The collapse of anonymous payments. At rest goes LibertyReserve. Or not

The second day screams on the forums and backstage whispers do not subside - whether the patient is alive or rather is dead. LibertyReserve is the largest anonymous electronic payment system. Founded by a native of Ukraine, Artur Budovsky-Belanchuk, over the past five years, the system has achieved leading positions in all gray markets and began to be seriously quoted in the west, replacing the rest of e-Gold, eBullion and others. Long before BitCoin, Liberty became a thorn in the US Treasury, as served as an ideal means of hiding capital from taxes and contributed to the turnover of capital in transactions that violate US laws.

The turnover of LR over the past five years is calculated in billions of USD, the current balance of accounts is estimated at 70-150M.
How these millions have sunk into oblivion
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Cases of bygone days

The beginning of the 2000s. Arthur Budovsky Belanchuk and Vladimir Katz, young guys with an active lifestyle, feel comfortable in the United States. They noticed a niche in the financial services market: the discrepancy between the wishes of the US Department of Justice and ordinary shadow businessmen in the area of ​​business control creates a demand for the conversion of easily traceable bank transfers into opaque and untraceable electronic candy wrappers. Without further ado, the guys open the exchanger GoldAge INC and help their customers get out of the Muller cap. The sums grow, 30M are driven away in half a year, life is successful ...

The finale of this enchanting action is predictable - the charge of money laundering and facilitating tax evasion. Court ... Term ... 5 years each ... but conditionally - lawyers have tried. The lesson was not easy, but invaluable experience, understanding of the market and customer base were obtained. Sin is not to take advantage

Becoming Liberty Reserve

Arthur moves to Costa Rica. A pleasant climate, simple incorporation, the absence of unnecessary regulation and liberal rates for protection from those in power. Well, what is not heaven on earth.
In 2002, Liberty Reserve SA was established in this very paradise. However, it “is not a member of any professional association or self-regulating organization, as required by the legislation of the Republic, does not surrender standards and conducts a risky credit policy” and has no official property to cover any either requirements, but it does not confuse neither the authorities nor the users, these are the rules of the game.

LibertyReserve earned fame as a very loyal system user, anonymity of accounts and low translation costs, coupled with the rampant support of exchangers, made the system ideal for shady transactions - HYIP (high-yield pyramid investment projects), mutual settlements in the criminal business (carding, child porn), money laundering from phishing and extortion, illegal gambling and the like. Increased medley in the “narrow circles” chained to the system and the attention of the FBI, such is the price of success in this area.

Something wrong in danish state

Already being the undisputed leader of the gray markets and seemingly resting on its laurels, LibertyReserve suddenly begins to block wallets. Without some kind of understandable community system. Treacherous. Without a declaration of war! Under the distribution get hundreds of accounts, as dummies and with balances up to 1M dollars. Rampage continues for weeks, support does not give clear answers, they speak for phishing blochili, then the failure of the script, then work on the site. Gradually, the accounts were unlocked to the majority, but the sediment remained.

Meanwhile, the States are pushing their “Fe!” In Costa Rica and against Liberty Reserve SA, a case of compulsory bankruptcy is opened and “on March 29, 2013. The Supreme Court of the Republic of Costa Rica decided to liquidate Liberty Reserve SA ”
Needless to say that such a trifle did not embarrass any of the users. And the site in the last year or two often lay for several days, or even weeks. In general, disabling the site on Friday evening at first did not bother anyone ...

Full Planetary Cyntnotes

News of the arrest of Arthur crept unnoticed. Together with the efforts of the Attorney General of Costa Rica, the FBI, Interpol and the company in Spain, Mr. Budovsky was arrested. Searches in Costa Rica, uproar scare.
On the sly, they didn’t even immediately notice that the domain libertyreserve.com, managed by the registrar in Sweden, was extended for five years, transferred to the sinkhole and blocked from changing the CSN.



Sinkhol is a system for recording and analyzing traffic that is included in front of the resource being studied through the substitution of DNS. The system is operated by a voluntary non-profit organization in favor of the FBI and the CIA. Even later, we noticed that likewise "monitors" the largest liberty exchangers in the states.

Split

After a couple of hours, after countless cries of alarm bells and equally numerous assurances of the flooding of the Titanic, LR users split into two camps. Some people consider all this to be a provocation on the part of the domestic PerfectMoney system, the main competitor of LibertyReserve, they say black PR, hacking DNS, propaganda. Even if they arrested them, if even the server was closed, if they even ate the domain they took away - the main loot will not go anywhere, everything will settle down.

The second group is of the opinion that either a) “they all get drunk, drank the loot”, or b) even if the system owners have the opportunity to restore its work again, it’s easier to quietly mix all current funds than to be long and tediously satisfied with percentages (especially considering the system’s discredit in the eyes of users and increased risks)

Whoever is right, I fear the consequences will be not pleasant

Effects

In addition to the obvious damage to end users, a misty prospect of a so-called emerges. scams - mass non-fulfillment of financial obligations by any market participants with reference to the loss of capital in LibertyReserve. First of all, these are of course the so-called quick HYIPs - investment projects that promise super-profits on a monthly and daily basis.
The second on the list for the shooting of private exchangers, holding in the reserves tens and hundreds of thousands of USD.
The death of a market leader in combination with the demise of exchangers is a risk for the entire ecosystem of anonymous EPS. The outflow of funds from similar systems that are not fundamentally different, against the background of discrediting the very scheme of their operations, can provoke a withdrawal from the business of other market players. So PerfectMoney has already announced the termination of work with citizens and residents of the United States. The global collapse of anonymous letters is coming))))



In this situation, only one thing pleases: every next dollar of investors lost in muddy payment systems strengthens confidence in regulated EPS and BitCoin, contributes to eliminating financial illiteracy and world peace. Whether the lesson is expensive is everyone decides for himself

Pictures borrowed from the post of cartoons
A couple of sources for those interested.

KrebsOnSecurity (eng)
HYIPMan (rus)

UPDATE
BBC opened the topic . A couple of quotes without context:

since 2006, laundered more than 6 billion dollars

Seven managers and employees of the company headed by its founders are brought to trial

All of them are theoretically facing up to 20 years in prison for conspiracy to launder money and up to five years for transferring money without a proper license.