liberty-reserve-logoIn its heyday, Liberty Reserve was the darling of countless scams that populated the MLM underbelly. And that was only a fraction of the fraud they got up.

The argument that the payment processor was simply trying to be the next Paypal was never going to hold up in court. Yet that’s the excuse that was trotted out at a sentencing hearing for Mark Marmilev.

Marmilev, Liberty Reserve’s Technology Chief, was sentenced yesterday in a New York District Court.

Mark Marmilev, 35, pleaded guilty earlier this year to conspiring to operate a money transmitting business that failed to comply with federal registration requirements.

“This isn’t about online currency, digital currency,” U.S. District Judge Denise Cote told Marmilev as she imposed the maximum sentence he could have faced.

Marmilev’s attorney had argued that Liberty Reserve ‘was formed to compete with PayPal‘, however this argument was dismissed because

Liberty Reserve was used extensively by criminals, including those specializing in identity theft and Ponzi schemes, and found little indication of use by legitimate, mainstream online businesses.

Customers opened accounts under blatantly fictitious names that sometimes signaled their criminal purposes.

Liberty Reserve’s two founders have yet to be sentenced, but you can bet they’re going to be receiving similar if not harsher penalties than Marmilev’s 5 year sentence.

The jailing of a Liberty Reserve executive comes on the eve one of the larger Ponzi schemes in operation today gears up to announce their new payment processor.

After a short-lived run with Payoneer, they terminated their relationship with Achieve. The scheme has yet to hook up with a replacement payment processor.

Last week news broke that incoming investment into the scheme was now being handled by iPayDNA, but nothing yet has materialized on the withdrawal front.

iPayDNA appear to be accepting investments from Achieve affiliates using multiple unrelated business entities originating out of China.

After issues of credit card fraud and identity theft surfaced, Achieve Community co-founder was quick to brush aside investor concerns. Johnson explained that having multiple companies unrelated to the entity you are investing in appear on a credit card statement, was now occurring because Achieve is “an international company”.

Johnson had told affiliates a new withdrawal payment processor would be announced last week, however as of Friday an unnamed processor was “still working on getting (Achieve) set up”.

In a recent affiliate update, Johnson proclaimed Achieve Community now has “over 13,000” investors.

Personally I think we’re going to see more rogue payment processor operators shut down in 2015. Achieve Community solicit $50 investments on the promise of a $400 ROI, subject to enough new affiliate investment flowing in.

There’s no question of whether or not Achieve is fraudulent, it’s an out and out Ponzi scheme.

Anybody who hooks up a merchant account to Achieve has already demonstrated a complete failure at the most rudimentary of due diligence.

The fate of Liberty Reserve and its management should serve as an example to any processor who thinks otherwise.

Stay tuned…


Update 13th December 2014 – Some additional background information on Mark Marmilev from the DoJ:

Marmilev was a longtime associate of Liberty Reserve founder Arthur Budovsky, and he served as Liberty Reserve’s chief technology officer.  In that role, Marmilev was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure.

Marmilev also promoted Liberty Reserve to criminals on the Internet, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for “shady businesses.

The Court found that Marmilev understood the illegal nature of Liberty Reserve’s business and that he knew that a wide array of criminal enterprises used Liberty Reserve to further their criminal activity.

“Marmilev used his technical expertise to create a virtual currency business that was used extensively by criminals throughout the world,” said Assistant Attorney General Caldwell.  “Marmilev boasted that the crime group was beyond the reach of U.S. law enforcement, but he couldn’t have been more wrong.

Today’s prison sentence shows that those who hide their illegal activities on-line and off-shore will be caught and sent to prison.

In addition to the jail sentence, Marmilev was also fined $250,000.

In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of Marmilev’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, Marmilev purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.

Hat tip to Don @ ASDUpdates for the heads up.