FX Traders Stunned as Liberty Reserve Shuts Down After Owner's Arrest
International spot FX trader are feeling an economic brunt as their preferred payment method for deposit and withdrawals with FX
Liberty Reserve, the leading payment channel for traders in emerging and frontier markets, has come under fire and the firm has been taken out of operation, according to a report in the Tico Times. As reported, the owner of the South American based company has been arrested by authorities in Spain in alleged connection with serious financial crimes.
It is believed that Arthur Budovsky Belanchuk (39), owner of the popular Liberty Reserve, was arrested on Friday 24th of May in Spain as part of an international operation spearheaded by the United States and Costa Rican governments on financial crime. Mr. Belanchuk, a Costa Rican citizen of Ukranian origin, was under investigation since 2011 after authorities flagged his firm for money laundering. Apart from financial and general e-commerce, it is thought by the investigators that the company engages in illicit payments from criminal activity such as child pornography and drug trafficking.
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Forex brokers have been benefiting from Liberty Reserve’s vast access as a payment provider, especially in countries where traders face difficulties in transferring funds. “Liberty Reserve was a ‘gift’ for several traders, especially after the State Banks’ (State Bank of Pakistan) changes to international money transfers”, said Masroor Ghoori an introducing broker and analyst from Karachi, Pakistan, in a comment to Forex Magnates. Liberty Reserve is a payment channel whereby people can send and receive secure payments without revealing their account numbers or identities.
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Forex brokers operating from heavily regulated markets such as the UK are obliged to use payment channels that are regulated, for example UK brokers use services provided by the likes of Money Bookers. Liberty Reserve (LR) an un-regulated service is used by several international forex brokers, such as; Marketiva, FXOpen, Markets, Instaforex and others.
Liberty Reserve has been widely used by traders where central banks restrict bank transfers to foreign entities; for example in countries such as Malaysia, Pakistan, Argentina, Nigeria and Brazil the company has been the preferred payment method. The service offers traders a fast and cost effective method with charges capped at $2.99.
Liberty Reserve’s website has been shut down and none of their international representatives in India or Malaysia were reachable for comment. Dery Rusdan one of the largest introducing brokers in Indonesia said in a comment to Forex Magnates: “We always thought that Liberty Reserve could have issues like e-gold but this was a shock, business will suffer.”
A Dubai based brokerage firm who wished to remain anonymous told us: “We average around $250,000 to half a million in monthly deposits, mainly from Asia and Africa.
Forex traders have faced issues with payment providers in the past, like with e-gold, a digital currency provider that was found guilty of money laundering by US authorities”.
In the end provider of financial systems such as liberty reserve on this internet seems to find the end point. there is little personal experience that I had just experienced last Thursday may 23-2013 wherein the same time my account hacked by an account calling itself (SOL) U5124662. There is confusion in the account after surfing the internet and found that the account has a lot of piracy activities against other LibertyReserve account, where I can find it by googling on google with the same story as I experienced. I’m not accusing but based on the rules specified by the… Read more »
This is EXACTLY, EXACTLY, EXACTLY why Bitcoin is so important. It is a digital currency that is 100% completely decentralized. So even if one exchanger gets shut down or accused of negative press or [WHATEVER lame interventionist excuse here], the totality of the blockchain and the Bitcoin currency can continue to survive. I’m sure all of the bitcoin advocates will quickly quote this article, as this news clearly strengthens the argument. Fiat currency is used for illegal activities also, right? But I guess the de-facto world reserve currency does not want any competition. There are thousands of legitimate people running… Read more »
I forgot to add. The brokers who were affected the most were the brokers who held float amount of client funds in liberty reserve. In other words, they did not actually convert the funds to USD, EUR, etc but kept it in LR USD/EUR etc.
The account balance did not reflect this distinction, and now clients are in a bind.
And another question: how often has this happened in the past? Perhaps an article on this would help users understand this type of counterparty risk.
I say f%$# the US government! What’s their problem with a payment processor that has no business in their country.
Liberty Reserve is a payment processor which has no value in the USA and they still just don’t mind their business.
They really need to start minding their own business! They are just control freak! Iwanncontroleverythingdotcom!F%#$ERS!
