May 28, 2013

Indictment, arrest of virtual currency founder targets alleged “financial hub of the cybercrime world.”

U.S. federal law enforcement agencies on Tuesday announced the closure and seizure of Liberty Reserve, an online, virtual currency that the U.S. government alleges acted as “a financial hub of the cyber-crime world” and processed more more than $6 billion in criminal proceeds over the past seven years.

After being unreachable for four days,'s homepage now includes this seizure notice.

After being unreachable for four days, now includes this seizure notice.

The news comes four days after inexplicably went offline and newspapers in Costa Rica began reporting the arrest in Spain of the company’s founder Arthur Budovsky, 39-year-old Ukrainian native who moved to Costa Rica to start the business.

According to an indictment (PDF) filed in the U.S. District Court for the Southern District of New York, Budovsky and five alleged co-conspirators designed and operated Liberty Reserve as “a financial hub of the cyber-crime world, facilitating a broad range of online criminal activity, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”

The U.S. government alleges that Liberty Reserve processed more than 12 million financial transactions annually, with a combined value of more than $1.4 billion. “Overall, from 2006 to May 2013, Liberty Reserve processed an estimated 55 million separate financial transactions and is believed to have laundered more than $6  billion in criminal proceeds,” the government’s indictment reads. Liberty Reserve “deliberately attracted and maintained a customer base of criminals by making financial activity on Liberty Reserve anonymous and untraceable.”

Despite the government’s claims, certainly not everyone using Liberty Reserve was involved in shady or criminal activity. As noted by the BBC, many users — principally those outside the United States — simply viewed the currency as cheaper, more secure and private alternative to PayPal. The company charged a one percent fee for each transaction, plus a 75 cent “privacy fee” according to court documents.

“It had allowed users to open accounts and transfer money, only requiring them to provide a name, date of birth and an email address,”  BBC wrote. “Cash could be put into the service using a credit card, bank wire, postal money order or other money transfer service. It was then “converted” into one of the firm’s own currencies – mirroring either the Euro or US dollar – at which point it could be transferred to another account holder who could then extract the funds.”

But according to the Justice Department, one of the ways that Liberty Reserve enabled the use of its services for criminal activity was by offering a shopping cart interface that merchant Web sites could use to accept Liberty Reserve as a form of payment (I’ve written numerous stories about many such services).

“The ‘merchants’ who accepted LR currency were overwhelmingly criminal in nature,” the government’s indictment alleges. “They included, for example, traffickers of stolen credit card data and personal identity information; peddlers of various types of online Ponzi and get-rich-quick schemes; computer hackers for hire; unregulated gambling enterprises; and underground drug-dealing websites.”

A Liberty Reserve shopping cart at an underground shop that sells stolen credit cards.

A Liberty Reserve shopping cart at an underground shop that sells stolen credit cards.

It remains unclear how much money is still tied up in Liberty Reserve, and whether existing customers will be afforded access to their funds. At a press conference today on the indictments, representatives from the Justice Department said the Liberty Reserve accounts are frozen. In a press release, the agency didn’t exactly address this question, saying: “If you believe you were a victim of a crime and were defrauded of funds through the use of Liberty Reserve, and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact (888) 238- 0696 or (212) 637-1583.”

It seems clear, however, that the action against Liberty Reserve is part of a larger effort by the U.S. government to put pressure on virtual currencies. In tandem with the unsealing of the indictments against Budovsky and others, Manhattan District Attorney Cyrus R. Vance, Jr., announced the formation of the “Financial Intelligence Unit” — a group that will work with the FBI, IRS and Secret Service to more closely scrutinize suspicious activity reports filed by U.S. financial institutions.

“Keeping our Office and its investigations firmly rooted in the 21st Century means mining unique troves of data previously unavailable to prosecutors and investigators to uncover wrongdoing,” Vance said in a prepared statement. “As financial information has made the leap from ledger books to online sources, this new unit will be tasked with making sure these sets of data are analyzed, which will enhance our prosecutions of everything from classic white-collar crimes to street crimes to cybercrime.”

Several of Liberty Reserve’s competitors have apparently seen the writing on the wall and moved to distance themselves from U.S. customers. On Saturday, digital currency Perfect Money 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.”

WebMoney, a digital currency founded in Moscow and probably the closest competitor to Liberty Reserve in terms of users and daily transfer volumes, started blocking new account signups from users in the United States at least two months ago, according to Damon McCoy, assistant professor at George Mason University’s computer science department.

McCoy said that on March 13th, 2013, WebMoney presented him with the following message when he attempted to create an account on the service: “The services and products described on and and offered by WM Transfer Ltd. are not being offered within the United States and not being offered to U.S residents or citizens, as defined under applicable law. WM Transfer ltd. and its products and services offered on the site, are NOT registered or regulated by any U.S. including FINRA, SEC, FSC, NFA, FinCEN, CFTC or ASIC.”

It’s also not clear how the government’s actions will impact Bitcoin, a peer-to-peer digital currency that is gaining worldwide currency and momentum. While Bitcoin’s distributed nature in theory lacks the geographic central point of failure that allowed the US government to take action against Liberty Reserve, currency holders rely on bitcoin exchanges to convert bitcoins into other currencies; those entities must register with the U.S. Treasury Department as money service businesses, and could become a focus point for banking regulators going forward.

As I noted in my story last week, the U.S. District Court awarded the Justice Department control over (PDF) not only, but at least four other currency exchanges that worked closely with it. In addition,  a civil action was filed against 35 exchanger websites seeking the forfeiture of the exchangers’ domain names.

Some of the bitcoin exchanges currently registered with the U.S. Treasury as money service businesses.

Some of the bitcoin exchanges currently registered with the U.S. Treasury as money service businesses.

One other big question looms large: How much data about Liberty Reserve’s customers was the U.S. government able to collect from this law enforcement action? According to The Tico Times, a Costa Rican daily newspaper, San José prosecutors conducted raids in Budovsky’s house and offices in Escazú, Santa Ana, southwest of San José, and in the province of Heredia, north of the capital.

But at least one cybercrime expert said it may be difficult for U.S. prosecutors and investigators to glean meaningful and actionable data from any servers or computers seized from Liberty Reserve.

“I would expect that there is a huge chance that most if not all of this data is heavily encrypted,” said Arkady Bukh, an attorney based in Brooklyn, N.Y. who has represented quite a few cybercrime defendants over the years. “Any case I’ve seen where we’re talking about more than $10 million, I always see very good investments in making sure that governments will not be able to penetrate the database without cooperation of the arrested parties.”

Five defendants, including Budovsky, were arrested on May 24. Vladimir Kats, the co-founder of Liberty Reserve, was arrested in Brooklyn, as were Liberty Reserve administrators Mark Marmilev and Maxim Chukharev. In a press conference today, Preet Bharara, the United States Attorney for the Southern District of New York, said the United States would be seeking the extradition from Spain of Budhovsky and Azzeddine El Amine, an account manager for the company.

Update, 2:58 p.m. ET: Added comments from Bukh, the phone numbers for Liberty Reserve account holders seeking more information, and the names of those arrested.

315 thoughts on “U.S. Government Seizes

  1. Gem

    Lots of claims of lost business, no proof.

    What legitimate businesses relied on LR? Links, please. With billions in money trading hands, it should be trivial to build an *enormous* list of legitimate businesses relying on LR….. right? Anybody?

    1. BrianKrebs Post author

      This whole line of discussion about whether a company can be declared bad or illegal because a majority of its customers were using it for illegal or at best questionable means reminds me of the complaints we heard in the wake of the 3FN and McColo takedowns: Well, you can’t prove that all 20,000 of the sites there were bad. Of course you can’t, but there’s a compelling case to be made when so much badness is concentrated in one place.

      1. voksalna

        But — Brian — Money is not serving malware, and server users should, in all honesty, have backups — it’s apples and oranges. While those takedowns affected people, obviously, it did not prevent people from moving on with anything more than pre-paid hosting, most likely, which — yes — is not fair to the innocent user but which is not the same as something generally inert and incapable of causing harm.

      2. voksalna

        Put in other terms, data is duplicatable; money is not.

        1. CooloutAC

          I remember the Michelangelo virus years ago, that would eat up the fat table and infect every file on the computer. Around in the 80s only discovered in 1990. I would throw away hundreds of floppy disks. One of the first known bios viruses.

          long before chernobyl (CIH). And it kills me when guys like you usually also say nothing can infect the bios…how its all a myth. how hardware can’t even be damaged by a virus….etc…

          well its not a myth and has been going on for 20 years…and is only worse now, an epidemic imo.

