The founder of Liberty Reserve, a digital currency that has evolved as perhaps the most popular form of payment in the cybercrime underground, was reportedly arrested in Spain this week on suspicion of money laundering. News of the law enforcement action may help explain an ongoing three-day outage at libertyreserve.com: On Friday, the domain registration records for that site and for several other digital currency exchanges began pointing to Shadowserver.org, a volunteer organization dedicated to combating global computer crime.
According to separate reports in The Tico Times and La Nacion, two Costa Rican daily newspapers, police in Spain arrested Arthur Budovsky Belanchuk, 39, as part of a money laundering investigation jointly run by authorities in New York and Costa Rica.
Update, May 28, 9:11 a.m. ET: Libertyreserve.com is now resolving again, but its homepage has been replaced by a notice saying “THIS DOMAIN NAME HAS BEEN SEIZED,” and features badges from the U.S. Treasury Dept., U.S. Secret Service, and the DHS.
Original story:
The papers cited Costa Rican prosecutor José Pablo González saying that Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using Liberty Reserve, a company he created in Costa Rica. “Local investigations began after a request from a prosecutor’s office in New York,” Tico Times reporter L. Arias wrote. “On Friday, San José prosecutors conducted raids in Budovsky’s house and offices in Escazá, Santa Ana, southwest of San José, and in the province of Heredia, north of the capital. Budovsky’s businesses in Costa Rica apparently were financed by using money from child pornography websites and drug trafficking.”
For those Spanish-speaking readers out there, Gonzalez can be seen announcing the raids in a news conference documented in this youtube.com video (the subtitles option for English do a decent job of translation as well).
Liberty Reserve is a largely unregulated money transfer business that allows customers to open accounts using little more than a valid email address, and this relative anonymity has attracted a huge number of customers from underground economies, particularly cybercrime.
In a now 10-page thread on this crime forum, many members are facing steep losses.
The trouble started on Thursday, when libertyreserve.com inexplicably went offline. The outage set off increasingly anxious discussions on several major cybercrime forums online, as many that work and ply their trade in malicious software and banking fraud found themselves unable to access their funds. For example, a bulletproof hosting provider on Darkode.com known as “off-sho.re” (a hacker profiled in this blog last week) said he stood to lose $25,000, and that the Liberty Reserve shutdown “could be the most massive ownage in the history of e-currency.”
That concern turned to dread for some after it became apparent that this was no ordinary outage. On Friday, the domain name servers for Libertyreserve.com were changed and pointed to ns1.sinkhole.shadowserver.org and ns2.sinkhole.shadowserver.org. Shadowserver is an all-volunteer nonprofit organization that works to help Internet service providers and hosting firms eradicate malware infections and botnets located on their servers.
In computer security lexicon, a sinkhole is basically a way of redirecting malicious Internet traffic so that it can be captured and analyzed by experts and/or law enforcement officials. In its 2011 takedown of the Coreflood botnet, for example, the U.S. Justice Department relied on sinkholes maintained by the nonprofit Internet Systems Consortium (ISC). Sinkholes are most often used to seize control of botnets, by interrupting the DNS names the botnet is programmed to use. Ironically, as of this writing Shadowserver.org is not resolving, possibly because the Web site is under a botnet attack (hackers from at least one forum threatened to attack Shadowserver.org in retaliation for losing access to their funds).
Reached via Twitter, a representative from Shadowserver declined to comment on the outage or about Liberty Reserve, saying “We are not able to provide public comment at this time.” I could find no official statement from the U.S. Justice Department on this matter either.
Libertyreserve.com is not the only virtual currency exchange that has been redirected to Shadowserver’s DNS servers. According to passive DNS data collected by the ISC, at least five digital currency exchanges —milenia-finance
Assuming the reports at The Tico Times and El Nacion are accurate, this would not be the first time Mr. Budovsky has attracted attention from authorities for money laundering. According to the Justice Department, on July 27, 2006, Arthur Budovsky and a man named Vladimir Kats were indicted by the state of New York on charges of operating an illegal money transmittal business, GoldAge Inc., from their Brooklyn apartments. From a Justice Department account of that case:
“The defendants had transmitted at least $30 million to digital currency accounts worldwide since beginning operations in 2002. The digital currency exchanger, GoldAge, received and transmitted $4 million between January 1, 2006, and June 30, 2006, as part of the money laundering scheme. Customers opened online GoldAge accounts with limited documentation of identity, then GoldAge purchased digital gold currency through those accounts; the defendants’ fees sometimes exceeded $100,000. Customers could choose their method of payment to GoldAge: wire remittances, cash deposits, postal money orders, or checks. Finally, the customers could withdraw the money by requesting wire transfers to accounts anywhere in the world or by having checks sent to any identified individual.”
