NEW YORK In what was described as the biggest-ever international money-laundering scheme, a federal grand jury has indicted a company on criminal charges that it used "virtual" currency to launder more than $6 billion in ill-gotten gains.

Liberty Reserve, a Costa Rica company founded in 2006, was so welcoming to criminals looking to cloak their identities that an undercover agent was able to register as "Joe Bogus," authorities said. The agent was then able to set up an account to supposedly rip off ATM customers and what he described as "for the cocaine." His purported address: 123 Fake Main St., Completely Made Up City, USA.

Among the world's largest Internet-based currency companies, Liberty Reserve amounted to a financial hub for the black market, becoming "the bank of choice for the criminal underworld," Preet Bharara, the U.S. attorney in Manhattan, said Tuesday. The company allegedly provided anonymity for criminals looking to conceal illicit profits from drug-running, child porn and cyber crime such as credit card fraud and identity theft.

"Its entire existence was based on a criminal business model," Bharara said, adding that the indictment against Liberty Reserve and seven of its principals and employees is part of a broader effort to reign in "the Wild West of illicit Internet banking."

The case marks the latest black eye for the emerging world of virtual currencies and payment systems based on them. Virtual currency services have drawn growing interest from venture capitalists and entrepreneurs, who see them as an opportunity to revolutionize how people pay for just about everything. They believe such systems can dramatically lower the cost of doing business and make all types of finance far more efficient.

Chris Larsen, co-founder of virtual currency payment system OpenCoin, said such crackdowns are to be expected as entrepreneurs push the boundaries of these new payment systems.

"I think it's kind of a natural evolution," said Larsen, whose company has attracted investment from major Silicon Valley venture capital firms including Google Ventures and Andreessen Horowitz. "These types of payment systems will go from zero people to everybody. And I think when people look under the hood, they'll get comfortable with it."

That was the case a decade ago, when PayPal first emerged. The online payment system drew heavy scrutiny from state banking commissions, and grappled with a reputation as a haven for porn companies and online gambling. Now, as a unit of EBay, PayPal has become part of the fabric of the Internet.

Among the new breed of financial companies, Bitcoin has probably drawn the most attention, in part because it is not a company. Instead, Bitcoin is a currency system that operates across a distributed network of servers controlled by no single organization, making it harder to regulate.

Regulators worry these new payment systems are creating a kind of lawless frontier, leaving the government scrambling to keep dirty money out of the U.S. financial system as transactions increasingly take place on the Internet, on mobile phones and even with newfangled cyber currencies.

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Liberty Reserve indicted on digital currency money-laundering charges