So what happens to our funds?
huh liberty reserve LR is a good and fast digital currency every digital currency can be used illegal and legal so the lr should be back we love lr
@Jon – re:WebMoney – funny you mention them – they just added BTC wallets. Researching for a possible article about that story, the view is that webmoney started out with suspicions of whether it was legit or a scam/ponzi scheme. Those worries have subsided though as it keeps churning. Some compliance people I spoke to claim that they typically haven’t had problems with deposits/withdrawals except for the occasional time that a payment gets mis-accounted for, but those issues are fixable.
you are right john doe and specially its a russian company and usa doesnt want it it should be back and the owner should be released from the jail he is aa good and a helper man
OMG, i hate bank transfers which take too long and now liberty reserve is gone. The cheapest one of all, how am i going to get my 499.99 over there? and will brokers like instaforex allow me to withdraw by other means even though i deposited with liberty reserve?
I’ve deposited money with LR to my HotForex… Its Sunday night.. I’m worried.. how they are going to react on it? whether, I’ll be able to get other ways to get withdraw like Payoneer Card?
What really USA Govt. Have to do with it?
Methods of payment seem to be getting increasingly fewer in numbers outside of bank transfers/standard merchant credit cards. The NFA may ban use of credit cards for deposit to forex accounts in the future too It isnt just the regulators either. Acquiring banks are extending their due diligence when dealing with payment to unregulated companies: http://forexmagnates.com/the-payments-purge-unregulated-forex-companies-risk-full-refund-of-client-money/ Omnibus accounts can be used to conceal payment methods from regulators too.. especially from white label partners of forex firms located overseas. The CFTC reminded all participants last week that they are continuing to conduct inspections of omnibus accounts and reports should be filed…… Read more »
F@#$ US. What is there f&^$ing problem? We want LR back or US gov will suffer alot. They have f@#&ed our business and if LR doesnt come back we will f&%$ there business too. Enough is enough
We should stand for LibertyReserve >>>>>>>>>>>>
Hello, I have a question… if paypal or ebay owner do same as LR owner did, then does paypal or ebay got down>?? Never… i think LR down by paypal through usa cause LR is top competitor of paypal, and also some others.. however, there are millions of legit guys getting bread and butter from LR and forex. what about it? and i do not think the million dollar incomer like LR owner going to do drug and child porn to get caught by US police. when julian assange cought for wikileaks.. usa did same complaints against him. Hope, LR… Read more »
Honestly, LR has advantage over e-currency processors but they allow anonymous registration that prompt scalawags and ponzi programs to take advantage over honest members…in fact I lost 1k from my account before by also another member and yet the management done nothing about it….so it would be better to shut down such company unless they submit to some regulation in a particular governing body…..safety of funds should not be compromise…I suggests that netrepreneur should consider other safe processor, such as skrill, paypal and other with the same level of security…….
Question is, what is the next method of deposit for retail brokers with clients in Asia/Africa/Middle East where LR was popular? -> perfectmoney
The main problem that all trades all around the world should realized is, on this case we just don’t facing the fastest or cheaper transaction. I also agreed regarding this LR give us good services among the fees , but as we aware our finance transaction no matter what its about money and yes it our money and not belongs to any provider or processor either exchangers. so My opinion things must be clear and protected where we can get claimed if problems come and this not about country ! once again it is about how to secure people money… Read more »
F*&@ THE USA !!!! THEY HAVE NO F%^^ing RIGHT TO SEIZE FUNDS OF FOREIGN INVESTORS WHO HAVE HAD ACCOUNTS IN LIBERTY RESERVE…WE SHOULD SET UP A PETITION AND GET THOSE SCOUDRELS TO RETURN OUR FUNDS IMMEDIATELY WITHOUT QUESTION!!!
There are to many people posting as ‘Andy’ on this site.
Personally i think someone who lost more than lunchmoney in this can only blame himself. A fool and his money..
alpari is half russia half rest of the world
alpari is half russia half rest of the world
Never heard of them until now, but another firms called Perfect Money announced that it is no longer accepting US clients. https://perfectmoney.com/news_view.html?id=342
We assume this is in reaction to the LR news
BTW-if the site doesn’t open for you, it’s probably due to your malware settings prohibiting the site (not a great indicator)
USA has tried in fighting money laundering, they should also try in rescueing innocent and genuine business funds trapped in the so called closure of LR. Stopping or no stopping of LR is not an issues but the real issue is what plan has USA in helping traders of online forex get their fund out of LR. Until that is done, their action is not justified.
