A Russian patsy or high-tech criminal?
Maxim Chukharev’s mother, Dina, is restless. Sitting at a conference table in a newspaper office, she launches into her story in impetuous Spanish peppered with a thick Russian accent. Mid-sentence, she pauses to answer a cellphone. She excuses herself. Out in the hall, she switches to a rapid-fire conversation in Russian. She’s loud, and it’s hard to hear what her soft-spoken husband, Igor, is saying.
Despite the commotion, Igor takes his time explaining how their son, Maxim, a bright, young computer programmer who immigrated to Costa Rica with his family from Uzbekistan during a period of political upheaval, wound up at the center of what the U.S. government says is one of the biggest money laundering cases in history.
U.S. prosecutors claim the Costa Rica-based online currency company Liberty Reserve, shuttered last May, helped launder a staggering $6 billion over seven years, mostly the result of criminal activities including credit card theft, identity theft, drug trafficking, investment fraud and child pornography.
If Hollywood had scripted the indictment against Liberty Reserve’s eight defendants, founder Arthur Budovsky, who currently is in a Spanish prison fighting extradition to the U.S., would be Auric Goldfinger, plotting to launder the world’s criminal proceeds. Maxim would be one of those banal, uniformed brains in the background, helping to build the IT infrastructure that ran the cyber-bank of the underworld. While Bond parachutes to safety with his beloved Pussy Galore, local authorities lead Maxim to a U.S. federal pen.
But to Dina, 48, and Igor, 49, who sometimes still view world events through the prism of Cold War politics, Maxim – the oldest of two sons – is a patsy, targeted by the U.S. government because of his Russian nationality and a zeal to nab Budovsky, who already had dodged prison once before.
Maxim is not a criminal mastermind, Dina and Igor say, but rather an earnest employee trying to provide for his two young daughters; someone who wanted to better himself, who never had more than $5,000 in his bank account and who drove to work in a used car while other Liberty Reserve principals raced about in Jaguars and Rolls Royces.
“When a person works for a company, and that company is legally established here, it pays taxes, why should that employee have to be aware of laws in the U.S. or England or Argentina?” Igor asked.
Locked up for the past six months, Maxim has had plenty of time to ponder that question.
In a photo sent from inside Costa Rica’s San Sebastián Preventive Prison, Maxim wears a staid look that belies his boyish features. His short-cropped blond hair sets him apart from the other prisoners, and the dark circles under his eyes suggest the last six months in cellblock A1D4 have taken an emotional and physical toll.
Although Maxim has lived in Costa Rica since he was 12, because he’s Russian, other prisoners treat him like a foreigner, which places him lowest in prison hierarchy. For the first few weeks, he shared a cell built for 44 inmates with 77 others, often sleeping on the floor. When he got sick, it took prison officials two weeks – and the intervention of the Russian consul – to allow him to see a doctor, according to Russia’s consul in Costa Rica, Ekaterina Baryshnikova.
“It’s hell,” Maxim said. “There are a bunch of thieves and killers in here, I don’t wish this on anybody. I’ve lived [in Costa Rica] for the last 15 years, I speak Spanish with no accent, but I’m still white and blond, and this is good enough to be different in here.”
At the time of his arrest, U.S. officials had just shuttered Liberty Reserve’s website, and Costa Rican cops accompanied by U.S. agents were raiding the offices and homes of company principals throughout the Central Valley.
The massive raid was coordinated by the Costa Rican Prosecutor’s Office, the Judicial Investigation Police (OIJ), Costa Rica’s judicial branch, the Costa Rican Drug Institute, Interpol, the U.S. Justice Department, the U.S. Secret Service, the IRS, U.S. Immigration and Customs Enforcement-Homeland Security and the U.S. District Court for the Southern District of New York.
The bust was the culmination of an investigation that had lasted years, spanned several continents, and led to the indictment of eight people by U.S. Attorney Preet Bharara, whom The Washington Post recently named the “most prestigious and powerful prosecutor” in the United States.
