Panic spread on the Internet Friday as word about Arthur Budovsky Belanchuk’s arrest reached users of his digital currency business Liberty Reserve, which was shut down on Friday.

Budovsky, 39, was arrested on Friday in Spain as part of a money laundering investigation performed jointly by police agencies in the United States and Costa Rica. U.S. officials likely will seek his extradition.

U.S. officials have targeted companies like GoldAge and Liberty Reserve for years, saying they are hotbeds for criminal activity including money laundering, drug trafficking and tax evasion.

“The ability to conduct transactions in digital currencies is constantly available, making digital currencies more convenient than other methods of funds transfer, which may be limited by normal business hours and international time zones. Additionally, digital currency transactions can be conducted from any location or device with Internet access,” a 2008 report by the U.S. National Drug Intelligence Center stated.

“Because most digital currencies are denominated into internationally recognized weights of precious metals, inconveniences traditionally associated with international financial transactions, such as calculating international exchange rates for another nation’s currency, are eliminated,” the report added.

Liberty Reserve, which operated without oversight from any global agency, was a convenient tool for foreign currency brokers, as it allowed them to bypass local legislation and avoid exchange rate fluctuations, particularly in developing countries. But its lack of oversight also attracted organized criminal elements, prosecutors said.

“Payment in digital currencies makes it easier for traffickers to launder funds that no longer need to be placed into the traditional financial system. Payment can be immediately forwarded to an international digital currency account, perhaps in payment to the original source of supply, or further layered through multiple digital currency accounts and exchangers until reintegrated into the legitimate economy,” the National Drug Intelligence Center stated.

To open a Liberty Reserve account, users needed only to submit a name, address, email address, date of birth and occupation.

Online reaction has also come from Nigeria, Malaysia and other countries.

An earlier story on www.ticotimes.net about Budovsky’s arrest prompted worried clients to ponder the fate of funds deposited with the company.

“[M]illions of client of Liberty reserve now worried for money around the world , plz give few more info..LR site is down now,” one reader posted on The Tico Times Facebook page.