Last week, the US government shut down Liberty Reserve, a digital currency service operating out of Costa Rica. Its founder, Arthur Budovsky, was arrested at the Madrid airport as he tried to return to Costa Rica. Other arrests were made in Spain, Costa Rica, and the United States. The company is accused of laundering over 6 billion dollars in illegal funds, with more than a million users globally – 200,000 of these being in the United States. The company’s site now sports a notice that it has been seized by US law enforcement.
Liberty Reserve has long been a favorite way for cybercriminals to exchange money securely without exposing their identity. So how are they taking to the shutdown of Liberty Reserve?
In a word: poorly. Not only did they lose access to Liberty Reserve, making underground transactions more difficult, but they also lost funds as well. Many cybercriminals are claiming they lost thousands of dollars, if not more: we saw one claim that he’d lost $300,000 in the seizure. We have to take the more extravagant claims with some skepticism, but it’s clear many cybercriminals did lose money thanks to Liberty Reserve’s closure. Somewhat amusingly, some are still in denial about the whole affair, saying that the service would return on June 1 with improved security. Obviously, that didn’t happen.
What are cybercriminals going to replace Liberty Reserve with? Even in the underground forums, that isn’t clear. Both gold and Bitcoins have both been mentioned as possible substitutes. Other digital currency services like PerfectMoney have been mentioned as well. Coincidentally, some of these services have explicitly banned users from the US, perhaps in an attempt to shield themselves from US law.
In the short term, we may actually see more online theft occur due to cybercriminals trying to make their money back. In the long run, if other digital currencies are targeted, it could make life for cybercriminals very complicated.