U.S. authorities estimate that Liberty Reserve had more than one million users worldwide, 200,000 of them in the U.S., and that the company conducted more than 12 million financial transactions annually, totaling more than $6 billion, according to the U.S. indictment. Authorities referred to it as “the bank of the underworld.”
Liberty Reserve users could receive transfers of “LR,” or Liberty Reserve currency, from other users on Liberty Reserve accounts. Liberty Reserve charged a 1 percent fee, up to $2.99 per transaction, every time a user transferred LR to another user. For an additional “privacy” fee of 75 cents per transaction, users could hide LR account numbers, effectively making the transactions untraceable.
In June 2010, the FBI set up a fake website that allowed users to buy, sell and exchange credit card data. The undercover site was allowed to operate for two years while the FBI monitored user communications in discussion forums and in private messages. That operation led to the June 2012 arrest of more than two-dozen people allegedly involved in trafficking stolen credit card data. The most preferred form of payment by users was Liberty Reserve, according to a special agent from the U.S. Secret Service assigned to the Electronic Crimes Task Force, who testified in an affidavit supporting Maxim’s extradition to the U.S.
The affidavit also mentions a notorious ATM heist in May 2013 in which hackers stole $45 million from thousands of ATM machines across the globe. The thieves used Liberty Reserve to distribute the loot. The Department of Homeland Security said Liberty Reserve was used by online child pornography distributors, and the DEA said it was used by underground drug trafficking sites.
Mastermind Budovsky was nabbed on May 24, 2013, in Spain. His codefendants include Liberty Reserve co-founder Vladimir Kats, 41, who was arrested in New York and pled guilty in October; Ahmed Yassine Abdelghani and Allan Esteban Hidalgo, who are free in Costa Rica; Azzeddine El Amine, also arrested in Spain; Mark Marmilev, arrested in New York; and Maxim, the tech guy.
The seven men are accused of three felony charges of conspiracy to commit money-laundering, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business, crimes that carry a maximum sentence of 30 years in U.S. federal prison. Kats also pled guilty to additional charges of receiving child pornography and marriage fraud.
Much of the case seems fairly uncomplicated. But questions about the role Maxim played and whether he’ll get a fair shake are much less straightforward. Maxim’s parents say this isn’t the first time their boy has been unfairly targeted.
Fifteen years ago, shortly after the collapse of the Soviet Union, racial tensions in Uzbekistan were escalating, and blond children who were associated with Russia were being attacked. Igor, then 36, and Dina, 35, decided to take their two young boys, Maxim and Vadim, and leave.
“It was nationalism at its worst,” Igor said. “We had the chance to live in Costa Rica and we didn’t think twice.”
The Chukharevs arrived in Costa Rica, where Maxim’s uncle had immigrated before them, as tourists with no money. They told an immigration official they sought refugee status, and he sent them to the United Nations. At the office of the U.N. High Commissioner for Refugees, a caseworker didn’t believe their story and rejected their refugee application, accusing them of lying about their Russian citizenship.
“It was absurd to be accused of being expelled by Russia. Why would Russia expel its own citizens? That would be like kicking Ticos out of Guanacaste,” Igor said, still aggrieved over the 15-year-old episode.
The Chukharevs became an immigrant family living in Costa Rica without legal documents. Igor is not proud of that period; he said he believes in rules and doesn’t like to break them. His sons, he said, were raised the same way.
But “when you have a family, you do what you have to do.”
Igor first worked as a pirate taxi driver in San José. Dina began helping out at a small boutique hotel in the eclectic neighborhood of Bario Amón. The couple eventually took over as administrators.
At 12, Maxim attended a public school in Moravia, a northeastern San José suburb. His younger brother attended public schools and is “so Tico he doesn’t even know how to write in Russian,” Dina said.
After a couple years, they moved to Santa Cruz, in the northwestern province of Guanacaste, where Igor worked as a mechanic, and Dina a homemaker. They opened a small pulpería, the Costa Rican version of a corner store.
