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A Virtual Money Laundering Scheme For ‘The Criminal Underworld’

Six billion dollars and what might be the biggest money laundering scheme in U.S. history. We’ll investigate.

Preet Bharara, U.S. Attorney for the Southern District of New York, describes a chart showing the global interests of Liberty Reserve, during a news conference in New York, Tuesday, May 28, 2013. (Richard Drew/AP)

Preet Bharara, U.S. Attorney for the Southern District of New York, describes a chart showing the global interests of Liberty Reserve, during a news conference in New York, Tuesday, May 28, 2013. (Richard Drew/AP)

There are so many ways to move money anonymously on the Internet. WebMoney, out of Moscow, will do it. Perfect Money, out of Panama. CashU, in the Middle East.

This week, U.S. prosecutors have gone after Liberty Reserve, out of Costa Rica. Charged its operators with massive online money laundering — $6 billion worth — moving proceeds, they say, of credit card fraud, identity theft, narcotics trafficking, child pornography. It’s the Wild West of banking.

Up next On Point: Blowing open the big, dark world of anonymous online money.

– Tom Ashbrook


Reed Albergotti, reporter for The Wall Street Journal who has been covering Liberty Reserve and who wrote “U.S. Says Firm Laundered Billions.” (@ReedAlbergotti)

Brian Krebs, investigative reporter who blogs on computer security and cybercrime at Krebs on Security. (@briankrebs)

Marcus Asner, former chief of the Major Crimes and Computer Hacking and Intellectual Property Unit for the Southern District of New York. He is currently a litigator and partner at Arnold & Porter LLP (@AP_Arbitration), specializing in white collar criminal defense and cases involving financial fraud, money laundering and cybercrime.

From Tom’s Reading List

The Washington Post: Feds Shut Down Payment Network Liberty Reserve. Is Bitcoin Next? – “Federal prosecutors have shut down Liberty Reserve, an alternative payment network that they say was a $6 billion scam “designed to help criminals conduct illegal transactions and launder the proceeds of their crimes.” (Read the indictment.) This is a case anyone with Bitcoins in their virtual wallet is going to want to watch very closely.

Bloomberg Businessweek: Liberty Reserve Joe Bogus Account Said to Reflect Evasion – “Liberty Reserve SA, whose operators are charged with running a scheme that masked more than $6 billion of criminal proceeds, was designed to help users evade scrutiny, U.S. prosecutors said. The digital currency company, unlike traditional banks or legitimate online payment processors, didn’t require users to validate their identity and allowed accounts to be opened under fictitious names such as ‘Russia Hackers’ and ‘Hacker Account,’ according to prosecutors.”

The Wall Street Journal: Promise And Peril Of Virtual Currencies — “The crackdown on money-transfer service Liberty Reserve highlights the growing challenges virtual currencies face as they gain wider use among businesses and consumers. Such alternative payment methods have the potential to drive down or eliminate the processing costs businesses pay when they accept credit and debit cards. But, recently, some virtual-money firms have been mired in controversy over their lack of compliance with U.S. financial laws and allegations some are involved in illegal activities, such as buying and selling drugs.”

Tweets From During The Show

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  • Wm_James_from_Missouri

    Investigate? You are joking, right? The Press has failed to show us, who, what, where, and how, Presidential Candidate, Mitt Romney, did with his overseas accounts ! What about all those other off shore accounts ? Swiss accounts ? What happened to the billion of dollars in cash that was found in Saddam’s hoard ? Who has the billions of dollars that were acquired by drug lords selling Afghanistan’s poppy crops ? You know the crops I am talking about. The crops that were guarded by US Military troops. I guess all that spying at Bluffdale, Utah hasn’t turned up a single clue. These crooks must be super crooks, with super human capabilities ! As I write this I am wondering how much longer the people on this planet will continue to get up and go to work. Oh well …, I guess as long as we are told there will be an investigation, those alarm clocks will keep going off.

    • northeaster17

      When people talk about an underground economy most think of petty drug dealers and of people selling food stamps for tobacco or what ever. Meanwhile the trillion and trillions of hidden cash floating around the world influences policy in unseen and unheard ways. Food stamps and other aide is chump change compared to what is really going on. The international arms trade comes to mind.

  • WorriedfortheCountry

    When I saw the topic I thought this was going to be a story on Solyndra.  You know, the way Obama and the Dems recycled taxpayer money into their own coffers albeit very inefficiently.

    • jpolock

      Hilarious!  Chump change compared to what Bushco did with KBR, Halliburton, Blackwater et al….

      You’ve got to pick your battles.  One the one hand you have an attempt to actually improve our lot through clean energy…on the other a murderous MIC crime cartel destroying a entire countries, pillaging their wealth AND our taxpayer dollars (ooops 9,000 million missing here, 10,000 million missing there…) in the process, the greatest crime and robbery in American history…and that’s not hyperbole

      • WorriedfortheCountry

         Hey we can agree that there was a lot of cash wasted in Iraq.

        • Steve__T

           You mean stolen right?

  • donniethebrasco

    Liberty Network’s big mistake is that they didn’t give enough to political campaigns.

    Or maybe they did, which is why they lasted so long.

    Are the people remaining patsies?  That would be the smartest way to run it.

  • http://www.facebook.com/people/Stephen-Real/100001034943811 Stephen Real

    Is WebMoney the same thing as Bitcoin? I’m so uninformed on this topic.

  • creaker

    A good example of “too big to fail” is Wachovia (now Wells Fargo), instead of $6 billion they did upwards of $384 billion and as far as I know no arrests ever made and the whole thing was buried in the crash of 2008.