          Lemme tell you something, I think even Brian would agree, that virus scanners can’t keep up with all the criminals out there, and once you get a virus/malware its sometimes impossible to get rid of. You can buy a new hdd, clear ram and cmos and only hope sometimes. We are becoming more and more aware of this every day.

          Heres another example….I know accountants that get their identity stolen every couple of years, because they cannot discard data dude. People in that type of job profession are hacked for a lifetime. Their data is their life. Alot of their data they are getting from clients and under court ordered not to leave an office or even a computer sometimes as well. Their backup are just for when their pc gets bricked. But they will always be spied upon.

          1. voksalna

            Of course malware can infect BIOSes — where the hell have you been? Your government itself is very fond of this method. 😉

            1. CooloutAC

              My gov’t just viruses webpages now like your people do. i.e. facebook.

              1. CooloutAC

                They don’t need to brick computers to cover their tracks.

              2. voksalna

                CIPAV was so sexy-sexy that I almost shitted my pants. NOT.

                There are things that are done within your country; you may occasionally hear about these things (like the Stingray stuff, or CIPAV) if you’re lucky enough that anyone like EPIC or EFF or ACLU would make a fuss…

                And then there are the things done outside of your country. The fun thing is most of this is done by private corporations who license things to not only your own country but foreign countries as well (who use things like FinFisher).

                A BIOS-level rootkit done right would not brick a computer. You must be talking about amateur types who copy/paste open source crap. I’m talking about more sophisticated types, like those that the government would have the money and ability to hire indirectly through private companies who do nothing but this.

                There are indeed far fewer people capable of this level of expertise (ie not bricking things), but most of these ‘evil hackers’ you oppose wouldn’t know the first thing about BIOSes to begin with, so your point is kind of moot. The types of people you’re talking about will more likely just keep stacking installs or writing payloads so outrageously terrible that they lock up system resources and make them unusable, or give you a nice stolen leaked copy of ZeuS that is a few years old and probably backdoored.

                People rarely make classic COM viruses any more, and machines are rarely bricked like they used to be. Not that many malware writers even know ASM. Actually not that many even know C. There are more in general, but most of them — as in almost all of them — do not have the patience or skill to be so sophisticated, nor would they bother even if they did; the ability to enter the market is easy without it.

                1. CooloutAC

                  They brick the computers to be dicks or cover their tracks man. Its not accident by an amateur. Its what a non gov’t person would do, purposely.

                  The gov’t has been spying on me for years. Hey we all download cookies too man…lol Although i hear the mozilla people finally made the move to now block all 3rd party cookies in their next version.

                  I’ve said on this blog how Halliburton and Army research and development use to spy on me when i played counterstrike 15 years ago. They sent recruiters after me for years.

                  its nothing new….but it doesn’t bother me half as much as the delusional nerd who thinks hes robin hood… the jealous gamer….or some terrorist who thinks America is so evil he has the right to be malicious.

                  And for you to constantly think its all America working alone….means you know nothing about us. The world is starting to hate hackers just as much as Americans. This guy was arrested in Spain, the site was in costa rica, and was not even registered….

                  I’m not a hacker or a terrorist and I’m glad my gov’t know this.

                  1. CooloutAC

                    and so thats nice you admit viruses can go into the bios. Most of you hackers deny this.

                    But now your trying to imply it happens less often, instead of more often?

                    And you are seriously trying to convince anyone that viruses are LESS sophisticated 20 years later?

                    man i know a bf3 player got his mobo bricked recenlty cause he outed some hacker website selling hacks to boot people offline or crash their server…along with the bots. Even he didn’t believe me when i told him it was them.

                    well you are right that there is MORE malware out there nowadays. But ridiculous to imply viruses are less sophisticated nowadays….or that less hardware is being ruined………..

                    1. CooloutAC

                      and its because that they are so more sophisticated, that are so hard if not impossible to get rid of alot of times.

                      and sites like this….are why all these “amateurs”, as you say, roam free and buy all this malware in the first place.

                    2. voksalna

                      Oh, I’m not saying viruses are less sophisticated. I’m saying *malware writers* are less sophisticated. And there aren’t that many classical viruses released at all these days.

                  2. voksalna

                    It blows my mind, so to speak, that you, who have been harassed by gov, would not understand how this is eroding privacy and rights in your country. Then again in thinking about it it could very well be that their surveillance of you effectively bullied you into changing your world view.

                    I don’t think you realise, I am trying to prevent your country from throwing away its freedoms, and the freedoms of others. This only peripherally has to do with the LR case. I can see what is coming because other countries have been through it — some time and time again — and it amazes me that nobody there understands what is being done to them in the ‘pursuit of security’.

                    We’ve maximum nested on here, and maybe it’s better that way.

                    All I am urging you to do is think and consider about impacts and ramifications. I thought the basis of your justice system was that it was better to let one guilty man go free than to punish 100 innocents. But maybe it is too late for you to return to that. I hope not, because it does not affect only you.

                    I wish you well.

                    1. dirty_bird

                      “It blows my mind, so to speak, that you, who have been harassed by gov, would not understand how this is eroding privacy and rights in your country.”

                      My government does not bother me. We have our constitution which protects us from the Gov, even if we need to hire attorneys or engage the EFF to make them see that.

                      It’s the idiots that feel they need to share everything via social media such as FaceBook and Twitter that really threaten our freedoms.

                    2. CooloutAC

                      harassed? you mean them spying on me while playing a video game and then trying to recruit me? Am I on a watch list for watching pornos? possibly. who cares?

                      I hardly call that harassment.

                      what i call harassment is hackers threatening to ruin my pc hardware because they are sore losers, my pc getting bogged down by malware or my router getting bogged down…hackers virusing me to spy on every little thing i do on the pc, and they think i’m the one with no life? ddos’n servers i go to?, robbing my family and friends of their credit and identities?

                      My gov’t has nothing on scum like that.

                      I can’t believe you dont’ see the difference? You truly believe anonymous money transactions is a human right? I disagree lol.

                      Maybe food and shelter is. Maybe education is. Maybe health care is. But def not anonymous money transactions. I have not heard any good arguments so far that would make me favor such a ludicrous idea.

                    3. CooloutAC

                      and yes dirty bird is right….lol Go search me on facebook with the same name. I don’t even make anything private…..

                      I don’t need to hide and i have nothing to hide on my pc. Believe it or not though i have had some hackers threaten me on facebook. They are nuts.

                      Don’t you find it suspicious how on alot of pcs now, especially ones with security programs, facebook will hang the pc for a minute when first loading the website after inital bootup of computer?

      3. Rais Zada

        hi Krebs,
        What about users who was using Liberty Reserve for legal business and lost money in account ? I was selling domains and hosting and l lost 3400$ , so will I ever get refund ?
        any possibility of reopen of Liberty reserve with new rules etc ?

        please must answer

        1. BrianKrebs Post author

          My sense is that you’re unlikely to get your money back. But you can certainly try. There is information in the story about some phone numbers the government has made available for just this purpose.

          I may be calling them myself. I also had funds in a LR account (although not much). I used it mainly to fund a dollar or two here or there needed to open accounts on dodgy services.

          1. Rais Zada

            well please update us after calling them, if they plan some refund to users now or in future

          2. dirty_bird

            In the case of a Ponzi scheme, the court will usually appoint a Receiver to sort through the mess. i.e. Bernie Madoff, Ad Surf Daily, and others.

            In those cases, people wishing to recover funds have had to register with the Receiver and provide proof backing up their claims. After the claims were received and approved, there’s usually a pro-rated payout to those who lost money.

            Brian, do you have any insight on what the Feds are planning to with LR? Will “legitimate” parties be offered the opportunity to submit proof that they were using LR for legitimate purposes? Or are the Feds throwing out the baby with the bath water (it could be a baby sand flea in ocean full of bath water) and confiscating all accounts?

      4. Heizenberg

        “Well, you can’t prove that all 20,000 of the sites there were bad. Of course you can’t, but there’s a compelling case to be made when so much badness is concentrated in one place.”

        “much badness” … haha

        Is this allso by that definition “who is not 100% with us is against us” ?

        If US “justice” system “works” on this principles .. . world in whole DOES NOT !