Maxim’s interest in computers took shape shortly after his arrival in Santa Cruz, and at 15 he began helping a family friend at a computer repair shop. Maxim was good at fixing things, and he quickly learned to refurbish old computer monitors his boss brought back during trips to the west coast of the U.S.
“Max was always fixing computers,” Igor recalled. “He practiced and he learned.”
At 16, Maxim moved back to the capital and attended San Marcos High School, in the center of San José near the Foreign Ministry. He didn’t graduate, but would later obtain an equivalent degree by studying at night school.
At 19, he obtained his residency – but not citizenship – when his first daughter was born in 2005. He lived with his daughters’ mother for a couple years, but they were never married, and they eventually separated. Maxim continued supporting his family, although now that he’s in prison, that financial support has been cut off.
While Maxim stayed in the city, Dina and Igor moved to Tárcoles, a working-class community on the central Pacific coast. For nearly a decade, they lived in a humble house with no electricity or working telephone. Igor landed a job working for a Canadian patrón as a mechanic, maintenance worker and animal caretaker. Dina is a homemaker, and between the two of them they earn about $1,600 a month, which now pays for electricity. Vadim, who has a family of his own, works as a waiter in an eastern San José restaurant. The members of the Chukharev family generally grew to like here.
“Costa Ricans and Uzbeks have a similar dark sense of humor,” Igor observed. “We all help each other out. Whenever I go to the store, I ask the neighbors if they need gas, milk or whatever, and they do the same.”
At 21, Maxim landed a job at Hewlett Packard, where he earned $400 a month. To make ends meet, he took a second job installing security systems at local businesses. One of those businesses was Liberty Reserve, and it was there that Maxim met Budovsky.
The Russian-born founder of Liberty Reserve was impressed by Maxim’s knowledge of computing infrastructure and offered him a job. That was 2010, and Maxim didn’t know it at the time, but Budovsky had previously been convicted in the U.S. of running the same online currency business without a license.
After he was paroled, Budovsky moved to Costa Rica, obtained citizenship through a sham marriage to a Costa Rican empanada vendor, and renounced his U.S. citizenship. He started up the same business with his old partner, Vladimir Kats, who would leave the company in 2009. Maxim believed Budovsky was a financial consultant, and Kats already had left the company when Maxim was hired.
“They asked if we had networking. They needed help with their system, equipment and data center. I said yes. I thought [the data center] was somewhere around here, but it was in Holland,” Maxim said. “So, I said, ‘we have engineers, but we don’t have engineers who can travel and do a responsible job.’ And that’s how I made my first trip to Holland, to maintain their network and replace some old hard drives on their equipment, working with their technical team, which was located in the Ukraine.”
Four months after Maxim returned from that trip, Budovsky called and gave him a full-time job at Liberty Reserve.
“I worked for about six months at Liberty Reserve, and as far as I understood, Budovsky was there as a financial consultant,” Maxim said. “Six months later, Budovsky calls and says, ‘Hey, I would really love for you to come work for my company, WEBSA. We’re going to provide third-party service to Liberty Reserve, and we’re going to set it up as an IT company here in Costa Rica.’”
Accepting the job meant Maxim would earn $1,800 a month, barely enough to support his two daughters, now 1 and 8, and buy a “piece of shit” car with monthly payments of $500.
“I said, ‘Why not?’ And I was hired.”
On the morning of May 24, 2013 – three days after Maxim’s 27th birthday – 10 Interpol agents surrounded his father’s car as Maxim was leaving home.
“Hands up!” they said. They pulled him from the vehicle, placing Maxim face down on the ground and then handcuffing him.
According to Maxim, the agents searched the car, and when they were done, someone forgot to engage the hand brake and it rolled into a police cruiser. With Maxim in jail, a judge later ruled Maxim was responsible for the damages and had to pay for a new bumper on the police car, Maxim and his parents said.
This was only the first in a series of grievances against their son, Igor and Dina said. Maxim’s lawyer, who is well versed in Costa Rica law, helped put the other perceived injustices into perspective.
