Bitcoin was not the first type of online money to be ever created, as it was preceded by E-Gold and Liberty Reserve, to name a few. The creator of Liberty Reserve was sentenced to 20 years in prison on May 6th.
Liberty Reserve Creator Arthur Budovsky
Ever since its inception, there has been a lot of discussion about the validity of Liberty Reserve. Transferring money over the Internet with next to no oversight has caught the attention of both governments and Internet criminals alike. The platform seemed to lend itself towards money laundering, as very little information was needed to send money to anyone else in the world.
This money transfer service, run out of Costa Rica by Arthur Budovsky, was in operation between 2006 and 2013 before law enforcement officials shut the platform down for good. According to the US government’s claims, Liberty Reserve was nothing more than a money laundering operation transferring more than $6bn USD in funds.
Those claims seemed to be rather valid considering all one needed was a recipient’s name, email address, and birthdate to send funds. Comparing this to how the traditional financial system works, the amount of information Liberty Reserve required was next to nothing. Such a system would make it rather easy for [internet] criminals to funnel funds on a global scale.
During the peak period of Liberty Reserve, the platform served over 1 million customers around the world and handled 12 million transactions per year. An operation of such magnitude cannot continue to run without oversight for very long, and the US government used the Patriot Act to shut down the platform. Cutting Liberty Reserve off from the American financial system was the first step, before taking over the website and shutting it down completely.
Arthur Budovsky, who was responsible for creating and running this platform, was taken into custody by Spanish law enforcement agencies, and later on extradited to the US in 2014. Budovsky pleaded guilty to money laundering – as well as sluicing away $122m – in January of 2016, and was convicted to 20 years of jail time on May 6, 2016.
Assistant Attorney General Leslie R Caldwell referred to this conviction as “the significant sentence handed down today shows that money laundering through the use of virtual currencies is still money laundering and that online crime is still a crime.”
Satoshi Nakamoto Identity Reveal?
This story paints an interesting picture as to how the US legal system looks at the creators of online payment solutions. Bitcoin creator Satoshi Nakamoto could very well fall into the same category as Arthur Budovsky although the real Satoshi does not control Bitcoin in the same way Liberty Reserve was a centralized payment network.
Bitcoin has been associated with money laundering efforts in the past, which indirectly implicate Satoshi Nakamoto as creating a virtual currency, which facilitates this type of illegal activity. However, the Bitcoin creator is not earning any money from illegal transactions, whereas Liberty Reserve took a fee from every payment, similar to what PayPal does.
Even though the difference between Bitcoin – a decentralized payment protocol with no leader or owner – and Liberty Reserve – centralized and owned by Budovsky – could not be more evident, the US legal system might see things differently. Then again, they should also trial the Federal Reserve as fiat currency is the most common payment method among criminals all over the world.
What are your thoughts on the Liberty Reserve story? Would Satoshi Nakamoto face similar charges if he ever revealed himself? Let us know in the comments below!
Source: CNN Money
Images courtesy of Shutterstock, Arthur Budovsky