        I am deeply trieing to find any logic an justification for this actions made by US gov… but if you use logic + moral ethic standards … there is no any !
        You can not NOT to askyoursel a question or two .. if this is OK what about …. this and taht …

        From justice and moral point .. it is same like Guantanamo prison ! Is it ILLEGAL to have it in US … yes …
        Can someone shut it down then … NO ?

        becouse it is not about the law and justice .. it is all about the power and double standards !

        Basicly US goverment can do whatever !
        If it is not by the bok (by the law in US) … they will rewrite it or add some extra or whatever to justify it !
        And then it will be legal !

        Legislative is totaly coruptet thing at this point !
        I do not know why we must so badlt hang to it !
        When it is obviously in contradiction with common sense !

        “…… so much badness is concentrated in one place.” … yea right .. 3rd grade definitions .. Even applied (world wide) and there would be much pointing towards Pentagon or US senat as concetration on badeness !

        What will happen from now ….

        well US citizens will be forced to use Paypal … WU and other .. while rest of the world will use WebMoney … Bitcoin etc …

        In US will be illegall to acess Bitcoin exchangers … WebMoney etc …
        It will be censored like news are censored in China !

        What an irony !

        And same rulle can apply on 100$ bills wich are moust counterfited bills in history of money i think …
        And are not accepted in moust of the exchangers … especially if you brin a stash of 10 for example !

        Does that mean that US dollars should be all confiscated worldwide ! Usage of same put under illegal activity ?

        No one seems to be bothering with that in US gov. …

        bottom line .. it is all about money/power . .was will be .. sadly some people give thumbs up for this kind of behaving !

        Worse than taliban thinking .. talibans beleve in god while this western talibans beleve in their goverment …
        Untile one day they are on the street jobles … homles .. then they start to thinke about it …

        Now one quote from Martin Niemöller for all you narrow thinkers inside US (it can be applied to LR as well) :






        1. Fen

          You tinfoil hat wearing nutjobs are always good for a laugh.

          1. Heizenberg

            hehe … yea tinfoil hats and nutjobs .. thats must be it …

            You have it all figured out ! Case closed !

            1. voksalna

              Hey, man, my foil hat is itching me, yours too? 😛

        2. SeymourB

          The US doesn’t need to outlaw bitcoin because nobody uses bitcoins. Buttcoins are full of sound and fury, signifying nothing.

          Do keep watching the skys for black helicopters though. It’ll keep you busy, stopping you from creating misery for others.

        3. CooloutAC

          When they came for hackers and internet con men I did not care, because I was neither.

          1. voksalna

            And when you realise what a surveillance state it is that you have created, you will need those very hackers to survive.

            1. The Giant Rat of Summatra

              “you will need those very hackers to survive”

              Riiiiiiiiiiiiiight. “Help us, semi-competent script kiddies, you’re our only hope!”

              1. voksalna

                Did I say ‘script kiddies’? No, I did not. I said hackers. Astoundingly some people know operating system internals, networks, coding, and any number of other valid, expert skills. Though of course the vast majority of THOSE hackers are being hired by your government. You don’t think that’s at all funny? Heh.

              2. voksalna

                Also, there is only one ‘m’ in Sumatra.

                1. CooloutAC


                  “In this era of 21st century democracy, do you think hackers are essential in the effort to keep the public informed? In his guilty plea, hacker Jeremy Hammond explains his actions: “I did this because I believe people have a right to know what governments and corporations are doing behind closed doors.” Speaking to us via livestream from the Ecuadorean embassy in London, Wikileaks founder Julian Assange says that Hammond’s prosecution comes as part of a wider crackdown “on effective political activists and alleged journalistic sources.” Do you agree?”

                  No I don’t. Because Julian Asange exposed absolutely nothing. Massive files he got. Tons of data….and exposed literally nothing. Nothing that wasn’t exposed in the past by photographers in every war in our history. And even still he had a mole. You still need a source on the inside.

                  It might sound cool to hack the gov’t and expose their secrets. It might be great challenge and accomplishment for some little hackers ego. But you could actually be making people unsafe….and to be honest its not practical, and you will expose no real secrets.

                  We are no the evil empire you think we are. Sure we are getting more corrupted everyday which is kind of scary. But generally speaking….as wikileaks has proved. Theres really not that much to expose. And i’m sure Julian found things he knew he couldn’t expose, because they were not scandals and could be a threat to national security.

                  We didn’t need hackers for watergate. We didn’t need hackers for every scandal in this country before the 80s. And what have hackers done? What has the activitst group anonymous exposed? What has wiki leak really exposed? NOTHING of any significance. sorry.

                  and what really pisses me off. Is how unlike the old days….thes hackers don’t go after other hackers. That is what they really need to be exposing.

                  The only time i want hackers helping me. Is when we are fighting cyber wars against other countries….. Or stopping cyber criminals trying ruin poor American peoples lives.

                  1. voksalna

                    I would not consider any of those things to be hackers. The fact that you would, or think I would, says way more than I ever could. Opps, there’s my comment for the 3rd. 🙂

                    1. CooloutAC

                      you don’t consider the cyber-activist groups anonymous hackers? hmmm. well thats interesting.

                      what pisses me off about them….is they look the other way when it comes to other hackers, which is what we really need hackers for. We need to go back to white hats vs black hats. Now it seems like everyone is just a malicious loser. Noone is sharing knowledge anymore….everyone is reamining anonymous and just causing mischief like children. whether its against my gov’t citizens of my country….

                      Malicious hackers affect my life more directly and negatively then my own gov’t does!

    2. Gem

      “I could go ahead and name about 50 legitimate server companies that accept LR”

      … but you didn’t. No surprise: these 50 companies of yours don’t exist.

      1. gemshit accepted libertyreserve as payment option, the biggest hosting company in USA

        1. Gem

          Haha, is a well-known spam sender. Google spam.

          Hahaha. You just proved my point.

        2. SeymourB

          Do you think it’s surprising that a company which partners with criminals will accept payment from a money launderer?

      2. Julius Kivimäki

        Google: liberty reserve hosting

      3. Graham Eric

        I wonder how you would feel if you were part of those who have lost a substantial amount of money due to the closing of the Lr companies, at least they should have pasted further notice of their actions, but their actions were putted up at the whims which has affected , especially ‘I’ innocents , why don’t you named the 50 legitimate companies that accept Lr payments, are they not working for profitability, However the criminals issues are aside, we know they uses the Lr site for criminal art , what of those who are not part of them?? we don’t have to comment partially towards this actions that has been taking from The US Government and partakers

  2. minh nguyen

    to me, webmoney seems more legitimate compared to lr. Can u give ur ideas.

  3. Bob

    Look like governements don’t like competition.

  4. redacted

    hmm, seems mr krebs is doing some creative editing of the comments. Maybe mine wasn’t to your liking?

    also see several other comments, like the one that prompted me to put in a reply, removed.

    There goes free speech

    1. Stefan

      Free speech(laws) does not apply to private blogs. Get your facts straight.

    2. BrianKrebs Post author

      I don’t edit comments, period. In the very rare cases that I do anything, I un-publish them in their entirety. I can assure you none of the comments in this thread or any other LR-related has been edited.

      The other possibility is that your comment was full of profanity and/or links, in which case your comment was probably auto-flagged by my anti-spam filters.

      Yet another possibility — and the one I consider mostly likely: Maybe what you typed isn’t what was in your head?

  5. v

    Pronunciation: IPA: /freɪm/
    Rhymes: -eɪm

    (transitive) To construct in words so as to establish a context for understanding or interpretation.
    * How would you frame your accomplishments?
    * The way the opposition has framed the argument makes it hard for us to win.

    (transitive) (criminology) Conspire to incriminate falsely a presumably innocent person.
    * The gun had obviously been placed in her car in an effort to frame her.

  6. Bastien


    I’m a european with a webmoney account (earning bonus money with a small funny pictures site, the image host pays me a bit of money depending on how much traffic I send, the payments are sent to my webmoney account), so, if the information is relevant, I can comment on webmoney, if you guys need comparison materials.

    Their site is SO secure, comparatively to Paypal for instance, that it’s a pain in some private lower part.

    If you want to transfer your money to real world accounts, or if you want to, still virtually, manage more than minuscume sums of money, you have to provide full identification (ID card, proof of living at a given place, date and place of birth with a paper on which that info is confirmed, valid cellphone).

    Whatever you do with your online account, you frequently have to re-confirm your account with a new SMS validation step.