Of the eight defendants, Maxim is the lowest-level target, she said. Because he is still a Russian citizen with Costa Rican residency, U.S. prosecutors nabbed Maxim while allowing higher-level Costa Rican employees of Liberty Reserve to remain free. (According to Maxim and his parents, he was six months away from receiving Costa Rican citizenship when he was arrested, which would have prevented his extradition.)
But even Maxim’s attorney admitted there are unanswered questions involving her client. When Budovsky was arrested in Spain, he was carrying credit cards issued to Maxim Chukharev. Authorities also discovered two bank accounts in Cyprus in Maxim’s name, and emails seized from Liberty Reserve servers in the Netherlands from Marmilev to Maxim appear to be the most damaging bit of evidence.
Asked about these details, Maxim doesn’t hesitate: He didn’t know about the credit cards or the bank accounts, and it wouldn’t have been difficult for his former boss to steal his identity.
The emails appear to show Marmilev, Budovsky and Maxim conspiring to create a website with fake data to fool Costa Rican financial regulators about transactions over $10,000, a key element of the money laundering conspiracy charges. But Maxim never responded to those emails, he said, and anyway it doesn’t matter because the fake system was never implemented.
In the email exchange, Marmilev allegedly wrote, “We need to create special admin area ‘Government Admin Area’ (GAA) where Costa Rican government can view a few statistics. Majority of these statistics are going to be fake.”
Maxim said he was only copied on those emails, and had been with the company only four months when the emails were sent.
What was implemented, Maxim said, was a real system to account for suspicious transactions of $10,000 or more, a requirement by Costa Rican financial regulators. Liberty Reserve, he said, had hired a compliance officer to make sure the system followed local financial accountability rules.
“The system is legitimate, it has nothing to do with what is written in the accusations,” Maxim said. “We were planning to flag every transaction that was more than $10,000.”
Still, the evidence was enough for a Secret Service agent to recommend he be extradited. “I know from various sources that Chukharev … was deeply involved in maintaining Liberty Reserve’s technological infrastructure,” the agent wrote. Interviews by U.S. federal agents of former Liberty Reserve employees also confirmed that Maxim “was the person in Costa Rica who was responsible for maintaining Liberty Reserve’s information technology system,” he said.
The agent also alleged that once Liberty Reserve managers realized they were under investigation by the U.S., they began moving millions of dollars out of accounts in Costa Rican banks. “At least two such shell companies, held in Cyprus, were opened in Chukharev’s name,” he said. “Budovsky was found to be in possession of credit cards in the name of Chukharev and these shell companies, indicating that Chukharev opened the underlying accounts as a nominee for Budovsky.”
The agent said he believes there is probable cause to try Maxim on conspiracy charges, and that Maxim’s efforts to “thwart oversight by Costa Rican regulatory authorities” proves his knowledge of the conspiracy.
To Maxim, this is all hearsay. Would an IT employee at a bank be responsible if that bank laundered drug money? What about PayPal and Bitcoin?
“My opinion … is that [the case against Maxim] is impossible and illogical,” said Alexander Dogadin, Russia’s ambassador to Costa Rica. “This is a young person who was employed not by Liberty Reserve, but by WEBSA, which is another company, and who was receiving a modest salary. He doesn’t have anything, no properties, for example, so how could he participate in this multi-million-dollar operation? It’s illogical.”
Maxim also was listed as a “secretary” of WEBSA – which U.S. prosecutors say was a Liberty Reserve shell company – allowing him to purchase equipment, although he didn’t have direct access to company finances. In Costa Rican business nomenclature, socios, or shareholders, are the actual owners of a company, and being a secretary doesn’t necessarily entail company ownership or management.
“We were providing IT services as a third-party service. In the meantime, we were an IT company, creating a web-hosting environment, working with clouding systems, with heavy Cisco routing and switching, a lot of interesting things in the IT field,” Maxim said.
In September 2011, WEBSA moved into offices in Escazú, southwest of the capital, and continued providing services to Liberty Reserve’s data center, located in the Forum 1 office complex. WEBSA leased its services to Liberty Reserve, and Maxim insisted there are work contracts, copies of which were retained by Budovsky and Hidalgo.