From the U.S. government’s description, Liberty Reserve sounds virtually indistinguishable from GoldAge, except for having been based in Costa Rica. If Liberty Reseve stays offline, this could cause a major upheaval in the cybercrime economy. I will be following this case closely, and would expect to hear more about this apparently coordinated takedown following the Memorial Day holiday in the U.S. on Monday.
For now, however, many in the underground would rather believe almost any other explanation than a law enforcement takedown. The administrator of cybercrime forum Carder.pro, for example, has been telling forum members that the entire incident is the work of professional hackers working for Liberty Reserve’s competitors.
Carder.pro administrator “Ninja” isn’t buying the news being reported by Costa Rican media.
Update, May 26, 10:45 p.m. ET: A competitor to Liberty Reserve, a virtual currency called Perfect Money, on Saturday posted a note to its site saying it would no longer accept new registrations from individuals or companies based in the United States. “We bring to your attention that due to changes in our policy we forbid new registrations from individuals or companies based in the United States of America. This includes US citizens residing overseas,” the company wrote. “If you fall under the above mentioned category or a US resident, please do not register an account with us. We apologize for any inconvenience caused.”
Update, May 28, 1:26 p.m., ET: I just filed a follow-up story which confirms that libertyreseve.com and other exchangers were seized by the U.S. government. The story also examines the impact of this law enforcement action on other digital currencies, including Bitcoin.
I am use liberty reserve since 5 years agoo, what a pitty this happens
omg!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!please active liberty back!!! my money!!!! wtf!!!
This is quite a shame, many have lost a lot of money; legally or illegally acquired. This was a hard hit at “cyber-crime” but still doesn’t change a thing. They are hundreds of e-currencies and LR falling only means the birth of new heads on the hydra.
Kerbs i love reading your site, its inspiring and gives birth to more sophisticated ways to do what we do. The downfall of LR should be taken as a lesson; Never put all your eggs in the same basket and Don’t keep papers in your wallet, always know when to take them out.
To me this changed nothing, tomorrow its back to work as usual. Just happy a reliable source confirmed it was brought down by law officials.
++
Government of america sucks, LR should be back… This is not the right way to shutdown the money related companies without information , the authorities should be sued and the man behind closing sites like liberty reserve should be hanged till death.
“Crebs, its your fault.”
lulz – they came out of the woodwork on this story.
There is no more delicious irony than watching cybercockroaches foam at the mouths because their illegally gained money was ‘stolen’ from them.
And about cybercockroaches …
Pickpocketers as pickpoceting will allways exist … and will never never be menace to any “normal” society !
But as long in society where 100$ for Someone in India is a LOT (can feed a lot of hungry mouths) .. and in US they even do not bother on that sum … problem will exist !
Disproportion of welth/wages are huge and unnatural !
If digital pickpoceting is soo profitable fo so much people .. something is really wrong in this system in wich we live in !
Bottom line … things can be changed by finding the cause or forever fighting the consequences !
Same liek prohibition . .or in new era .. war on drugs …
The goal is to keep it going and going … not to win the battle !
i heard he was arrested in 2006 and were sentenced 5 years then how he was handling libertyreserve
Dont worry guys lr will be back there blog.libertyreserve.com is back and pointing to there server now.
Stop lingering false hope Liberty blog is down as well!
Liberty Reserve Founder arrested is Scam Hoax or Is True?
I just Do Some Research About Liberty Reserve Server Down for Liberty Reserve community member information:
http://www.facebook.com/groups/161669747344980/
I sent a request to join the facebook group. I am interested in facts about this not all the blah blah that some people have posted on different blogs about LR… I use LR to send money and was shocked to hear this…
Hello! I simply wish to give an enormous thumbs up for the nice info you’ve gotten here on
this post. I will be coming again to your weblog for more soon.
http://www.ipetitions.com/petition/us-government-restore-the-online-services-of/
voksalna, your analogy is true !
What is allowed for big ones is not allowed for small ones !
HINT “to big to fail” expression !
And they ofthen justify it with something blurry like “greater good” (for who I ask)
For sure not for citizens worldwide in global !!!
For example recently HSBC bank paid only some fee for being involved in drug money laundering for mexico cartels!
And this is only few % of info available for public to know !
and in WW2 some of major US BASED companies and banks played major role in rise of nacizm in europe … still operating today ! Intact !
