Vladimir Kats, one of the co-founders of digital currency service Liberty Reserve has pleaded guilty to a number of charges including money laundering, marriage fraud and receiving child pornography.

The 41-year-old from Brooklyn, New York issued his plea at a federal court before US district judge Denise L. Cote yesterday (31st October).

Many of the charges he faced related to his role in running Liberty Reserve, which allegedly laundered more than $6bn in suspected proceeds of crimes.

If Kats receives the maximum sentence for each charge, he faces 75 years behind bars.

Acting assistant attorney general Mythili Raman said: “Vladimir Kats, by his own admission, helped to create and operate an anonymous digital currency system that provided cybercriminals and others with the means to launder criminal proceeds on an unprecedented scale."

She went on to say Kats' conviction shows that action will be taken against banking systems that allow criminals to conduct illegal transactions anonymously.

"Professional money launderers will be brought to justice," she added.

Yesterday, Kats pleaded guilty to the following:

A sentencing date has not yet been scheduled.

Liberty Reserve was incorporated in Costa Rica in 2006, and was allegedly created to help users launder the proceeds of their crimes. For years, it operated one of the world's most widely used digital currencies, which it described as "instant real-time currency for international commerce".

The company touted itself as being the Internet's largest payment processor and offered its services to people across the globe including those in the US. In fact, the US government estimates the company had approximately 200,000 users located in America.

However, it failed to register with the US Department of the Treasury as a money transmitting business and was operating without even the basic anti-money laundering controls, such as know-your-customer procedures.

The indictment relating to Kats' arrest describes Liberty Reserve as follows:

It claims that the company processed more than 12 million financial transactions per year – totalling an estimated 55 million between 2006 and 2013, to the tune of $6bn.

According to the indictment, the merchants who accepted Liberty Reserve's currency were "overwhelmingly criminal in nature":

The government document ordered the defendants forfeit "a sum of money of at least $6bn", plus all funds on deposit in 42 accounts in various countries across the world, including Morocco, Greece, Cyprus, Spain and Latvia. On top of this, the government is seizing up to $36,919,884 from three Westpac Bank accounts in Australia.

The domain names libertyreserve.com, exchangezone.com, swiftexchanger.com, moneycentralmarket.com, asiangold.com and eurogoldcash.com have also been seized.

In the indictment, the role Kats played in the company is detailed as co-director, and it states he also ran multiple Liberty Reserve 'exchanger' services.

Kats left Liberty Reserve in 2009 following a dispute with co-founder Arthur Budovsky, who also goes by the names of Arthur Belanchuk and Eric Paltz. The site was shut down two years later in May 2013, the same month that Kats was arrested in Brooklyn.

Marco Santori, chairman of the Bitcoin Foundation’s Regulatory Affairs Committee, explained Kat's arrest and his recent guilty plea provides yet more evidence that digital currencies are a terrible tool for money laundering.  He said:

"Liberty Reserve operated a centralized convertible digital currency system that – as the guilty plea now confirms – was used for criminal activity and laundering money.

Decentralized digital currencies like bitcoin, on the other hand, offer unprecedented transparency to public scrutiny."

Santori went on to say criminals chose Liberty Reserve’s centralized system instead of bitcoin specifically because Liberty Reserve offered the kind of opacity to public investigation that bitcoin has rejected from its infancy.

The charges against Kats' co-defendants are still pending, with a press release from the US Department of Justice stating: "Those defendants are presumed innocent unless and until proven guilty."