“Everything was legal; there was nothing weird, nothing strange,” Maxim said. “If you follow the logic of the accusations, even the cleaning lady should have been arrested,” he said.
But that’s not how it went down, and dozens of employees were spared, according to Maxim.
On Oct. 3, a judge in the western San José district of Pavas ruled in favor of the U.S. extradition request for Maxim. His attorneys, working pro bono on behalf of the family, appealed, and a final ruling is pending.
In Costa Rica, a judge has 10 business days to rule on extradition appeals, but in reality, a backlog of cases often delays the process, sometimes up to two years. Meanwhile, Maxim and his parents are doing everything they can to prevent him from being sent to the U.S.
“I have never been in the United States,” Maxim said. “I have nobody in the States, no family in the States, no friends in the States and no attorney in the States.” The worst part, he said, is that his parents wouldn’t be able to visit him. “They have no money.”
A judge doesn’t need to determine innocence or guilt in order to extradite, so in Maxim’s case, the indictment handed down is enough to have him extradited, according to legal experts consulted by The Tico Times.
Two of the charges – conspiracy to operate an unlicensed money transmitting business and operating an unlicensed money transmitting business – do not exist in Costa Rica’s Penal Code. That means that Maxim cannot be extradited or charged on those counts. But the third count, conspiracy to commit money laundering, is a crime in Costa Rica, and Maxim can be extradited on that charge.
Still, he remains defiant, reaching out daily to his parents, his younger brother, Vadim, the Russian Embassy, and any reporter who will take his calls. He has evidence to prove he’s innocent, he said, but it’s impossible to access without a computer.
“There is no proof, there are only suggestions, recommendations and speculation,” he told The Tico Times. “If you read the whole accusation, everywhere it says, ‘We have reasons to believe that he conspired.’”
Yet with Kats pleading guilty, the scales of justice seem to be tipping against Maxim, and U.S. prosecutors seemingly hope to use Maxim’s testimony to nail Budovsky.
“As a co-founder and operator of Liberty Reserve, Vladimir Kats served as a global banker for criminals, giving them an anonymous, online forum to hide the proceeds of their illegal and dangerous activities,” Bharara said on Oct. 31. “With his guilty plea today, we take a significant step toward punishing those responsible for creating and running this international den of cybercrime.”
When asked about Kats’ guilty plea, Maxim said, “I don’t even know him.” Asked if he would cut a deal in exchange for testifying against his former boss, Maxim seemed nonplussed. “Why would I do that?” he asked.
Assuming for a second that Maxim’s bank account was nearly empty, that he wasn’t a principal at Liberty Reserve, and that he did not have access to millions of dollars the company managed in dozens of bank accounts around the world, why then, is he being targeted?
The quick answer is to help convict Budovsky.
But the Russian government has its own version of events, which starkly contrasts with the U.S.’ position. Russian officials insist the case is politically charged, just like a series of other cases in which Russian citizens were nabbed by the U.S. in third countries, a violation, Russian officials say, of a 1999 bilateral treaty that governs law enforcement requests between the two countries.
“To justify their investigation, they need to catch someone, and the easiest option was Max. He’s not Costa Rican, he’s easy to extradite,” Igor said. “That company [Liberty Reserve] had managers, it had lawyers, and the names are all there.”
According to a former Costa Rican prosecutor, Costa Rica likely made a deal with the U.S. not to arrest Costa Rican company principals until Maxim was in U.S. custody. This is because if evidence of wrongdoing is presented to Costa Rican officials, the Prosecutor’s Office is obligated to investigate and see the case through all the way to trial. That would mean the U.S. could be unable to extradite Maxim – and they might lose access to him entirely – if local charges are brought.
Since May, a spokeswoman for Costa Rica’s Prosecutor’s Office has repeatedly declined to discuss the case, saying only, “The investigation is ongoing.”
While newspapers around the world carried the story of the Liberty Reserve raids, few outside Maxim’s family, their close-knit rural community, and his former co-workers are familiar with Maxim’s case.
