions of people lack bank accounts or credit cards.

"Liberty Reserve was neither all good, nor all bad," he said. "Liberty Reserve was not as black and white as the government would have you believe."

Marmilev, an Israeli citizen, was Costa Rica-based Liberty Reserve's chief technology officer before law enforcement shut down the company in May 2013.

Born in Ukraine, Marmilev moved to Brooklyn a decade ago, befriending others who created the company and brought him aboard.

Prosecutors said in court papers that the company that was formed in Brooklyn in 2002 and was moved to Costa Rica in 2009 operated one of the world's most widely used digital currencies. They said Marmilev earned more than $1 million as the company boasted that it provided "instant, real-time currency for international commerce" that could be used to "send and receive payments from anyone, anywhere on the globe."

Prosecutors said customers opened accounts under blatantly fictitious names that sometimes signaled their criminal purposes. A U.S. investigator opened his undercover account under the name "Joe Bogus" from "Completely Made Up City, New York, United States."

By the time it was shut down, Liberty Reserve had 5.1 million accounts and had processed over $16 billion for millions of customers, including U.S.-based individuals and entities that made up more than 15 percent of the company's accounts, the government said.

Prosecutors said investigators discovered Liberty Reserve was used extensively by criminals, including those specializing in identity theft and Ponzi schemes, and found little indication of use by legitimate, mainstream online businesses.

They said two links to "merchants" featured under the category "Shopping" led to the Facebook page of an Indonesia individual offering to "resell" what seemed to be stolen clothing, electronics and other goods while a second link connected to a site that would purchase any item on the Internet and re-ship it for a high "processing" fee to the customer.