Etc etc etc …
LR mainly was used for “illegal” activities but what moral right this give them to take those legit as collateral damage ?
I assume same principle and “moral” grounds are taken when they need approval from US senat for carpet bombing with drones in middle of nowhere in Pakistan .. killing innocents civilians as well !
It is legal .. but unhuman ! And imoral in any aspect !
One more thing …
If you allow US based company to go to China,Philliphines,Bangladesh,Cambodia etc .. and exploit the polis (use the situation on low public rights, enviromental standards, low wages and care for humanity in global)
And at same time those people are UNABLE to come to US as working labourers … dishwashers etc … but have 1001 obstacle in a way of VISAS .. Green Cards .. work permits etc …
To offer their services to US public !
Is that a bit unfair !
Poor people are forced to work for pennies, they are imprisoned by regulations to move globaly and offer their service (as a dishwasher)
While companies aint !
That is why any one with at least little moral grounds and ethic should not pitty ANY big company who does that kind of modus operandi worldwide when it loose few millions on the way to exploit the rest of the “fools” on the planet !
It is all connected and sadly it is all moneytalk and doble standards !
Those with the most money, the best propaganda machines, and the biggest weapons (legal or illegal) always get to choose what is legal or illegal. Morality has shit all to do with it.
any gov is Robber
we want and pray liberty reserve.com back soon
Really bad…Lots of money lost
please ooo, liberty reserve, why are you doing this because of someone? my money is there ooooo, please reactivate the site
if he was an AMERICAN…….it would be registered and not shut down. every financial institution is guilty of fraud…
He was apparently also an American citizen but then he renounced his citizenship in the US when he became a Costa Rican citizen by marriage. The US is funny about multiple citizenships, at least at an adult age, and there are a whole lot of rules with not a lot of loopholes, unlike Ukraine (where he was from) and the majority of other countries in the world, where more than one citizenship can freely be held without a lot of hassle.
By my math wouldn’t he have been on probation still at the time he left the US (not when he became a Costa Rican citizen, but when he left the US)? Or am I calculating this incorrectly? Maybe he left the US illegally?
I do not understand what is being experienced by the founders of liberty, but the liberty cap the tens or even hundreds of lives are at liberty to make money would be disappointed and confused about what to do now
I hope so, although its founders were arrested, but at least liberty reserve still be active so that people who do not have jobs can still live and make ends meet, that’s my hope 🙂
all the US are robber
hahahahahaha what is all this….how can my money just go like that , if liberty account was not real…he supposed to be closed for long government of spain know more about his plz i need my money back ..pleased libertyreserve have to be open because i used liberty to transact my business how can this happen to me…………..because i,m not happy if my money is not return
What can i do? i want my money back from LR
Shit so sad i use LR for my Business I want my money back.
http://www.facebook.com/imranislam.emon1?ref=tn_tnmn
gffhgghfhgfhfhfhfhfh
http://www.ipetitions.com/petition/us-government-restore-the-online-services-of/
hmmmmmmmmmmmmmmmmmm
By the way your petitions for the US gov to restore LR are not only pointless, but are doubly pointless because they aren’t going to care about the petitions of non-US citizens.
I think people are going to need to cut their losses, just like they have had to in the past with things like epassporte, etc.
Consider this a prediction (but not a sign of participation) that this is going to give a whole lot of people a whole lot of reason to be a whole lot more evil trying to “catch up” to what they lost, perhaps.
Brian will be busy with a whole lot more to write about soon I predict.
voksalna,
I put it onto you this hour that if you don’t mind what you comment about this issue, the wrath of Almighty God will be upon you and your entire family.
End time Prophesy has begun in the US. Street shooting, Gay marriage, 666 ,Church of Satan, heavy crime has saturated their end but instead for them to take care of these, the were busy looking for riches and oil exploitation opportunities in other regions.
Is US banks free of fraud? are you free of crime? Just note that the head of innocent people that you and the US Govt want to cheat will come for vengeance and you will surely die of either car accident or plane crash except you stop your wicked and ungodly post here and look for something else to do with your time.
i have been reading your post ever since
I think you have not been reading my postings at all, because if you had you’d see your reply made even less sense than it would on its own.
.1…..By the way your petitions for the US gov to restore LR are not only pointless, but are doubly pointless because they aren’t going to care about the petitions of non-US citizens…….
.2…..He was apparently also an American citizen but then he renounced his citizenship in the US when he became a Costa Rican citizen by marriage. The US is funny about multiple citizenships, at least at an adult age, and there are a whole lot of rules with not a lot of loopholes, unlike Ukraine (where he was from) and the majority of other countries in the world, where more than one citizenship can freely be held without a lot of hassle.