The Miami Herald picked up his story, noting it has become the latest diplomatic entanglement in already strained relations between Russia and the U.S., particularly given Russia’s decision last July to grant temporary asylum to U.S. intelligence whistleblower Edward Snowden.
As the Herald noted, “In the past six months, Russians have been a frequent target of arrest warrants executed at the request of U.S. prosecutors.”
Those cases include Aleksandr Panin, 24, who was arrested in the Dominican Republic on charges related to cyber-scams and online banking information theft; alleged arms dealer Dmitry Ustinov, extradited from Lithuania; Dmitry Belorossov, arrested in Spain on fraud charges; and Viktor Bout, an arms dealer known as the “Merchant of Death,” extradited from Thailand in 2011 and now serving a 25-year prison sentence in the U.S.
“What’s going on is the smearing of Russian citizens. That’s evident. The Russian government cannot accept these actions because we have a 1999 treaty,” Dogadin told The Tico Times. “But in practice, the U.S. acts via third countries; they are practically exercising extraterritorial jurisdiction, and that we consider to be a vice and completely unacceptable.”
Baryshnikova, Russia’s consular chief in Costa Rica, said, “The position is very clear: We don’t want our citizens extradited to the United States because it violates our treaty between Russia and the United States.”
Russia also has declared U.S. Attorney Preet Bharara persona non-grata, meaning he can’t travel to Russia. Bharara appears on Russia’s “Guantanamo List,” a roster of 60 U.S. officials either linked to the U.S. military prison in Guantánamo, Cuba, or to cases against Bout, Yaroshenko and other Russian nationals.
“It’s our greatest concern that [Maxim] could be sought [by the U.S.] because of his nationality, not because of the facts of the case,” Baryshnikova said.
Russia isn’t alone in its concerns about the long reach of U.S. law enforcement into third-party countries. Europe and Latin America also are troubled, the Miami Herald reported.
“It gives the impression that there might be a certain abuse of power from a powerful country,” Juan Carlos Esquivel, a Costa Rican lawyer who is president of the anti-money-laundering committee of the Inter-American Bar Association, told the Herald.
U.S. officials scoff at the notion of any vendetta against Russian nationals. To them Maxim’s is a law enforcement case. Dogadin, however, pointed out that Costa Rica is in a “very difficult and delicate situation.”
While Maxim awaits his fate in a Costa Rican jail, his parents travel back and forth between Tárcoles and San José. They make the rounds of local newspapers, looking for a friendly ear. They meet with Maxim, who tells them what to do next. When he can, Maxim calls reporters on a prison phone, which allows for five-minute conversations that are interrupted every minute with a pre-recorded voice reminding the callee that an inmate of San Sebastián is on the other end of the phone line. Other inmates pressure Maxim to get off the phone.
At first, Igor’s and Dina’s neighbors offered to help – after all, the Chukharevs had never received so much as a parking ticket. The neighbors were baffled about how the nice couple’s son was accused of being one of the leading criminal masterminds in modern history. Yet as the weeks wore on, their compassion transformed into soft-spoken apologies and averted eyes.
“What can we do?” a friend asked Igor.
He and his wife must simply wait, hoping the lawyers are good enough, or that a story in local media will help Maxim’s cause. Igor, Dina and Vadim visit Maxim in prison every week, time and money permitting. They fear that if he is extradited, they might never see him again. The mother of Maxim’s children would be left to raise their daughters alone.
Reflecting on the last few months, Dina came to a sad realization. “We left Uzbekistan for another nightmare,” she said.
You may be interested
Pic of the Day: Hot chocolate with a garden viewThe Tico Times - February 22, 2020
Minutes outside of San José toward Cerro Zurquí, Sibú Chocolate serves some of the finest Costa Rican delicacies around. Their…
After public criticism, Costa Rican gov. repeals decree that created department with access to ‘confidential’ informationThe Tico Times - February 21, 2020
The Costa Rican government repealed a decree that had created a Data Analysis Unit, after public criticism questioned its purpose…