    So, while I imagine webmoney may also be used for cybercrime, this would be much more of a hassle, it would require massive amounts of time to be able to start processing real money, and cheating would be much more harder.

    1. dirty_bird

      Yes, and since criminals breath air, the earth’s oxygen supply should be shut off.

      Seriously, where do you get this tripe?

      We don’t fill in all the wells because a cow pisses in one, we try to keep to keep the toxics below a certain level so people don’t get sick en mass.

      It’s the same with currency. In the case of LR, the toxics were making people sick well above an acceptable level.

      1. Bob T

        Where do you get your tripe?

        You’re just naive, and buying into the B.S. that you’re being spoon fed by your shepherds. Look, if you disagree fine. But I think if you look a little deeper, what looks like tripe from a naive distance will become clear as the cr*p that it is upon deeper investigation.

        1. dirty_bird

          So I am naive and need to dig deeper? Ok, I guess you win. I give up.

          Actually, what shepherds are you talking about? I don’t see any.

          Nor do I see the point of going down the path of card board license plates, Robert Mathews, Richard Butler, Gordon Kohl, Timothy McVeigh and $30 trillion law suits by Arbies Indian tribes.

          ZOG suits me just fine, thank you very much.

          1. voksalna

            Here is something funny for you to think about: Since they are just blanketly assuming that it is all illegal proceeds, I don’t see them having specific ‘victims’ or ways to return funds to the ‘legitimate owners’ (nor would they).

            Rather than continue to explain things in my and other peoples’ terms I will try your own:

            Following the logic of you guys, seizing this money means the US will be running on the proceeds of crime (which it always has but no matter). It is thus seizable.

            1. dirty_bird

              I Brian if he and any information about getting legitimate funds back to people yesterday. In a Ponzi scheme, there’s often a Receiver appointed by the courts to sort through the books, if any.

              Governments have confiscated the proceeds of crime as long as there have been governments, depending how they choose to define crime….sometimes to the point the government becomes a criminal enterprise.

              The other sentiment I see on the boards is that payment processor A is doing the same thing as processor B, so processor B should not be held to account since processor A is still operating. Basically the mentality is that if A gets away with something, so should B. I think my mom set me straight on that “logic” about the time I was 4 or 5.

              1. voksalna

                In the meanwhile, there is no way to prove a negative. In other words, I’d open myself up to extensive information on me being stored by a notoriously privacy-invading government with a chip on its shoulder about people who use a service they dub ‘criminal’, which would no doubt follow me no matter where I went, if they let me go much of anywhere. Even if I satisfactorily proved that I received money legitimately, I’d have to track down every business I did business with and they’d have to prove everything. In the meanwhile none of this would likely begin for a good 5-10 years (eGold is only now really starting to get into that), but my information would certainly be held during that time, all the while the state of surveillance would be growing. If they didn’t want me to have the money all they’d have to do is claim that the service itself was illegal, even though I am not a citizen of the USA, and in fact they could deny it explicitly because I am not a citizen of the USA. Or because I used a corporate name instead of a personal name in my LR profile, etc.

                You have a lot of faith in the government. I’d LIKE to have that much faith in the government, including your government, which is why I can see things from your angle, but I have seen too many cases over the years where things do not go this way. Politicians, governments, and people have angles.

                Ultimately the US did not like that things were tracked, or at least this is their argument. Never mind that it was not their business and never mind that ‘money laundering’ is not ‘buying things anonymously’ — if it were anyone who ever used a gift card or gift certificate would be ‘money launderers’. All of this is just a way for them to cut down on peoples’ eroding abilities to maintain any degree of privacy, no matter where they live, and in the meanwhile gain the ability to track people they would not have been able to to track otherwise who are stupid enough to let themselves get on a watch list such as that which will no doubt be compiled during the course of this investigation.

                1. CooloutAC

                  Everyone keeps business records. its bad business not to. Unless your a bad business period. Unless for some strange reason you didn’t for w/e your mysterious business is.

                  1. voksalna

                    Of course I keep business records. But what business is it of the USA to have access to them when I do not do business in or with the USA?

                    1. CooloutAC

                      Basically what i got from your long drawn out post. Is that you in fact do not.

                    2. CooloutAC

                      In your long drawn out previous post it seems that you in fact do not.

                  2. voksalna

                    I’ll be glad to tell you what I do for a living if you tell me what you do for a living.

                    1. CooloutAC

                      I’m a MTG processor and fix computers part time.

                    2. voksalna

                      I am a computer programmer from Ukraine. See, not so hard was it?

                2. dirty_bird

                  Ultimately, you want everyone to jump through your hoops. Fair enough, finance and build your own system and you can set the rules as allowed by your government.

                  The problem you have is that you are using a common system governed to a greater or lesser degree by people who don’t share your values. Many people want to run the “U.S. hegemony” flag up the pole forgetting that Costa Rica and Spain had pieces in this pie as well. Most of the first world has similar values and regulations.

                  In the west, we view the former Soviet block and republics along with China and other places with hesitancy regarding online business because of the “lightly regulated” reputation. The funny thing is that when the shit hits the fan, they seem demand U.S. dollars for payment.

                  Don’t you find it at least somewhat ironic that Arthur Budovsky and his cronies kept his millions in conventional banks governed by conventional regulations and not Perfect Money, bit coins or some other “alternative” currency?

                  1. voksalna

                    Why would I find that funny? I think you’re confusing a ‘transition point’ with an ‘end point’. As I’ve said before, almost every exchanger requires about as much, if not more, information than the majority of your banks. You believe we all kept all of our money in there? That’s a ridiculous belief. A lot of us were just in the course of handling our monthly billing cycles when things got shut down. Many of us do have bank accounts. Most of us shouldn’t need bank accounts. Generally the amount you could send and receive without a lot of ID was *less than* what could be sent via WU, which just makes you funnier.

                    1. dirty_bird

                      Correct me if I am wrong but it seems you want western style guarantees and protections without western style scrutiny, fees and regulations.

                      We’re just supposed to trust you.

                      Here’s where we differ, IMO.

                      In my view, your running your business, legit or not, using a payment processor that set up by criminals for criminals. Apparently, Spain and Costa Rica agree so it’s not just the big bad U.S. of A. Spain arrested the owner and Costa Rica’s regulators warned LR not to operate to the point LR pretended to comply with those orders.

                      And you basically expect me to believe that you went to Disneyland, got in line for the Pirates of the Caribbean and found yourself teleported to Somalia and portrayed as a Somali pirate? Please. You’re much more intelligent than that.

                      Just about everyone I have spoken with know that LR, STP, PM and Payza all go “both ways” so to speak. Somehow your the only one who does not.

                    2. voksalna


                      “Correct me if I am wrong but it seems you want western style guarantees and protections without western style scrutiny, fees and regulations.”

                      You’re wrong. If someone had stolen my credentials I would have taken the loss. If someone had stolen 100 peoples’ credentials I would’ve said ‘take the loss’, or even 1,000. There is a big difference between having money or an account stolen, and having things seized by another country’s government — not even the country the business was either taking place in OR incorporated in. That is what I have a problem with. I deserve the right to choose my own level of risk when it comes to my currency, but that does not mean I — and everyone else — deserve to be told we are criminals, and get treated like criminals, just because a government says so.

                      In fact, LR had basically no repudiation — if my money was lost to someone else within the system because I f*cked up then my money was lost to somebody else in the system because I f*cked up. The issue wasn’t me wanting regulation — the issue was with your government insisting I and everybody else outside of its regulatory territory should abide by it. Honestly if they wanted to seize Americans’ funds, sanction LR, and prohibit them from dealing with US customers, I would’ve had an issue with it but I would have understood it. But that’s not what they did. And THAT is why I am pissed the hell off. If something is against the law in a foreign country it is the person who’s breaking the law in THEIR country who should be held accountable. Otherwise we’re all screwed, and that even will eventually include you and your own peer group/family/whatever.

                    3. dirty_bird

                      “You’re wrong. If someone had stolen my credentials I would have taken the loss.”

                      Actually, stolen credentials are not protected if using U.S. based banks. Banks will happily forward funds offshore, even to dubious destinations, if the proper username and password is entered. The banks don’t require two factor authentication such as a one time pad. Brian has posted several articles outlining these cases. And the courts agree. That’s why I keep minimal funds in these types of accounts. If I get hit, it’s an inconvenience, but it won’t cause me a huge hardship.

