Liberty Reserve
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| Type of business | Sociedad Anónima |
|---|---|
| Founded | 2006 Costa Rica |
| Dissolved | May 2013 |
| Headquarters | Costa Rica |
| Services | Digital currency transfer |
| Launched | 2001 (?) |
| Current status | Inactive (taken offline by regulators) |
Liberty Reserve was a Costa Rica-based centralized digital currency service that billed itself as the "oldest, safest and most popular payment processor... serving millions all around a world". The site had over one million users when it was shut down by the United States government. Prosecutors argued that due to lax security, alleged criminal activity largely went undetected, which ultimately led to them seizing the service.
In May 2013, Liberty Reserve was shut down by United States federal prosecutors under the Patriot Act after an investigation by authorities across 17 countries. The United States charged founder Arthur Budovsky and six others with money laundering and operating an unlicensed financial transaction company. Liberty Reserve is alleged to have been used to launder more than $6 billion in criminal proceeds during its history.
Based in San José Costa Rica, Liberty Reserve was a centralized digital currency service that allowed users to register and transfer money to other users with only a name, e-mail address, and birth date. No efforts were made by the site to verify identities of its users, making it an attractive payment processor to scam artists. Deposits could be made through third parties using a credit card or bankwire, among other deposit options. Liberty Reserve did not directly process deposits or withdrawals. Deposited funds were then "converted" into Liberty Reserve Dollars or Liberty Reserve Euros, which were tied to the value of the US dollar and the euro respectively, or to ounces of gold. No limits were placed on transaction sizes. The service made money by charging a small fee, about 1%, on each transfer. Transactions were "100% irrevocable". Liberty Reserve also offered shopping cart functionality and other merchant services.
Service was popular among currency brokers and multilevel marketing companies. According to Forex Magnates, a specialized forex news service, Liberty Reserve was "the leading payment channel for traders in emerging and frontier markets." Richard Weber, head of the U.S. Internal Revenue Service criminal investigation unit, declared, "If Al Capone were alive today, this is how he would be hiding his money". At the time of its closure, Liberty Reserve had more than 1 million registered users, 200,000 of which were from the United States. It was a member of the Global Digital Currency Association.
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