Liberty Reserve’s Money Mayhem

It’s strange that money laundering – money-cleaning, really – should have a negative connotation. After all, the U.S. Treasury Printing Moneyprints a flood of currency backed only by faith in the U.S. Government. That’s $85 billion a month of brand-new dollars, conjured out of thin air: there is nothing as clean as crisp new paper money…..


But Liberty Reserve, a global currency exchange based in Costa Rica, was closed down in early June on the suspicion of money-laundering the ill-gotten gains of cybercriminals, organized crime and even terrorists. Although based in Costa Rica, U.S. officials used a provision in the Patriot Act to target Liberty Reserve and other co-transacting organizations, this being the first time this provision has been used to prosecute a provider of virtual currency.

Operating outside the confines of international banking regulations, the aptly named Liberty Reserve provided the freedom of a simple, seamless and anonymous global monetary system, a network which conducted 55 million global transactions over 7 years, amounting to $6 billion.


And therein lay the problem, because a user need only provide an e-mail address to open an account, without any verification of identity. You could open an account as ‘Ukrainian Mafioso Viktor’, call your account ‘Cocaine Distribution’ and still sleep soundly. There was no identity verification process, no paper trail and no collection of banking information (account names and numbers). For a trustworthy global money exchange to operate securely and safely, the identity of each participant has to be properly verified, and the issuing/receiving bank accounts have to be confirmed, things that Liberty Reserve failed to address. In complete contrast, Anthem Vault recognizes that these two conditions are the sine qua non of safe and secure online transactions.

Image00001But one still wonders about Liberty Reserve. Forget for a moment the lack of identity verification or bank account verification. Extinguish for the moment the lurid images of Liberty Reserve’s Colombian drug-smugglers, Russian hackers, Bulgarian cybercriminals and Thai pornographers. Absent the foregoing, wouldn’t Liberty Reserve be something pretty interesting? With no government oversight or regulation and no money-transmitting license required, Liberty Reserve would surely rival the financial sector’s monopoly on moving money around the world.


Let’s backtrack. In the distant past, it became apparent that hauling around bags of silver and gold for daily transactions was totally impractical. One day, someone of standing and repute in the local community decided to try something new. Instead of handing over silver and gold to his creditor, he wrote an IOU note for the full amount, a ‘promise to pay’ based on the full faith and credit of himself as debtor; as a respected member of the community, he had the moral authority to do this. Over time, IOUs evolved into paper money and trading with paper became commonplace. Eventually, the States and the Federal Government got involved and legal authority supplemented moral authority. But the moral authority was always paramount, because without an abiding faith in the ethics of the debtor, how could the creditor even sleep at night?

So how far have we really come? Today, the Fed has supreme legal authority, to the extent that no other currency than the U.S. Dollar is allowed or recognized as legal tender. But it has arguably lost the moral authority, since the world’s faith in the Fed diminishes daily. With the White House administration badly handling five major scandals currently and with polls indicating a majority of Americans distrust their government, where do we look for moral authority today?Gold Globe

The answer is silver and gold.


U.S. Treasury prints $85 billion a month, a printing mania that devalues the dollar and promotes monetary mayhem. The U.S. Constitution authorizes gold and silver are to be used to backstop the nation’s currency, but neither is utilized and the Constitution is ignored.

Liberty Reserve moved $6 billion in 55 million global transactions over 7 years, becoming the darling of cybercriminals and organized crime. Good idea in a sense, but no identity or account verification and the wrong application.

Gold and Silver bullion is the only tried and true universally recognized store of value, globally traded safely and securely for over 5,000 years.