Vladimir Kats, one of the seven men associated with creating Liberty Reserve (an online bank), has pled guilty to money laundering and operating an unlicensed money transmitting business. He has admitted to creating the digital money transfer system, a system proven to have been used to provide cybercriminals with methods to launder their proceeds.

Liberty Reserve was founded in 2009 and quickly became an anonymous way for people to transfer funds. So it doesn’t take a genius to understand why criminals decided to use it to launder ill-gotten gains. By 2013 it was one of the most popular anonymous online banking systems.

It isn’t clear if Kats and his associates originally planned on creating Liberty Reserve for use by criminals or had other ideas in mind. Regardless, criminals pounced on the opportunity provided by Liberty Reserve.

Kats guilty plea could land him in prison for up to 75 years. He is the only one out of the seven men arrested in conjunction with the site to plea guilty. As a result of the plea he will not only serve a prison sentence but also surrender all property, real and personal related to Liberty Reserve. This includes around a collective $6 billion and an additional tens of millions of dollars in various accounts worldwide. All defendants in this case must forfeit property and money.

The site’s other cofounder, Arthur Budovsky Belanchuk, was arrested just before the feds seized Liberty Reserve’s website (LibertyReserve.com and associated domains) and has been a citizen of Costa Rica ever since he denounced his US citizenship in 2011.

I wonder what effect this will have on Bitcoins. Only time shall tell.

[via Ars Technica]