Founder of Liberty Reserve Pleads Guilty to Laundering More Than $250M
justice.gov
justice.gov
LR was a direct reaction to what had befallen e-gold, which was in fundamentally the same business except it did all of the cashing first-party (early in life, at any rate). e-gold was shut down for being a money laundering operation, principally because it was a money laundering operation.
LR was also a money laundering operation. It observed various issues e-gold had had, such as being physically located in the US (though theoretically registered in a country friendly to money laundering), and intentionally fixed these bugs with the intent of being the most robust money laundering operation it could be.
This ended up not working out, which is why the vacuum that urgently desires a money laundering operation has replicated the same hub-and-spokes model with the hub being a cryptocurrency (presently Bitcoin) and the spokes being exchanges and LocalBitcoins sellers. The onramps/offramps to Bitcoin are exposed to a variety of ways to curtail their operations but the central trusted DB required for them to cooperate is not controlled by anyone who can be conveniently extradited. People in the Bitcoin community refer to this obliquely as either "censorship resistance" or "resistance to policy attacks."
If you're interested in the history of this, Paypal and e-gold were approximately contemporaries, and one of the reasons Paypal succeeded and e-gold did not was that Paypal conspicuously courted respectability, so that even if Paypal was also doing hundreds of millions of dollars of fraud and illicit transactions it would be unlikely to indict them as a criminal enterprise because they were a proper company whose lawyers wore suits and whose VCs were quite respectable. Bitcoin collectively cottoned onto the wisdom of having its fronts benefit from the same factor as opposed to being, well, insufficiently socially insulated from legal process. (I can accurately summarize who makes Bitcoin exchanges but it would read like a parody.)
One of the biggest Bitcoin exchanges is run by "Big Vern".
Bitcoin in a nutshell.
It's like calling
Not since they 'lost' a mere 10,000 Bitcoins, no. Google "big bitcoin exchanges" though and you'll see they feature quite heavily.
>Never mind the fact it's an altcoin exchange
What is Cryptsy:
Cryptsy International is an Internet startup managed by Project Investors, Inc.
*focusing on the exchange of Crypto-Currency commonly known as “BitCoin”* and
it's derivatives.
https://cryptsy.com/pages/about
I'm not sure how this refutes my point.
HSBC Judge Approves $1.9B Drug-Money Laundering Accord [1]
"U.S. District Judge John Gleeson in Brooklyn, New York, signed off yesterday on a deferred-prosecution agreement"
HSBC money-laundering procedures 'have flaws too bad to be revealed' [2]
"HSBC’s procedures to prevent money laundering, sanction-breaking and criminal activity still have deficiencies so serious that to publicly disclose them would risk serious crime, the US Department of Justice has said."
[1] http://www.bloomberg.com/news/articles/2013-07-02/hsbc-judge...
[2] http://www.theguardian.com/business/2015/jun/05/hsbc-money-l...
. . . By Former Chief Foreign Exchange Dealer; Director of Credit Card Interchange @ Visa & Founding Director of the Bitcoin Foundation . . .
Pecunix and C-gold are other centralized, closed book-entry systems still around though Pecunix changing to a voucher system.
I agree with what you're saying but I disagree with your example.
[1] http://economics.stackexchange.com/questions/8320/how-and-wh...
More details about the case when the charges were announced a couple of years ago.
It's like anything else. If you operating a nightclub, and there's a crowd of people selling meth in the bathroom all night, you're facilitating a crime.
2) Usually money laundering means the money was obtained illegitimately. That money had to come from SOMEWHERE, and someone was probably harmed in the taking of it.
according to whom?
My goodness, that flag does look a bit gold fringed.
Illegal means it violates a law. A crime is something that actually harms someone.
Gay marriage may have been illegal, but it was never a crime, for example.
Alas, these days the USA is a very authoritarian culture and the idea that there might be US laws that are themselves crimes to enforce seems alien. But logically and morally it is the case.
You're language is too loose to be making such distinctions. Crimes have a legal meaning so you can't just use the word crime in its moral sense only without being specific.
>On HN people rarely make the distinction because they think something being illegal makes it a crime.
HN isn't that dumb.
> Gay marriage may have been illegal, but it was never a crime, for example.
