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Us Prosecutes '$6Bn Money-Laundering Hub'

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The Liberty Reserve digital money service that was shut down laundered more than $6bn (£4bn) in criminal cash, US authorities have said.

Weekend police raids in 17 countries scooped up Liberty Reserve's owners, operators and its computer hardware.

The Department of Justice said it was the "largest international money-laundering prosecution in history".

Liberty had about a million users and processed more than 55 million illegal transactions, said DoJ court papers.

Cash transfer

The documents allege that seven people involved in running Liberty Reserve set up the digital cash service as a "criminal business venture" designed specifically to "help criminals conduct illegal transactions and launder the proceeds of their crimes".

The raids in the US, Spain, Costa Rica and other countries led to the arrests of five of Liberty Reserve's principals, including its founder Arthur Budovsky.

The service's operators will face charges of money laundering and operation of an unlicensed money transmission system. Also arrested were many of the principal operators of exchanges that fed cash to Liberty for distribution to members of criminal gangs or as the start of the laundering process.

The raids also garnered servers supporting the service and allowed the DoJ to seize the web domains through which the service was run.

Behind the scenes, data traffic for the sites from regular customers was directed to a series of virtual traps, known as sinkholes, that log information about who is trying to use the service.

In addition, it said, 45 bank accounts used by the service have been seized and action has been taken to take over the assets of 35 other sites that fed funds to Liberty Reserve for laundering.

Some details about the scale of the Liberty Reserve operation came to light in court documents unsealed by the New York office of the DoJ, which is leading the action against the service.

The digital money scheme run through the service was one of the world's largest, the DoJ said, and handled $6bn over the seven years it was in operation.

Liberty Reserve was so successful that it became a "financial hub of the cyber crime world", whose users were involved in credit card theft, investment fraud, hacking, child pornography and drug trafficking.

The shutdown has caused problems for legitimate users of Liberty Reserve, said Mitchell Rossetti, head of the EPay Tarjeta service that piggy-backed on LR.

"Thousands upon thousands of LR users are not nor have been involved in illegal activities," he said, "but now have become victims through the closure and seizure of LR."

"We seem to be acceptable collateral damage," he said. "We have committed no crime and want our funds returned to us."

I wonder if those involved will be dealt with as strongly as HSBC was. Or does their business echo that of Bitcoin?

Edited by Eddie_George

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I wonder if those involved will be dealt with as strongly as HSBC was. Or does their business echo that of Bitcoin?

Not sure if that was sarcasm.

The problem Liberty Reserve had was that they're not "TBTF" and certainly not "Too Big To Prosecute"

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I suppose thousands of legit users are now going to have to wait months to get their money back. :huh:

You can just see the next miscarriage of justice scandal brewing right before your eyes.

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When will scammers, hackers and privacy lovers realise centralised services that offer anonymity will always get shut down. I expect most of them will flock to Bitcoin now.

It's going to be fun watching how the authorites try using the same tactic against Bitcoin. Liberty Reserve, E-Gold etc had their accounts frozen, owners arrested, domains seized and exhanger accounts frozen. With Bitcoin they'll only be able to seize exchanger accounts since the other things don't exist. I wonder will the authorites demand that exchangers hand over their Bitcoins too.

All of this BS is just hastening the development of decentralised exchanges. If you fancy having a look at the future check out this protocol description for value transfer between any type of asset class


There's already a Java Wallet GUI available for testing.

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They let anybody open an account apparently, without even an id or name check. Cue massive laundering.

Banks have had it coming for a while regarding bitcoin, Sardinian 'sardex' etc. Charging you £20 - £30 to send currency to another country is so 20th century and a rip-off. It's electronic and is the push of a few buttons. 'Costs' my a**e.

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  • 242 Brexit, House prices and Summer 2020

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      • down 5% +
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      • Even
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