Tuesday, June 4, 2013

The Liberty Reserve Shutdown Shows Bitcoin What Not To Do

 

Federal prosecutors in New York this week announced the crackdown of a $6 billion online money laundering scheme, the largest such case in history.

According to the indictment handed down by federal courts in Manhattan, Liberty Reserve, a digital currency exchange, was “the predominant digital form of money laundering used by cyber-criminals worldwide,” handling 55 million transactions over years of operation. The site served millions of customers, ranging from black hat hackers to international crime syndicates, siphoning profits from drugs, child pornography, theft, human trafficking, among other nefarious activities.

As the head of the Internal Revenue Service’s criminal investigation puts it, we’ve entered the “cyber age of money laundering.”

“If Al Capone were alive today, this is how he would be hiding his money,” Weber said at the news conference. The Costa Rica-based Liberty Reserve was able to subvert mainstream financial institutions, thus maintaining user anonymity, by relying on a dubious network of exchangers in Russia, Nigeria, and Vietnam.

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