Bitcoin News Journal

Liberty Reserve Closed For Alleged Money Laundering


Liberty Reserve, one of the popular payment processors for USD and Euro, has been closed by United States and Costa Rica police agencies and it’s owner Arthur Budovsky Belanchuk, was arrested in Spain (source). At the time of writing, the Liberty Reserve website is down and returning a 503 “service unavailable” error. While in operation, LR offers two digital currencies i.e. Liberty Reserve USD (LRUSD) and Liberty Reserve EURO (LREUR).

Liberty Reserve Money Laundering

After Dwolla, Liberty Reserve was one of the favorite method to add USD in to MtGox account. Earlier this month Department of Homeland Security seized Dwolla account of MtGox.

Liberty Reserve and Dwolla were very successful in Bitcoin transactions since they don’t support chargebacks,  so that exchanges could use these services safely without fear of a fraudulent customer buying and withdrawing bitcoins, and charging the USD back, this is a very common problem with PayPal and Credit card transactions, that’s why none of the exchange use their services.

One can still use bank wires to send and receive cash from MtGox. Though Bank wires can be expensive for small traders.


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  1. Rezza July 25, 2013 Reply

    Except that is very clearly is, if not a pyrmaid scheme, a scheme which gives certain powerful and wealthy individuals absolutely disproportionate profits through the work of others who receive only a minute fraction of them.I am not talking (only) about the sickest miners with the best rigs. Besides, they used and paid for their electricity. The problem is the control exerted by the pool operators.It is easy to see how enormously the pool operators profit. They claim the fee of 2-3% (which translates to 1-1.5 BTC) is required to maintain the pool. However, a simple calculation reveals a single operator of a major pool makes hundreds or thousands of dollars’ worth of bitcoins daily by maintaining it. One does not need these kinds of amounts of money to maintain a server or even a dozen.The thing is, I am perfectly fine with this. Everyone is a voluntary participant and is able to track his/her profits (or usually lack thereof) virtually in realtime. Besides, what people are contributing here is some computation time, getting big electricity bills. Compared to the massive Ponzi schemes where people lose their lifetime savings and their houses this is just another nice little game on the Internet for most. One doesn’t really lose anything of substance even though he might not (and most likely will not) profit from mining, be it pooled or solo.We still shouldn’t delude ourselves by thinking that this doesn’t follow the same path as any money for free scheme: the early bird gets the worm? (gets the easiest bitcoins and ends up having the most of them). Additionally, as in any scheme seen so far, the ones early in the game get to use the others to further increase their profits, usually maintaining a faster rate of profit than any of the people who entered the game later. We are already past the point when this starts happening and we can easily observe it happening right now thanks to the extensive market data and statistics. It can’t be stopped. It is just the nature of this beast.

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