In the sense you're using the word crime (i.e. moral) you're absolutely wrong, it was a moral crime and gay people were the victims of said oppression.
However, in the US it is illegal to operate a money transfer business without getting the proper licenses and registrations at the federal, state, and local levels.
It's even more illegal to operate a money transfer business that's being used for laundering, know or be told of these laundering uses, and then not do anything about it.
The US could pass a law that Sainsburies (a UK grocery store, with no US locations) has to employ a jazz band at every one of their stores for 3 hours every friday afternoon... but it doesn't matter, because the US does not have jurisdiction over the UK. Even if a US citizen goes and visits and stops by a sainsbury and is upset at the lack of a jazz band.
As you've probably noticed, the US goes around the world and enforces its will all the time. Whether its via various asymmetrical treaties, direct military invasion or some other tactic, they usually at least move the needle towards the direction of their desire.
Which is not to say that the US is alone in these actions. There are lots of entities that enforce their will like this. Russia for example just recently went and took a nice chunk of land for itself in the form of Crimea. This was neither new nor surprising, especially for me as I was born in a Russian occupied territory.
As it stands today, there are some entities that are effectively more equal under the law because they have infinity money. One of the most important rules for a successful adult life is to never cross anyone with infinity money (unless you yourself also possess infinity money). Money talks.
Laws for MSB's anywhere require them to comply with legislation based on where their costumers are originated.
When you move money from your US account to your friends in the UK through say PayPal; PayPal has to comply with the regulations in both the US and the UK.
Amongst those things the MSB also needs to ensure that they do their due diligence to ensure that they do not provide a service to launder money or facilitate other illegal activities this often includes running background and credit checks on the costumers, providing notifications of transfers to the authorities, checking their costumer base against a list of known criminal organizations and suspect individuals, and in general even required to report any set of transactions which fit a certain pattern.
LR (just like say Megaupload with it's "reversed" payment model) was designed to circumvent all of this intentionally while there might be some legitimate use for it it's primary use was to transfer funds and exchange currency in an unregulated manner which makes it attractive to only a certain type of individuals which seek that intentionally, anyone else would not want to use it using an unlicensed MSB is a sure way of getting your funds frozen and putting you under investigation.
I don't even understand how people can support them, even if they did not do so intentionally they've put their entire costumer base under a microscope if people used this service thinking it was a legitimate MSB they were defrauded. Money laundering and tax evasion is tricky, many laws in many countries are often structured in such manner that the accused has to prove that those funds were acquired legitimately and that all taxes were paid as due. Even if LB did this out of sheer stupidity (which obviously they didn't) they deserve to get their asses handed out to them just for putting every person who ever used them at risk of going to jail or getting in debt due to financial irregularities.
Also it's customer, not costumer.
These are serious laws and it doesn't cost much to find out if you're in or outside of MSB regulations.
- Contract a legitimate 3rd party ID verification service like bitstamp does. You get API access where the entire verification process can be automated on your end, and it's out of your hands, so you have some kind of legal protection offloading the KYC risk to that party.
- Encrypt all internal employee messages, regardless if they are totally innocent looking a prosecutor will find some way to twist the emails and chats into a crime. Have a written data deletion policy for internal messaging so they are not saved forever, as deleting them to satisfy a business operations policy will prevent possible future obstruction or evidence tampering nonsense charges.
- Avoid any and all political ideology, don't call your service DownWithTheFedCoin. Notice how the prosecutors made a point about Liberty Reserve's name.
- If you create an asset pegged to a currency don't use USD.
Finally have clear, concise instructions to resolve disputes, and some kind of phone number escalation procedure for users to actually talk to somebody. Better yet have a disinterested 3rd party to help moderate customer disputes in a totally transparent way instead of merely freezing accounts and ignoring their emails. As soon as somebody has their funds seized or delayed they run to regulators and lawyers to complain which in turn spawns government attention on your little cryptocurrency related service.
Thank goodness they didn't find Satoshi yet.
http://www.justice.gov/sites/default/files/usao-sdny/legacy/...
I also don't understand the downvotes. I'm asking a serious question because I'm curious - if this company was operated by a Russian citizen living in Moscow (or by an Albanian citizen in Albania, or a Swiss citizen in Switzerland, or even let's say by the North Korean government) - what would have happened here?