Payment processor Liberty Mutual owner Arthur Budovsky arrested in Spain in a money laundering investigation.

Things keep getting murkier in Bitcoin land. After the US government froze a mobile payments account associated with leading Bitcoin exchange Mt. Gox, and the CFTC indicated it is looking at regulating Bitcoin trading, now comes word that payment processor Liberty Mutual has been shut down, and its owner Arthur Budovsky has been arrested in Spain, as part of a joint money laundering investigation involving police in the US, Costa Rica, and Europe.

Liberty Reserve had been one of the more popular ways of processing payments for Bitcoin exchanges such as Mt Gox, as well as for MLM (multi-level marketing) companies, and Forex and Binary brokers.

It remains to be seen what will happen to traders and others who had significant amounts of money in their Liberty Reserve e-wallets.

This is not Budovsky’s first brush with the law. According to Bitcoin Magazine, Budovsky had been arrested before (in 2006), when he and a partner were arrested for operating digital currency exchange company Gold Age, which the US federal government deemed to be a money transmitting business, without a license. However Budovsky received probation and went on to operate Liberty Reserve. This time, the reason for the arrest was money laundering, with Bitcoin Magazine reporting (also citing BehindMLM) that allegations include that Budovsky’s businesses in Costa Rica apparently were financed by money from child pornography websites and drug trafficking.

For a good in-depth review of the story and background see Bitcoin Magazine.

Stay tuned to LeapRate for more as this story unfolds…

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