Outsider Club May 31 2013
In this country, there are two ways to operate a criminal enterprise: totally underground or hiding in plain sight.
Liberty Reserve has learned the hard way that if you want to launder billions of dollars for criminals, you had better choose the latter.
The currency company just got nailed for washing $6 billion worth of criminal funds through their secretive online currency.
In case you’re wondering, theirs was a relatively simple scheme…
Here’s how it worked: You opened an account with Liberty Reserve using a fake name and email address. You sent your U.S. dollars to an unregulated currency exchange in Russia, Nigeria, or Vietnam, where the unscrupulous currency exchanger coverts your dollars to LRs,Liberty Reserve’s online currency.
Those LRs were then transferred to another Liberty Reserve member in return for drugs, stolen credit card numbers, or any other type of illegal item or service. The recipient was then sending their ill-gotten gains to the unregulated currency exchange, who converted the LRsback into dollars.
Liberty Reserve made its money by charging users 1% transaction fees and $0.75 “privacy fees” to facilitate the exchanges. This scheme allowed “the bank of choice for the underworld” to conduct 55 million transactions for its one million users before getting busted.
This is one of the biggest money-laundering schemes ever hatched — and the founders of Liberty Reserve, Arthur Budovsky and Vladimir Kats, now find themselves facing what could be decades in prison.
Some of the their more clownish clients actually opened up accounts with names like “Russian Hackers” and “Hacker Account.” Cute.
Here’s the type of criminals that were using Liberty Reserve:
- Traffickers of stolen credit card data and personal identity information
- Peddlers of various types of online Ponzi schemes
- Computer hackers for hire
- Unregulated gambling enterprises
- Underground drug-dealing websites
- Child pornographers
Not necessarily the most endearing of folks, to be sure…
However, these thugs don’t look so bad when compared to the actions of “legitimate” superbanks like HSBC.
Too Big to Jail