                      “The issue wasn’t me wanting regulation — the issue was with your government insisting I and everybody else outside of its regulatory territory should abide by it. ”

                      Err, again, it wasn’t the U.S. that shut down LR, it was Costa Rica. LR applied for licenses in CR but failed to produce the proper documentation and consequently withdrew their application while pretending to comply with Costa Rican requirements. In fact, LR kept operating in violation of CR regulations and requirements. What does that have to do with the U.S.?

                      Drilling down, LR was owned and operated by someone who was previously associated with American companies e-Gold and GoldAge, both of which were shut down. He was prosecuted for that involvement. Rather than learning his lesson, he did what most criminals do when they are held accountable, he vowed to not get caught next time.

                      First, he set up his company in Costa Rica thinking that would insulate him. Second, he renounced his American citizenship, admitting in the exit interview the software he was developing exposed him to legal liability under U.S. law. He also entered into what is allegedly a sham marriage in CR.

                      Not only that, his processor became the favored payment processor of just about every HYIP and other “program” touted on TalkGold and MoneyMakerGroup, two notorious Ponzi pimping websites.

                      If he knew his software opened him up to “liability” under American law during exit interview, should he not have researched or hired legal expertise to mitigate or eliminate those risks? Seriously. Barring Americans goes a long way towards doing so, provided you do so from the start. Companies have been prosecuted by the U.S. for this offence, rightly or wrongly, for years. You would think that running a multi-billion dollar currency operation, he or his counsel would be clued in.

                      Additionally, the Feds allege that not excluding Americans, not conforming to Costa Rican regulations and catering to HYIP programs were just the tip of the ice berg. He was also catering to carders, child porn sites, drug dealers and any criminal business he could scoop up.

                      Is this the type of operation you choose to do business with? As I have posted previously, the authorities state that this was a criminal enforcement action, not action against virtual or offshore operations.

                      Why are other similar operations, whether based in the U.S. or other countries able to operate unmolested for years? Please explain that.

                      In my view, you set up your banking business in an unregistered hornets nest full of criminals. I have no knowledge if your programming is legal or not in the U.S., nor do I care.

                  2. voksalna

                    BTW what do you think these virtual currencies and exchange markets are if not “us setting up our own systems in our own countries”?!

                    1. dirty_bird

                      Find one that takes reasonable steps to exclude Americans and you should be fine.

              2. voksalna

                In short, I lost a lot of legitimate earnings and will be out a lot of money, but I’d rather be broke than be the tool of any government. This does not make me a criminal, although I no doubt will be accused of such just for not ‘trying to get my money back’ — which I almost certainly won’t be able to, and even if I do — by then how much will it be worth? How much hassle will I have to go through for my money, and how many lawyers would I have to pay? How long would I have to wait? And in the meanwhile I’d have to maintain an email address for a decade+ solely for that purpose; LR was attached to an email address — you couldn’t even change it. What happens if my email provider goes away in that period of time, and I cannot get notices or provide proof?

                This whole incident has made me conscious of the way the world is going. It’s also reminded me that ultimately it does not matter how ‘legitimate’ you are, so I suppose I offer the USA a ‘thank you’ for pushing me further towards privacy, instead of less.

                1. CooloutAC

                  Of course someone like you most certainly would not do that…want to scare others from doing so as well.

  7. uyjulian

    This is why we need decentralized digital currencies like bitcoin 🙂

  8. Faisal

    Many banks have been caught out. HSBC, Barclays and lloyds have all been fined for money laundering but how many of their bosses were arrested? Or the $420 billion laundered by Wachovia [], for which they paid a $160 million fine

    1. voksalna

      Notably even while they were being investigated their funds were not seized, they were able to conduct business as usual, and their customers were not penalised (except maybe for the actual lawbreakers, and that would have been done separately (and severally)).

      1. CooloutAC

        The diff is its not a bank that catered to criminals.

        “One undercover agent was able to register accounts under names like “Joe Bogus” and describe the purpose of the account as “for cocaine” without being questioned, officials said. That no-questions-asked verification system made Liberty Reserve the premier bank for cybercriminals, prosecutors said. ”

        Your normal bank is not infested by hackers…..that Americans are growing more and more hatred for…. that 1 out of 3 Americans are robbed by. The major diff here is the anonymity, and the ratio of criminals to legitimate customers.

        1. voksalna

          What they didn’t say is how they got the money in or out. If they broke the law then THEY broke the law.

          I find it ridiculous you keep quoting ‘prosecutors say’ — you believe everything they say, though, I’m sure. Authority is not to be questioned, correct?

          1. SeymourB

            I posit that the problem here is that you think that the rest of the world operates the same as your country does.

            1. voksalna

              I posit precisely the same thing, and then some, about the USA?

              1. CooloutAC

                Most of the world does hold the same values as us.

        2. Nick P

          That’s a very good point about how it catered. That certainly draws an extra amount of LEO heat. The verification part is less so. The Number One way for online crooks to move money was Western Union for quite a while. I can imagine that it’s WU yet again with LR gone. They require very little verification. When they do, it’s verification that’s easy to fake or money mule around.

          There’s also been uptake in prepaid cards. They’re good for smaller amounts as you just gotta send the code over the net and the fee is tiny. There’s almost no verification on them. Green Dot and several retailers are the major players.

          Yet, I’d be you won’t see any of those companies shut down, exec’s arrested, forced to use strong verification or even thoroughly investigated. So goes the double standards and corruption Stateside.

          1. CooloutAC

            Apparently a guy with a pre paid debit card site was on here complaining he used LR for it.

            I really don’t consider western union a bank. More like a mail system lol.

            Theres many reasons it seems why LR was the go to Bank for criminals.

            Theres been so many ddos attacks lately all over the web….maybe it will cool down a bit more now lol.

            1. voksalna

              I have come to the conclusion that you do not understand how the world works, only your piece of it (which isn’t really your piece of it anyway since at any time your country can come along and appropriate it, but no matter).

              Why would you think there’d be less DDOSing? People who would do less stupid things will now be doing more daring things out of desperation to make up for money they lost most likely a lot more legitimately. The more you force people to do bad things to achieve the same end, the more they will do it because they have come to believe there are no other options, and sometimes people do not have the luxury of time to recover. Add to that the anger factor, which I can completely sympathise with (much I am sure to your chagrin) and the fact that what the US gov is trying to do is both of questionable legality and frankly impossible (you think it will get rid of crime? *SERIOUSLY*?), and I think you are probably ridiculously underinformed about how life is not just for people in my part of the world but for the great majority of people in your own country.

              I am pretty sure you have never needed for much of anything or you would not be so easy to dismiss the needs of others. I am also fairly sure you are not ‘rich’ by your standards either. Comfortable, probably, which gives you a sense of self-righteousness. And apparently if your other comments are any indication older than I initially thought, which actually makes me kind of feel sorry for you.

              1. CooloutAC

                Now i know you are probably a young kid…lol

                You still think laws create more crimes huh? You should study the history of the world before you talk as if you know it.

                I have already said we are living in the internet barbarian/dark ages. Things will change abd the wild west internet will no longer exist.

                As long as we don’t nuke ourselves, the world gets more civilized not less. We are no longer chopping peoples heads off in my part of the world. We no longer throw babies up and catch them on pikes as some sick game. Very few parts of the world allow killing by ordinary citizens for any reason anymore.

                And i will predict, caveman attitudes like yours, you fake robin hoods and thieves, ruining peoples lives anonymously behind your pc screen will become far and few between. And less the epidemic it is now.

                I mean i guess they can always pay the booters with paypal right? But they would be taking more of a chance.

                1. CooloutAC

                  i should say…RECEIVE payment from paypal. Cause i don’t know how u make money paying to have someone ddos’d. But if your the hacker running the booter site….I guess thats a diff story.

                  1. CooloutAC

                    You should try growing up and community organizing and using soft power…voting and petitioning at all levels of gov’t instead of hacking someone like a little kid throwing a tantrum.

  9. Faisal

    if LR got ban just bcoz of crimnals?

    1st example “if u have $ u can buy medicine as well as poision” that doesnt make any sense u just ban the $

    2nd Example

    you can buy a knife from any store…. itz depend how u going to use it u either going to cut vegetables or meet … or going to Stabb some 1

    3rd Example

    all over the world alot of accident occurs that means u going to ban all vechiles?

