"The system allegedly was designed to give criminals a way to move money earned from credit-card fraud, online Ponzi schemes, child pornography and other crimes without being detected by law enforcement."
This is like saying Henry Ford designed the modern automobile to be used in bank robberies, drunk driving murders, hit-and-run maimings, and kidnapping.
Yes, virtual currency is attractive to criminals. It's also attractive to law-abiding citizens, many of whom do not like to be lumped into one big morass with "organized crime" stuck on top as a label. We're stepping dangerously close to "If criminals like doing it, it must be bad" reasoning.
ADD: I also note this section: "...On Tuesday, in the first use of the 2001 Patriot Act against a virtual currency, the Treasury Department invoked a section of the law to choke off Liberty Reserve from the U.S. financial system..."
Well, there's your terrorism act, used to control crime via virtual currency. We get scared of one thing, pass a law, and then see it used in a completely different context. The current American kerfuffle involving investigating reporters is tied to a WWI-era law that's almost never used. Amazing the tools American prosecutors have available to them. One could say overbearing, even.
ADD2: Nobody is saying they are innocent. The point here is that these guys are being shut down (and they probably need to be shut down) by procedures that have broad application to all kinds of legitimate use as well. These are very broad and powerful tools we've given the state. We should take some time and think about if they need to be more narrowly-focused. The initial Patriot Act had an expiration date. For a reason.
> This is like saying Henry Ford designed the modern automobile to be used in bank robberies, drunk driving murders, hit-and-run maimings, and kidnapping.
That analogy might be valid if 50-90% of Model-Ts were used for bank robberies, and all those other things, and exclusively.
At some point it crosses the lines of being a legitimate business and becomes a caterer for criminal enterprises.
Having 1 legitimate customer does not excuse you from willingly servicing the needs of 9 criminals.
LR went out of their way to hide the tracks of money transactions.
In order for a this analogy to work, we'd also need to imagine henry ford launching the model T into a market that was dominated by a monopolist whose product was carefully manipulated to serve as the basis for all of their society and much of the world, who had a track record of carefully and aggressively guarding that role for decades, and who had the nukes to back them up.
basically - I don't think the US gov't is going to cede the digital currency space quietly.
more important than the anonymity issue facilitating money laundering (which is a consideration) - is preserving the sanctity of the US dollar in world trade. to give one example - most oil is priced in US dollars, around the world. the dollar, including all the manipulative tricks we can pull with the fed, is the basis for our economic power and likely a key driver in all the shenanigans we pull around the world so the government would be complete fools to allow bitcoin or similar to turn into anything other than a science project.
It sounds like there's considerable evidence that the owners were fine with supporting illegal transactions. So, no one really contests their arrests.
The problem is that the service they created is/was used by many people to store and transfer legitimately earned money.
The end result is that many cybercriminals are no longer able to access the money they illicitly earned, yet many regular working people, often in foreign countries where they can't use Paypal or otherwise, can't access their actual funds. Those people had nothing to do with LR's management, nor the criminals who were using the service.
Obviously few people are going to pipe in and say that they used LD for illegal purposes, but I've read a lot of comments today from people who used it simply because it was cheaper than other options. It makes sense, you could easily make an account and could use it globally and there are a lot of countries without strong banking sectors.
It's nuts that the US can step in and shut down a foreign company like this. I understand cracking down on any of the exchangers that operated in the US, but it's really not the US's business if foreign parties in foreign countries exchange money with a foreign company.
What if the only reason it was cheaper for legal uses is that they were being subsidized by the illegal uses? What if the pricing LD offered would not have been a workable business model if they hadn't allowed money laundering?
(I don't know the facts here. I'm just offering a possibility.)
I don't think it's wild to assume thinking a 1% transaction fee is enough to fund an exchange. It seemed about as inconvenient to get funds in and out of as Bitcoin is and with similar fees.
Dwolla has a $.25 fee for example and while I'm sure a bunch of criminals use Dwolla, it would not stand out as suspicious.
Fees for LR were generally much higher, because the way they structured it was to have 3rd party companies[1] handle transactions in and out of LR - who usually charged somewhere around 3-5%.
Liberty Reserve wasn't in the business of actually converting money in their system to or from real-world currencies, and handed off tasks such as indentity verification and anti-fraud to the companies who actually exchanged those bits for real money.
In some regards, LR was very similar to a protocol.
Obviously this is a stepping stone towards pushing for harder legislation against anonymous online transactions.
That is why this is blowning up that strong in mainstream media which unquestionable accepts the idea that all the over 1m users are just money launderers.
My guess is that current legislation is not strong enough to bring Bitcoin down and cases like these help to propagate the only-pedophiles-and-terrorists-want-anonymity meme.
It's really hard to claim that the LR guys are innocent. The comparison with Ford is completely out. If you read the indictment itself it's fairly clear that they were knowingly building a system to work around money laundering laws (including the Patriot Act) and went to great difficulty to do so.
If they come after bitcoin and you make the same comment, I'll be more sympathetic.
> If you read the indictment itself it's fairly clear that they were knowingly building a system to work around money laundering laws (including the Patriot Act) and went to great difficulty to do so.
Reading an indictment to determine whether the accused did something wrong is about as sensible as watching Fox News to determine whether Barack Obama is a socialist. All indictments paint the defendants as guilty.
