BUSTED: Feds seize Liberty Reserve domains (then they came for Bitcoin?)

...and I didn't speak out, because I didn't use Liberty Reserve.

Liberty Reserve seized domain

The U.S. seizes libertyreserve.com and other domains used by the online payment processor. The DoJ alleges that digital currency service was a huge haven for illegal activity. But legitimate users cry collateral damage.

In IT Blogwatch, bloggers ponder double-standards and fear for future fracas.

Your humble blogwatcher curated these bloggy bits for your entertainment.

Brian Krebs breaks the news:

The news comes four days after libertyreserve.com inexplicably went offline and...report[s of] the arrest in Spain of the company’s founder Arthur Budovsky, a 39-year-old Ukrainian. ... [He] and five [others allegedly] designed and operated Liberty Reserve as “a financial hub of the cyber-crime world, facilitating...credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.”

...

Despite the government’s claims, certainly not everyone using Liberty Reserve was involved in shady or criminal activity. ... [But] “The ‘merchants’ who accepted LR currency were overwhelmingly criminal in nature,” the government...alleges. “...stolen credit card data and personal identity information...Ponzi and get-rich-quick schemes...hackers for hire...gambling...drug-dealing.” ... It remains unclear how much money is still tied up in Liberty Reserve. ...the Justice Department said the Liberty Reserve accounts are frozen.  MORE

And Aunty adds actualités:

...raids in 17 countries scooped up Liberty Reserve's owners, operators and its computer hardware. ... [It] had about a million users and processed more than 55 million illegal transactions, said [the] DoJ. ... The raids also...allowed the DoJ to seize the...domains through which the service was run. ...traffic for the sites...was directed to a series of...sinkholes that log information about who is trying to use the service.

...

The digital money scheme run through the service was one of the world's largest, the DoJ said, and handled $6 [billion] over the seven years it was in operation. ... [But it's] caused problems for legitimate users...said Mitchell Rossetti, head of the EPay Tarjeta service..."We seem to be acceptable collateral damage. ... We have committed no crime and want our funds returned."  MORE

So Mitchell Rosetti, via Cyrus Farivar, has more on that:

Rosetti['s] company...issues “virtual” Visa and MasterCard numbers to people around the world who don’t have access to traditional banking services. ... 70 percent of the company’s business came via Liberty Reserve. “We are now looking for alternative methods of payment. ... Further, our monies were seized...$28,000 of ours.

...

“Rarely have we had individuals that will send us $2,000. If something like that would happen, every red flag would go up. That could be a year’s income in some nations. My customer is someone who is unbanked and lives in Chile, Argentina, or Peru. ... I can tell you what my customers were transferring to me: $15, $23, $38. It goes up to $300. ... Whatever was lost came out of my pocket at this point. ... Being put into this group of pedophiles and drug kingpins—it’s not a nice thing."  MORE

But Timothy B. Lee wonders, "Is Bitcoin next?":

This is a case anyone with Bitcoins in their virtual wallet is going to want to watch very closely. ...the indictment states: “Unlike...legitimate online payment processors, Liberty Reserve does not require users to validate their identity. ... Accounts can therefore be opened easily using fictitious or anonymous identities.” Of course, that description could just as easily describe Bitcoin.

...

The U.S. government faults Liberty Reserve for requiring users to fund their accounts through intermediaries called “exchangers.” ... The Bitcoin economy has a similar structure.

...

But there’s also at least one important difference between Bitcoin and Liberty Reserve: If the authorities concluded that Bitcoin were a money laundering scheme, it’s not clear whom they’d prosecute. ... Trying to shut down Bitcoin could prove futile.  MORE

At which, Winston Cardillo scoffs:

You think the FED and their FBI henchmen are going to let an alternative currency evolve on the internet that they can't control? Of course not.  MORE

Meanwhile, mistalee3 spots pachyderm in atrium:

How much did HSBC launder for drug dealers and terrorists and got out of it almost unscathed? I guess they didn’t have any friends at DOJ.  MORE

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