    1. BillC

      I think you signed into the wrong blog, along with several other respondents. The one you want is “World’s Lamest Metaphors.”

    2. Gem

      “if LR got ban just bcoz of crimnals?”

      Yes, crime is banned.

  10. Dee

    I dnt knw if this is funny to you or you are simply enjoying the controversial chat you are having here. If there is any body here representing the us government,please tell the body in charge of LR case to at least release my money to me. It may not be much, but it means a lot to me. Thank you very much!

    1. Harry Johnston

      Anyone representing the US government would be very unlikely to post here. However, Brian provided contact phone numbers in the blog entry.

  11. CooloutAC

    anyone use LR for something besides forex trading or selling pre paid debit cards? lmao.

    because i gotta tell you….thats like saying. HEY I”M A HACKER. sorry maybe i’m a real ignorant american. But i don’t believe thats a legit business for a second.

    Voksalna what do you do for a living? I already got you pegged as a liar for saying your not Russian. But i’m curious what you do? why did you need LR?

    I only get angrier the more i hear fake foreigners complaining they don’t have healthcare and the only jobs on the computer for them are unscrupulous and shady……. When lots of Americans don’t have healthcare and corporations are outsourcing all the computer jobs. Its an insult.

    1. voksalna

      Had an explanatory comment all written but decided not to post it; I do not have to defend or define myself to you. I will say that not all former USSR is ‘Russian’.

      1. CooloutAC

        Your worse then our American politicians lol.

        So you have mysterious job you decided not to post for some reason?…..and you are a USSR’ian not Russian? my mistake?

        umm…. ya. I’ll take the word of the FBI agents over yours any day.

    2. voksalna

      And I’ve said what I do for a living in other posts. If you are too lazy to read it, why should I bother.

      1. CooloutAC

        oh so now its not that you decided not to post it…..its that you are just too lazy to post it again. I see.

        I don’t believe you. Please repost it to prove yourself to me. I will take the FBI agents word over yours.

        1. voksalna

          Tell me what you do and what state you live in (hey, the US is bigger than my entire country) and I will tell you what I do and my country. Deal?

          1. CooloutAC

            I already said this in another post. mtg processor, fix computers… NY. lmao….

            1. voksalna

              Is mtg short for mortgage or mt.gox?

              1. CooloutAC

                what is that some hack site? haha

                its short for mtg. a very flaky industry especially subprime like i did.

                I would love a computer tech job. But they ship those jobs out of America… the same people that rob us and talk shit about my country.

                    1. CooloutAC

                      haha. when borrowers saw their monthly payment and signed it, they take half the responsibility from the bank.

                      what was illegal is when i would tell the borrower if he had a friend in human services and personnel, to tell the bank a certain exact job title. So i can say they make a certain amount to get the loan. After checking a certain website for job titles and avg pay for that zipcode.

                      ^ def illegal. and common practice.

                      And then the major banks buying the subprime loans with no documentation at all except a phone verification lol. insane. They knew they were playing hot potato…who can sell bulks to fannie mae first before shit hits the fan.

                      But all thats changed…… Poor people might not be able to get a house as easily now. But at least they are not going into debt for life like a modern day indentured servant for a house or car anymore.

  12. Jacob

    The governments dont like competition on currencies. Bitcoin has managed to survive as they havent been able to pin it on anyone yet.

  13. voksalna

    And just wanted to add real quickly, I approve gay marriage everywhere in the world.

    1. voksalna

      Very mature. 😉 And actually I do believe people have the right to gay marriage. Care to reply with your own ‘made up only for Brian Krebs’ blog’ name next time? 😉

      1. CooloutAC

        I approve gay marriage….if its just a piece of paper with some religious stamp. Not a tax break. Maybe only if they swear they will adopt a child and raise it should they get a tax break. But i don’t even know how i feel about that…..I’m sorry just my opinion.

        1. voksalna

          It amuses me that someone who tried to impersonate me wound up giving us common ground of some sort. They must have assumed I am old-fashioned.

  14. voksalna

    And just wanted to add something real quick, I approve gay marriage everywhere in the world.

    1. voksalna


  15. Nikolay Danev

    “of the US $6 billion processed through Liberty Reserve, only US$20 million has to date been seized as the proceeds of crime.”

  16. Moise

    we invested money through libertyreserve with Urextrade which went offline since 11/02/2013.libertyreserve doesn’t say anything about Urextrade.may US investigation help us find these people ,so that we may get back our money.

    1. voksalna

      You won’t get back your money even if LR customers do (and they will not, almost definitely), if you gave it to a third party.

      1. CooloutAC

        Why would you say that? Do you have experiences with other sites who have met the same fate?

        If I was in your position even as a foreigner. I would write a letter to every one of those 5 bureaus i could get an address for.

        I would send as much information about myself as possible. Such as identifications needed for passports. photo id, birth cert, national ids…etc…. Paperwork that includes my business information. Address…Accounts etc. Describe your business, tell them you knew nothing of the owner or any criminal activity, and why you deserve to get your money back.

        If it was only 100 dollars I wouldn’t bother…. But if for some INSANE reason you had your lifes savings on this site….I would do what I said. it couldn’t hurt.

        In my country i email the BBB all the time. You’d be surprised how often I get results. Especially for major corporations, lol.

        1. voksalna

          I said it for precisely the reason Dave, below, replied. It’s a HYIP. If they went out of touch, then he is as you would put it “SOL”. I’m starting to wonder if your repetition about contacting the ‘5 agencies’ signifies something. It’s not like he found a roach in the creamy middle of a Twinkie bought from a Walmart.

          1. CooloutAC

            So now you are agreeing there is nothing legitimate about those fantasy businesses. Good for you.

            1. voksalna

              Chances of winning lotteries are small but people play them every day. Technically if you get in early enough you will make money. Probably you won’t and will either think you’re getting money til you’re not or you will lose it… or it’s not a Ponzi scheme, but another kind of scheme, in which case you may get your money and then some. These are not transparent things. I wouldn’t do it but I would not stand in someone else’s way from doing it and I’m not sure it should be illegalised if people want to gamble.

              1. CooloutAC

                I hope your not gonna convince me playing the lottery as a way to feed someones family?

                1. CooloutAC

                  cause thats the laughable excuse i’m hearing. And so far its the only job description I’ve read on here besides pre paid debit cards, lol, that anyone has provided.

                  oh and your a freelance computer programmer from ukraine….. as if we already didnt’ know that….

    2. Dave

      Urextrade was an HYIP, which is essentially just another name for Ponzi Scheme. You don’t get your money ‘back’ out of those – they are structured to take your money and keep it, and sending your money to anyone ‘running’ an HYIP is stupid, period.

      1. CooloutAC

        And someone claiming thats how they fed their family, is of course full of it…..

  17. Alexey

    But what to do? I lost about $ 10,000 over two years of work in HYIP, I’m from Russia, for me and my family a lot of money in the month of his wife pay $ 250 at the factory, I have a son, I just do not dwell on that now, most of the savings for HYIP I kept in Liberty, I hung up or what? Is there any chance at all that the system works?

    1. CooloutAC

      Try to contact all 5 American bureaus you can get address or contact for that seized the site and give them w/e they ask for.

    2. scammer

      HYIP are ponzi schemes and you never gain money in the end. If you actually profited from HYIP, you were probably running the scam in which case you deserve to lose your money. If you were planning on “investing” in in a HYIP, you were going to lose it because they are scams. Sorry I don’t understand your english. Stay away from HYIP.

      1. voksalna

        He said he kept his profits in LR — that means he did get a return — which means he lost money from LR not the place you are putting down.

  18. Nikolay Danev

    “The feds “graciously” allowed “legitimate” users to contact their office to get refunds on their now unaccesible accounts, while dismissing that most of the users were criminals (the site’s userbase is referred to in the indictment as “overwhelmingly criminal in nature”) and likely would not seek refunds.”

    1. voksalna

      Precisely. Of course nobody will get any access to anything because the accounts are seized, and they legally cannot/will not release anything for a long long long long time; that’s how legal proceedings work, and they themselves said that it wasn’t “real money”; technically the “real money” is tied up with the exchangers, most likely. Which would be funny to see them try to decide who to take what from.

      This is a LEO lure, and anybody who does contact them, legitimate or not, opens themselves up to whatever can of worms the US can cook up when they get bored. Unless you’re Brian Krebs probably.