    It makes this current “crackdown” look like a joke.

  • rightfromwrong

    The problem is a basic one:  internet anonymity.  Once the internet was opened to commerce (think mail), the premise of a right to anonymity should have disappeared.  Instead it has gotten us unrelenting fraud and illegal “commerce” because it is impossible to police/enforce “anonymous” (or at least so very difficult and expensive as to prove impossible).  Anonymous banking is illegal (currency reporting, large transaction reporting) in this country and we need to make “commercial” emails illegal unless they meet certain criteria, the first of which is legal, on-the-record identification.  Mail fraud laws worked.  STEEP penalties and a serious enforcement effort helped.  Why can’t we have internet fraud laws with the same teeth?  Because we are protecting internet ANONYMITY, that’s why.  And why?  

  • DrewInGeorgia

    What’s good for HSBC and JPMorgan Chase isn’t good for the gander?

  • DrewInGeorgia

    What about the $28,000.00 being held in limbo when Liberty Reserve has yet to be tried for or convicted of any crime?

  • jpolock

    How is this any different from all the Tax havens etc around the world?  Isn’t tax dodging a criminal activity as well?

    What really is the difference from someone who takes a suitcase of cash into a Swiss bank account?

    …I guess you just have to be sure the serial numbers are non-sequential…then you’re not a criminal…

    Ironic too, that he mentioned Capone, mobsters etc…most of which were taken down for TAX FRAUD etc, and not bootlegging, murder, extortion and all the other mob style crimes….

  • Jim

    big time with italians, russians and chinese… they have the cash.

  • creaker

    After 5 minutes research on the scope of what Wachovia did, Tom is sounding a little like Dr. Evil holding up his pinkie and touting “$6 billion dollars”.

  • Wahoo_wa

    It’s the INTERNET…how can there be “underground” sites?

  • http://www.facebook.com/kyle.rose Kyle Rose

    I note that “legitimate” bankers don’t get charged or go to prison when they do criminal things or aid criminals, but anyone who sets up a system to compete with the cartel eventually gets taken down.

    • Steve__T

      MATT TAIBBI: This is—I think this is the key thing that people don’t understand, is that in the law enforcement community there’s an incredible amount of enthusiasm, for some reason, among people in law
      enforcement for doing things like catching undocumented aliens. You know, I was down in Georgia last week. I heard about a case where a guy
      was deported for fishing without a license. You know, it’s incredibly easy to start a criminal case everywhere outside of Wall Street, but in Wall Street, we’ve had one scandal after another involving enormous sums of money, you know, not just billions of dollars but, with the Libor thing, trillions of dollars, and not a single person has had to have any individual consequence. So you talk about all those settlements. Those are all paid by the company and by the shareholders. Not a single person since 2008 has gone to—has been indicted, has gone to jail, has spent a day in jail, or has paid any kind of money out of his own pocket. And until there’s any individual consequence, it’s really a license to steal. I think the Libor thing is really going to be a litmus test for all regulators, because if you can’t go to jail for rigging an $800 trillion market, what can you go to jail for?

    • joao cesar

      LR was closed down because money was spilling away from the first world

  • 2Gary2

    All these MF here and on wall street are crooks.  This is not news

  • joao cesar

    The only crime here is the nation-state.

    This was an attack on anonymity of the internet.

    Preet, for instance, comes from a criminal nation-state, India, which is criminal because of its class/chaste system.

    This was about taxes, stupid.

  • GuestAug27

    Only 19 comments so far on a topic like this?!! That’s sad.

    “Permit me to issue and control the money of a nation and I care not who makes the laws.” Mayer Amschel Rothschild, founder of the Rothschild international Banking Dynasty, 1790

    If M.A. Rothschild was alive today, would he be sitting idle watching some upstarts like LR or Bitcoin trying to take a slice of the money issuance pie?

    And how is this Liberty Reserve operation different from a numbered account in a Swiss (or Cayman Island) bank?

  • lewislong99

    Wow, great show. It was tough to get that many hacks in one room. First of all 6 Billion is NOTHING compares to the $384 billion that Wachovia did. EVERYONE REPORTED THIS. That is one third of the entire GDP of Mexico. How is it that these clowns forgot?  I don’t know why we even pretend that these “Prosecutors” are doing anything but removing the competition for Wall Street banks. Letting them describe $384 Billion as a minor issue is ridiculous. It is astounding that after HSBC, Barklays an Wachovia they think they can just go on radio and just spin up a pile of BS for the American public. Liberty Reserve is a far more honest financial institution than Goldman Sachs, JP Morgan or Citigroup. I know what fees I’m going to pay in advance (they don’t hide it in the fine print). They never took a bailout to stay in business while paying astounding executive salaries. They don’t have to change accounting rules (mark-to-market vs mark-to-model) when they need to preserve executive bonuses. They don’t get zero interest rate loans from the fed that they can use to fund payday lenders with 1000% interest rates. Since Liberty Reserve executives are in jail they obviously don’t bribe politicians. As far as I know they didn’t fix LIBOR or gold prices or oil prices. The US needs proscutors, a Justice Department, an OTS, and SEC. Unfortunately these institutions have been taken over by the Public Relations department at Goldman Sachs. Please let these clowns go back to sucking up and furthering their careers – don’t pretend like they care about Justice.

  • dmart76

    What an amazing show! I listen to Onpoint religiously and this show is on the top of my list. Can’t believe a drug dealer actually called in to provide his “insider” perspective. Thanks Tom!

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