The popular Costa Rica-based virtual currency
exchange Liberty Reserve appears to have been shut down permanently, while its
founder has arrested on suspicion of using the site for money
laundering purposes. The news has caused uproar within the Web’s
underground cybercrime community, with hundreds of people reporting that
they’re no longer able to access funds stored on the site, which in some cases
amount to thousands of dollars.
Security website Krebs on Security reports that Arthur Budovsky,
the founder of Liberty Reserve, was arrested in Spain last Friday in a joint
operation between US, Costa Rican and Spanish law enforcement agencies. Krebs
claims that Budovsky is now likely to be extradited to the US, citing Costa
Rican news sources.
For those who’ve never heard of it, Liberty Reserve
is a notorious online money exchange that uses its own virtual currency, known
as the Liberty Reserve, or simply “LR”, to provide anonymous payment processing
services for online customers. The ‘currency’ is somewhat similar to Bitcoin,
only it has a far more sinister side to it due to its total lack of regulation.
With customers able to open an account anonymously using nothing more than an
email address, it’s said to be a haven for thousands of cybercriminals across
the world.
Liberty Reserve offers benefits besides its
anonymity – its fees are extremely low, with users being charged just 1% of
each transaction, whilst the service protects its users from credit card
chargebacks. On the downside, the exchange has been somewhat vulnerable at
times – for example in August 2012 a script problem left hundreds of users
locked out of their accounts, some of which possessed thousands of dollars.
On top of this, founder Budovsky has had his fair
share of brushes with the law in the past. Bitcoin Magazine reports that the founder was
arrested alongside partner Vladimir Kats in 2006 for carrying out money
transmittals without a license, before being convicted and sentenced to five
years probation. This prompted Budovsky to flee to Costa Rica, where he set up
Liberty Reserve.
Now, it looks as if Liberty Reserve has even bigger
problems. According to Krebs, the site first went down on Thursday night:
“The outage set off increasingly anxious
discussions on several major cybercrime forums online, as many that work and
ply their trade in malicious software and banking fraud found themselves unable
to access their funds.”
Worried cybercriminals bemoaning their bad luck
|
Almost simultaneously, a number of other suspect
online currency exchanges were taken offline, including asianagold.com,
echangezone.com, moneycentralmarket.com and swiftexchanger.com. Since being
taken offline, all of the above sites are now pointing to domains owned by
Shadowserver, a non-profit organization that fights against cybercrime. This,
more than anything else, suggests that Liberty Reserve’s fall from grace is a
permanent one, and that its users will be unlikely to recover their funds.
Liberty Reserve’s demise might be a disaster for
the web criminals and anyone else unfortunate enough to have funds stored with
it, but for the more respectable Bitcoin it could well be a blessing. Bitcoin
Magazine speculates that with Bitcoin now being one of the few remaining
payment processing platforms around that still doesn’t accept chargebacks,
it’ll become even more appealing to online marketers whose businesses are at
risk from chargeback fraud.
by Mike Wheatley
source http://siliconangle.com
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