      1. dirty_bird

        Well, in the case of the AdSurfDaily ponzi scheme, there were enough people paranoid enough about the gov that they did not contact the court appointed Receiver and fill out the requisite paper work. The upside for those that did fill in the paperwork, is that they received a 100% refund, unlike the typical 10 – 30% in a Ponzi.

        As for LR, I don’t know whether any attempt will be made to separate out the legit from illegitimate funds via a Receiver or other entity. You could always combine with others and form a class and sue to compel the gov to appoint a Receiver if you feel so inclined.

        1. voksalna

          I think the problem is they will try to play both sides of this, which they can do since the way they designed these raids/indictments is to game over everything even if nothing goes to trial. That was probably their point to begin with, and part of why they framed it as a hub for child pornography (of all things). Once they did that nobody legitimate had a chance. Never mind that most people who purchase and view child pornography have jobs where they deposit money into regular banks, come home, and look at child pornography. They did a very similar thing a couple of years ago with somebody else from my region — they wanted him for money things, but they know that attaching child pornography, however removed from his case (because it was a similar case but on a smaller scale) would guarantee an indictment, and extradition. They win by labeling and there is no way to reverse the labeling.

          With a Ponzi scheme/’HYIP’ — and note I don’t believe all HYIPs are Ponzi Schemes; I do however believe the majority are funding schemes of some sort (and that the ‘investors’ just do not know the back-end); either way I generally don’t think anybody should feel at all safe in ‘investing’ in them — but anyway with a Ponzi scheme, there is less of a ‘pot’, and more commonality — or at least any commonality whatsoever. That is the logic they will use not to return funds, if they have any interest in returning funds at all — and I am fairly sure they do not: There is no one thing. And for the things there are, it won’t be documented at all in LR. If people think their HYIP will come forward if they are keeping money in there (not likely but OK, let’s pretend), they are being stupid. People who were moving money in or out to other places may possibly fare better, but it will not matter because there will be no exchangers. Without exchangers and backing, an LR is ‘worth nothing’. Without LR’s system, or the ability to transfer LRs, an LR is worth nothing.

          Note also that saying ‘6 billion dollars’ does not mean they had *anything* like 6 billion dollars, either at the course of the shut-down nor anywhere along the way. What LR had accessible was probably more akin to what banks have — they tend to have limited liquidity, but enough to pay for day to day activities within accounts. Still, their own money laundering was remarkably simplistic. They themselves were hardly money laundering pros. I find this ironic, but I also think they should not have had to be because frankly I do not think their moving money from CR banks to other banks should have been illegal. Why should it have been? They were told they could not run their business there after being turned down for that type of licensing, so they were basically told to get their business out of CR. That’s what they were doing. From a legal sense (and maybe I and everybody else just wasn’t told the full story) there is nothing against moving their money out of CR to begin with.

          What LR *earned* and what the exchanges they ran earned, IMHO, should be the only things up for ‘seizure’ if anything (and note I still believe what the US did was internationally illegal, highly questionable, to begin with, and framed extraordinarily ridiculously in order to ‘legitimise’ their actions). I could *understand* their *earnings* being seized or fined (preferably fined) even if I find these legal proceedings grossly unfair. This belonged as a civil matter, at least from LR’s end. They should not have been criminally indicted, at least for LR, and they should have had the right to transfer ownership of it to somebody of their choosing, like any corporation would (because they were incorporated, even if they were not properly ‘registered’).

          1. voksalna

            Note I consider this latter thing akin to what is often done in your country if somebody owns a bar and loses their license to sell alcohol; they are not prohibited to sell their business to somebody who can receive the license, and the new owners have no responsibility to any government to do anything but show a license — the entire establishment retains most of its reputation; it doesn’t get seized and forfeited.

            1. dirty_bird

              “Note I consider this latter thing akin to what is often done in your country if somebody owns a bar and loses their license to sell alcohol; they are not prohibited to sell their business to somebody who can receive the license, and the new owners have no responsibility to any government to do anything but show a license — the entire establishment retains most of its reputation; it doesn’t get seized and forfeited.”

              I agree that if you own a bar and lose the license, you can sell the establishment. But the new owner will have to apply for a license and the show that any violations have been corrected. License renewal is not guaranteed and can be denied if the new owners are shown to be a front for the old owners.

              Here’s where we differ.

              Alcohol is a legal product in most places in the U.S. We do have dry counties where alcohol is prohibited. Try operating a bar there serving alcohol and see what happens.

              You see the LR as the equivalent of a bar in violation of some statutes. I see LR as a crack house and heroin den. If you run a crack house, the place will likely get raided and the crack dealers prosecuted. If the premises are continually raided due to ongoing drug violations, not only will the crack dealers leasing the place be jailed, but the premises itself will be declared a nuisance and confiscated by the authorities.

              Did you not do any research into LR before you went all in? The only information needed was two words, Arthur Budovsky. LR had a huge “kick me” sign on facade when it opened.

              1. voksalna

                You cannot on one hand say there is no parallel and on the other hand agree that if they had just gotten licensed it would have been OK. Let me add another parallel you may like better: If they find someone in your country serving minors they will fine the bar or shut it down; they will not freeze all of your assets, as well as the assets of anyone who has ever had a drink at your bar. Equally, if a woman were to have been raped and murdered in your bar, they would not generally shut the bar down permanently because a crime was permitted on the premises; likely at most they may shut it down for no more than a day or two to process the crime scene.

                The danger here, the biggest danger, is the precedent this sets. If you start saying a business is responsible for anything that goes on under its roof, you are making a very dangerous step.

                One thing also that has bothered me. Prosecutors have a very big reputation for taking things said sarcastically in IMs, phone calls, and writing, and “quoting” parts of them “totally” out of context. The snip-snipping done for the single sentence that talks about Budovsky et al “knowing” what the site does may have very conveniently left any of this out in order to sway a grand jury, the same as it would have very conveniently mentioned that there were a handful of people who may have conducted child pornography.

                Mention certain things in the US to a bunch of people who either lack the mental capacity to find a way out of serving on such a jury (which isn’t to say everybody does, but my understanding is a lot of people scheme their way out of it), or (godforbid) who wish to be on a jury such as that because they have a mall cop illusion of grandeur and power — and especially mention them (and ‘terrorism’, oh yes! and Russians!) to a more than likely middle-aged and up non-technical audience who probably has a fear of e-currency, technology, and the future, has little experience with computers other than facebook, google, and maybe paypal, and who was no doubt picked out very specifically for their biases and ignorances by the prosecution (remember, a grand jury proceeding very rarely does not result in an indictment and gives no recourse for the ‘defense’ to rebut) — and you have a recipe for an indictment (which means the business going out of business, effectively, long before a trial could ever take place) and you’ve effectively removed any chance for the defendent to possibly prove their innocence. When it comes to cases like this, it’s the equivalent of ‘guilty’ long before a trial would ever take place. If you do not know much about grand juries, you might want to read up on them. Calling people guilty before a trial, *regardless* is against both word and spirit of your law.

                I’ve said repeatedly I can understand why their exchanger operations would have been seized (in the country they operated in), and I could even understand why the US might want to indict them (although I believe that was CR’s place to do, and that extraditing these people to the US is a bogus political act)… but LR itself is a separate matter. What’s more, the (licensed!) exchangers they believe they can shut down is an even further insult to the law; while I understand they may desire to shut down the .com’s (and frankly this is something that any other business would be able to have back within a day or two), there is no way I can possibly imagine they should be permitted to seize domains in, for example, Vietnam (nor should they be able to shut down, at all, businesses outside of the US to begin with (eg Singapore).

            2. dirty_bird

              And if the authorities allege the bar is a crack house with repeated violations, they won’t open the doors every day so you can operate your flower stand inside the bar. You can petition to get your assets back if you are running the flower stand independent of the bar.

              Did you seriously just manage to pick LR at random and wander into one of the worst cesspools on the Internet?

              1. voksalna

                Why would I have picked it at random? It was, for many many years, the most accepted e-currency out there with an excellent reputation and beyond tip-top security, as well as one of the best and easiest to use for commerce. It is no doubt too late to do an effective google but I can tell you just about everything I needed I could buy via LR, and if not I could easily load it to a (non-fraudulent) debit card or (again non-fraudulent) virtual CC, or else use one of the vendors that aided in reshipping things into my country (for instance, Amazon will only ship books here). I buy most of my computer equipment and all of my hosting via e-currency, and I pay my employees by it because it is (was) hands-down the easiest to process payrolls with, with a large number of reloadable MasterCard vendors attached that actually work in almost every country I’d want to go to instead of, for instance, Visa, who is notorious for being snooty as hell.