It appears that the weakest link for a centrally controlled digital currency is the central authority itself. So if the owner or a representative does something that crosses the authorities of the jurisdiction it is located in, it has potential to shut down all operations for that currency. It’s kind of sad that all it took was one person to shut down the entire LR operations (or at least the most important ones, which is access to your currency account to make/receive payments. For a decentralized currency, the weakest link is the exchanger. The good news is that it is… Read more »
What gonna happen with the money deposited to Liberty Reserve ? I have a few hundred dollars there.
he took world total http://forexmagnates.com/six-in-a-row-alparis-august-volumes-set-a-further-record/ and subtracted russia http://forexmagnates.com/alpari-ru-monthly-volumes-average-134-billion-january-to-august-2013/ which is more or less that number
he took world total http://forexmagnates.com/six-in-a-row-alparis-august-volumes-set-a-further-record/ and subtracted russia http://forexmagnates.com/alpari-ru-monthly-volumes-average-134-billion-january-to-august-2013/ which is more or less that number
i think usa arrested the owner, but the LR team is the one who shutdown the website (and probably run with all the money)
well i can expect it from LR, its ok i have no faith over moneybooker,paypal or any service like that ,because i get same pain from paypal and moneybooker ,they want documents which they never get my account status as verified,i send many times my document to them via post.
Ecobest – I agree to an extent, however it will be interesting to see how many brokers whose clients got caught up in this will indeed reimburse the clients from their own funds. Its a question of risk management in this case. Legitimate brokers accepted funds via this unregulated and almost no-questions-asked method, which facilitated easy deposit but then they were likely aware and prepared for consequences should an event like this occur. It isnt really a government responsibility to reimburse people who used this method, as it is an unregulated foreign entity. It is however the US government’s responsibility… Read more »
This really bad……because some businness owners has lot of money in it
If that be the case it is rather unfortunate because the so called regulated online payment providers doe not entertain accepting customers from some part of the world even when those customers are running legitimate business they care not to know. How do they want people in those part of the world to survive, yet they are singing about reduction of crises people should be involved in legitimate businesses to survive and yet they care less about the funds of those in legal and legitimate business. You wake one day and closed a provider you know fully well it has… Read more »
THIS IS A SERIOUS ISSUE. I HAVE OVER $1000.00 TRAPPED IN LR. WHAT ABOUT LR TEAM? PEOPLE S’ MONEY ARE WITH LR TEAM NOT THE FOUNDER IN CUSTODY.
i’m now 90% positive that LR is seized by us secret service, LR points to same ip as.. : http://web.archive.org/web/20120408210416/http://www.drezpass.com/index.html
not really, but we have pretty good idea through our sources that numbers are credible
also alpari plans an IPO in the next 12-18 months so faking numbers now would very much work against them later on – so hard to believe they’ll report something else
not really, but we have pretty good idea through our sources that numbers are credible
also alpari plans an IPO in the next 12-18 months so faking numbers now would very much work against them later on – so hard to believe they’ll report something else
Interesting read:
Since 2011, It seems the owner of Liberty Reserve started to send big chuncks of money into bitcoins while other funds are kept in bank accounts. This could help him continue the business as bitcoins can not be seized (atleast not yet) but for that to come he needs to be out of jail. And this is quite difficult as he was on probation after he was jailed in US back in 2006 for running a financial business without proper license – GoldAge.
How to get your money back from Liberty Reserve – http://topgoldforum.com/topic/29815-breaking-news-libertyreserve-owner-was-arrested-and-the-site-is-now-closed/?p=175011
Surely the brokers should share some responsibility for providing dodgy deposit options for its clients. It’s very clear for all to see that this method stunk as a money laundering machine…
So all those that have money tied up with this cr@p, you need to ask yourself, was it worth it?
The only money laundering going on is by the corrupt Obama Regime in the US.
@JimmyFx 1) fiat currency was and is still laundered much more than digital currencies. 2) Even in western countries, not everyone wishes to use credit. But especially in developing nations and/or cash societies, liquid/secure digital payments are ideal to pay for goods both at home and abroad. 3) Fiat currencies can and do collapse or can get a haircut. The banking system requires TRUST, just like any other payment system. Bitcoin and currencies like them are unique in that the blockchain is open, so trust is limited to technological integrity of the actual currency, not human error or ownership. The… Read more »