## Facts

- Arthur Budovsky was indicted with others in connection with Liberty Reserve S.A., a Costa Rica–incorporated digital-currency business that enabled real-time transfers between users and charged transaction fees.
- The indictment alleged Liberty Reserve was intentionally structured to facilitate criminal transactions and laundering of crime proceeds by providing anonymity and routing funds through exchangers.
- The government alleged Liberty Reserve had hundreds of thousands of U.S. users and moved approximately $13.5 million through a bank account in the Southern District of New York.
- Budovsky had a prior New York conviction for operating an unlicensed money-transmitting business and later moved to Costa Rica, where he founded Liberty Reserve.
- Before trial, Budovsky moved to (1) dismiss on due-process/extraterritoriality grounds for lack of a U.S. nexus, (2) strike prejudicial surplusage from the indictment, and (3) compel additional disclosure of Brady material.

## Issues

1. Whether due process barred prosecution because the charged conduct was largely foreign and lacked a sufficient nexus to the United States.
2. Whether descriptive allegations characterizing Liberty Reserve as a hub for cybercrime and listing criminal activity should be stricken as prejudicial surplusage under Federal Rule of Criminal Procedure 7(d).
3. Whether the court should compel additional Brady disclosures beyond the government’s existing obligations absent a specific showing of noncompliance.

## Decision

- The court denied the motion to dismiss, holding the indictment alleged a sufficient nexus to the United States to satisfy due process.
- The court denied the motion to strike, finding the challenged allegations relevant to the charged offenses and not unfairly inflammatory under Rule 7(d).
- The court denied the motion to compel Brady disclosures, concluding a generalized order was unnecessary without identification of specific withheld exculpatory material.

## Legal Principles

- When U.S. criminal statutes are applied to largely foreign conduct, due process requires a sufficient nexus between the defendant and the United States, satisfied where conduct is intended to have or does have substantial U.S. effects or significantly uses U.S. financial channels.
- An indictment will not be dismissed at the pretrial stage where its allegations, taken as true, plausibly connect the scheme to the United States through substantial U.S. users, purposeful movement of funds into or out of the United States, or use of U.S.-located accounts.
- Motions to strike surplusage under Rule 7(d) are disfavored and are granted only when the challenged language is both irrelevant to the charges and unfairly inflammatory; allegations bearing on intent, knowledge, or scope typically remain.
- Courts generally decline to issue broad Brady-compulsion orders absent a concrete showing that the government is withholding exculpatory or impeachment material.

## Conclusion

The court permitted the prosecution to proceed, holding that the indictment’s allegations of extensive U.S. use and U.S.-based financial routing established a constitutionally sufficient nexus, that the indictment’s characterizations were relevant and not unfairly prejudicial, and that no special order compelling Brady disclosures was warranted without a particularized showing.


United States v. Budovsky, No. 13 Cr. 368 (DLC), 2015 WL 5602853 (S.D.N.Y. Sept. 23, 2015)