                My odds were far better in LR than anything else out there, including PP — certainly since I was in the process of wiring it out and never usually had more than a few hundred in there at any given time. The timing could not have been worse for me. One more week and it would not have affected me. I was literally in the process of wiring funds so that I could wire them back out when the site got shut down; I also lost money with an exchanger for the same reason. One can plan, but the odds of something like this happening on any given day was miniscule.

                BTW since people seem so fond of PayPal here, I’ll mention it not only freezes but constantly taunts you with the potential of freezing (or worse). For some people it is not unheard of to have PayPal ask them to reverify their identity (USING THE SAME EXACT ID (a very modern passport)!!!) a couple of DOZEN times in the past year — and sometimes more than once in the same 48 hour period?

                Do the math here and you’ll see that the chances of anybody on LR getting f*ed during any given day or week were considerably small given the length of time LR has been in business and the relative stability of it, as well as the widespread acceptance of it. I cannot help but think you are taking it for face value that it was a ‘den of crime’, and there is obviously nothing I can do to convince you otherwise at this point.

                Asking why I might have done business with LR, even after I’ve given multiple reasons prior to even this posting, is like you saying to me ‘why do you have sex with animals?’ — it assumes an affirmation of guilt that has been established by nobody but which prejudices the audience. That’s why they framed the prosecution the way they are, and why ultimately I know nobody will get anything back, even the legitimate people. For starters, the language of the seizure is different from the Ponzi seizures you have mentioned before. But there are many other reasons besides that, including the fact that with those Ponzi schemes, the *victims* were seen as victims instead of as participants in a vast underground conspiracy to commit crimes, destroy western civilization, and, oh yeah, see the breasts of 5 year olds.


      2. CooloutAC

        They assigned a receiver according to Brian Krebs. If you have your live savings in there and you are not a criminal why would you not try to get your money back?

        someone on this blog has already given a past example of people getting their money back under similar circumstances.

        I can understand why you are trying to convince people not to work the the us gov’t though…..lmao.

  19. Rob @ Rivalhost

    It has to be noted that there are legitimate companies – and people – that used Liberty Reserve. Not every country is offers PayPal. Options can be limited in other areas.

      1. BillC

        The article refers to one exchange (Mt. Gox), which they say handles 80% of Bitcoin trading.

        1. uyjulian

          Yes, but there are lots more exchanges out thare

          And they are better then Mt Cocks

          1. voksalna

            Won’t matter. Funny thing is if/when ID is beefed up it will actually provide a far better audit trail than even PayPal, due to how things get chained.

            1. CooloutAC

              and whats wrong with that? I’ve always paid my taxes even when working off the books.

              1. voksalna

                What do taxes have to do with anything? If you wanted to buy a dildo for your lover, would you want ‘dildo’ in federal computer systems? Have everything you do and buy tracked and have you profiled? You probably are already. Are you saying that other people do not have the right to avoid this sort of profiling (note, I do not buy dildos, but I also would not want any government, financial institution, or business I go to’s headquarters knowing my taste in cheeses).

                Anonymity and privacy have a place in this world. I really can not understand why you do not see this.

                1. CooloutAC

                  Your the one who mentioned audit trail buddy.

                  Implying thats your reason for wanting to be anonymous…

                  1. voksalna

                    I’m saying it’s one reason, and a very valid one, for some people.

                    While I believe it should be a choice for everyone, I’ll also say there are some people that require more anonymity than others, that are not criminals. For instance, an abused spouse attempting to get away from an abuser, would very much benefit from something that cannot be pretexted to locate her (or gotten from any number of online websites). It is almost impossible for people to not avoid the government but avoid databases nowadays, especially in your country, legitimately.

                    1. CooloutAC

                      So your saying it should be a choice to pay taxes?

                      I guess if you were living in my country you would be a teabagger for less gov’t and no IRS. Which i think has alot to do with racism as well.

                      But then we can all live with warlords instead? It will be great. We can live like russian barbarians in the woods mad against evil Rome. Like russian hackers in the internet barbarian age mad against evil America. The only thing that took down Rome in the end was corruption and complacency. But imo, it was still the best place in the world to live in that age. Sure it was still barbaric times….but we have come a long way to be even more civilized.

                      And i’m sure alot of people will die before they let you take us backwards again.

                      A mother avoiding her abusive husband? really? We have laws in my country for that. restraining orders etc. call the police! call the local hotlines……record all phone conversations all computer activity.

                      I don’t know how anonymous banking will stop that? how does witness protection work? I guess move out of the state and change names. Dont’ think you can change socials. but not sure.(you can always buy one online right? haha) If you have kids and family there’s not much you can do except wait till the guy kills someone i guess and make sure you have everything documented.

                      a ridiculous excuse dude.

  20. JimV

    Brian, I heard you interviewed the other day on the PRI radio program ‘Marketplace’ on the latest development in this particular topic, and thought you provided a bit of very good insight in the exchange. I was going to post this later in the evening, but there was far too much outraged backbiting and sniping among the miscreant wannabees, plus my Internet service provider has been having some real problems the past several days.

    1. voksalna

      I agree, I also found his portion of the program to be rather well-measured (surprisingly so, in fact).

    2. BrianKrebs Post author

      Thanks, Jim, although I couldn’t have been that good because they only let me talk for 5 seconds 🙂

  21. voksalna

    “briankrebs ‏@briankrebs
    Counting the deleted comments, the F-word appeared in more than 15% of the nearly 750 comments on the last 2 Liberty Reserve posts. F***!”

    Oh yeah, I never said: F*** THESE S***-F***ing C***-S***ing M*****-F***ers for appropriating my money without my consent.

  22. Mr. Pragma

    Front up: I’m a European IT guy, concerned about security but no professional in that area.

    It strikes me again and again how incredibly arrogant americans are. And, pardon me, how stupid.

    The assumption that the usa cared about fraud is rightout ridiculous. While pre usa attack the heroin production in Afghanistan was very low it has increased around 40 fold (!) since the usa took over that country. Similarly american banks, and arguably the government, sponsor and support brutal crime gangs.

    B. Krebs, whose thoughts and insights I usually value seems to think that pretty every Liberty Reserve client is a criminal, supposedly from eastern Europe.

    Well, I’m a LR client, too – and I never did anything criminal.

    The reason, both for me being a LR client and for the usa killing LR?
    Privacy. I wanted to evade the merciless 1984 type of control of every move and step by the finance and government mafia.

    One striking example: As many VPN providers are either secret service front ends or at least hand out everything they know about their clients when asked by american “authorities”, it seemed desirable to pay anonymously for a VPN account.

    It is things like this, the little escapes still existing – and not fraud – that the americans were targetting when killing LR.

    And B. Krebs, painting LR as a service for criminals is working right into the juntas hands. Being a security expert he should think deeper about freedom vs. security.

    1. CooloutAC

      So you wanted privacy for your online financial transactions just for the sake of privacy huh? Simply Because you believe anonymous money transactions is your human right? haha

      1 out of 3 Americans get their credit cards or identity stolen.

      More and more computers are so virused they are becoming too slow and frustrating to use especially with laptops and the avg user. Its been a growing epidemic for years imo.

      You foreigners are taking all the computer jobs out of my country and then con and rob us at the same time?….and then you try to convince us the only jobs online you can get online are with shady websites?

      I mean people were going on ddos rampages this past month. That can be considered a national security threat on certain organizations.

      You people can now be labeled terrorists and assassinated, even if your American citizens, and your complaining about losing a couple hundred dollars on some shady banking site?

      My hate, along with most Americans, as we become more aware, is only growing for foreigners online.

      1. voksalna

        I think this post of yours just made me decide once and for all that you cannot be a rational, logical, reasonable or open-minded individual.

        I’ll be going now.

        1. CooloutAC

          So you think anonymous money transactions is a human right? why do you feel this way? Please explain.

          I can’t see any rationalization for that. I can see a human right for food and shelter, education and healthcare…..but that is all. I do not think the world is an eviler place now. I actually feel the opposite.

  23. Maris

    Good evening, where to write the collective requirement of 25 people – if on a site there was the money, not connected with a crime and black business. Also there are all documents of an origin of money? ? Yours faithfully Maris Latvia!

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