And since when is working around the law a crime? It's almost by definition not a crime, because the whole idea is to accomplish the goal you set out to achieve without breaking the law.
Leaving aside the question of whether evading a law through a technicality is alright (and surely the court will decide whether they were successful at that or not), but the indictment indicates they misled financial regulators, submitted a fraudulent verification system to regulators that falsified data, and indicated they sold the company to a foreign entity then continued to operate it surreptitiously through shell companies. This doesn't sound like squeaking by on a technicality.
I really don't see why everyone is assuming these guys are in the right. I don't see much to support that claim.
The indictment is just a list of the stuff the prosecutor thinks will make the defendants look like bad people. They haven't actually proved anything yet.
>I really don't see why everyone is assuming these guys are in the right. I don't see much to support that claim.
You don't see much to support that claim in the indictment? No kidding.
| And since when is working around the
| law a crime?
Finding a loophole in the law, may make what you did technically legal, but it doesn't make it all of the sudden a 'good' thing. If I found a loophole in the laws that let me defraud you of all your money, while technically staying inside of the law, would I not still be a fraudster/conman, even if I didn't run afowl of any 'fraud' laws?
Your scenario is assuming the conclusion. Defrauding someone will cause you to be guilty of fraud, because that's what "defraud" means.
What you mean to say is that there are some things which are contemptible but still technically legal. But the converse is also true: Some things remain legally prohibited that would otherwise be morally unobjectionable. Legality and morality are independent variables.
Whether doing a thing is 'good' or not has nothing to do with whether that thing is legal, "technically legal" or totally illegal. All its legal status tells you is whether you can expect to be convicted of it if accused.
I think theres a rather large difference between finding away around the law to defraud/steal from someone and finding a way to send money cheaper/easier then existing methods.
Its very much like how urber or air bNb are finding ways around existing constrictive regulations designed to protect existing incumbents.
I mean really, what business is it of the governments is it who i send my money to??
| I think theres a rather large difference between finding away around the
| law to defraud/steal from someone and finding a way to send money
| cheaper/easier then existing methods.
| I mean really, what business is it of the governments is it who i send my
| money to??
My response about fraud was an example to highlight how 'working around the
law' doesn't necessarily mean that you are or aren't doing something. You may
not be doing it by the legal definition, but you can still be doing it by the
'common' definition.
| designed to protect existing incumbents
So, you're saying that tenants breaking their lease agreements is a good thing.
Because the tenant is 'disrupting' the landlord (the 'incumbent')?
If I have a house that I want to rent out, am I an evil person that needs to be
put in my place by the tenants that rent it from me? Is there someone wrong
with me wanting to vet the people that will be living in said house (especially
since damage done to the house can be hard to recover in some municipalities)?
Costa Rica is a foreign country, why should it not try to work round US laws? It has no responsibility to the US taxpayer or government. I don't understand how the US legal system has an jurisdiction there at all.
OK, I assume that they would be leant on and "persuaded" to give this thing up, but that just big bully boy tactics. Not a moral or legal thing.
If you read the indictment itself it's fairly clear that they were knowingly building a system to work around money laundering laws (including the Patriot Act) and went to great difficulty to do so.
An indictment is not a reliable source of objective fact or unbiased interpretation of fact. It's an accusation, written to make the accused sound as deplorable as possible.
You mention automobiles. The historical example you could have mentioned was fully automatic shoulder arms like the "Tommy gun," which was banned after it was discovered that almost all users were criminals.
I have no opinion about the allegations against Liberty Reserve. That needs proper judicial resolution, which takes time. I will note, in light of some of the other comments here, that the United States has international treaty agreements with most other countries in the world mutually to regulate money exchange from one country to another. Once in my work as a Chinese-English interpreter (this was back in about 1997), I had occasion to accompany a Chinese official to the offices of FinCEN
so that he could discuss with United States officials how his country (NOT an "ally" of the United States) and ours could cooperate in fulfilling their mutual treaty obligations.
I'm largely with you, Daniel, in desiring government to have narrower rather than broader powers to regulate individual behavior around the world, but I'm not so sure governmental power is too broad or being abused in this case.
This is like saying Henry Ford designed the modern automobile to be used in bank robberies, drunk driving murders, hit-and-run maimings, and kidnapping.
Yes, virtual currency is attractive to criminals. It's also attractive to law-abiding citizens, many of whom do not like to be lumped into one big morass with "organized crime" stuck on top as a label. We're stepping dangerously close to "If criminals like doing it, it must be bad" reasoning.
ADD: I also note this section: "...On Tuesday, in the first use of the 2001 Patriot Act against a virtual currency, the Treasury Department invoked a section of the law to choke off Liberty Reserve from the U.S. financial system..."
Well, there's your terrorism act, used to control crime via virtual currency. We get scared of one thing, pass a law, and then see it used in a completely different context. The current American kerfuffle involving investigating reporters is tied to a WWI-era law that's almost never used. Amazing the tools American prosecutors have available to them. One could say overbearing, even.
ADD2: Nobody is saying they are innocent. The point here is that these guys are being shut down (and they probably need to be shut down) by procedures that have broad application to all kinds of legitimate use as well. These are very broad and powerful tools we've given the state. We should take some time and think about if they need to be more narrowly-focused. The initial Patriot Act had an expiration date. For a reason.