By my math wouldn’t he have been on probation still at the time he left the US (not when he became a Costa Rican citizen, but when he left the US)? Or am I calculating this incorrectly? Maybe he left the US illegally?
Which of the above point make sense if you fear God?
Who care about US Laws? have they come out with anything out of their selfish interest? I was once told how everything started. Was it because they started internet or because they don’t want poor country and people to grow?
I saw your opening statement i know that today is for those that have their money in LR but yours will come one day and nobody will be there to sympathize with you on your own evil day. we all have evil day but ours is going to be better because we are many and we can console ourselves. Yours will consume you very soon unless you repent.
I don’t fear (or hate) God, actually. It’s not even relevant if I believe in God or not. I believe in a natural order. What the US is doing is believing it is God. The US is not God. So whether we agree or not on religion I do not think we are at odds here. I think you just read one page of my comments. Not where I was talking about how *I* too got screwed over.
So no, I don’t fear (or hate) God. I fear and loathe a world that enables the US government’s crazy bullshit.
1. There is no point in the petition because they don’t give a * about us. They will NOT give a * about us. It doesn’t matter what I or you or anyone else wants to be true. This is history repeating and they NEVER have. So you are saying, what, that logic, pragmatism, and doing the math is ‘wrong’?
I have faith in many things, and some persons, but not in a whole lot of people who get together and call themselves by a label.
Oooh … scary. God’s going to come and get us.
Seriously, grow up and get a life.
I wrote: “Oooh … scary. God’s going to come and get us.”
It’s occurred to me belatedly that anyone subscribed to this comment thread by e-mail may have seen the above comment out of context. I apologize for any offense this may have caused. The only excuse I can make is … well, the other guy started it!
I dont think that the whole story is true coz if such thing happened to Lr there would be big news on all tv channels coz lr is the leading Digital currency of the world. So hope lr will be back
Probably not the TV. Maybe the web news but they (maybe deliberately) arrested him and announced on a weekend. Most of the places will not publish much until Monday at the earliest. The Costa Rican media has covered it and the “raids” well enough to have me convinced that this has happened and the money will almost certainly be gone forever — and on the small chance it is not it will be extremely difficult to get ahold of, and not for a long time (but I would not get your hopes up).
In other words, expect to never see it again.
There is one small piece of hope here in that there is no ‘seizure’ graphic (yet) on their sites. But not sure if this matters.
Any Body Tell me that LR return back or open our account with balance because i have some US dollar in my LR Account.
My investment with $500.
Whoever that is in charge of rectifying all these problems being it US government should do & restore peoples account so we can gain access to our money. not because you people are rich you want other people to suffer & die in your hands. God will punish whoever that is pending my money, my business, my family, my food, my life, my all & all…..God where will i start again? please someone should help me out.
Many has lost over 20 000 USD on their LR . USA must not shut down the site and give the site to proper authority solving the legal issues. Liberty reserve was a payment processor. A payment processor cannot be a crime . There is no bad thing about a payment processor. What ever the owner is guilty or not you cannot punish the users and account holders of liberty reserve.
Remembering what happen to e-gold taught me a lesson the hard way.
First i just wanna said sympathize to all people around the world that had to be victimized,including me, i’m just thinking “it’s caused one person but have to sacrifice all people have not directly know, have not yet with their family, there are many-many people around the world depend on LR income, not the only work, business, why some people say simplistic as they said LR identified with illegal activity, don’t you think if pulse services using LR is illegal, investing in forex as the biggest activity you were called illegal too??
what about paypal and moneybookers it was using too as payment in porn or gambling activities but we never complain about that
i suggest to brian i hope you were not only write this article but you don’t care what the impact with people around the world , people who look for pennies just for survive their life, pennies by pennies to give food, pay school for their family, don’t you think about that? so many people were ready doing suicide because of this impact, their lost money and don’t know what have to do now.
you just write article just “because like you just said damn interesting about this” cmon where is your heart??? don’t you think you have child wife and thinking like us, do not what the hell happened , so look the fact now until this time if people said it is robbery from your side Amerika and using spain and Costarica to be “favorite doll” just to take million dollars money from us, don’t you see now??
where is your media ???? where is New York Time, CNN do not blow up this incident, why your media keep quite shit with this.
If the LR was back is the rate price will it same price with our currency like before?
”
Now people do not want think what caused of this incident , people just want their money back like start do not happened this incident.”
Please Forward what i quote say that to your authority side who has responsible. (i hope you know that)
I think it represent all people to be victimized with this incident.