Liberty Reserve, Jed McCaleb, Japan and Costa Rica…

October 21, 2022 5:31 pm Comments

Buckle up friends, we’re going on a deep dive today…

A few days ago, we brought you a story on the “Satoshi Four”…at least that’s what I’m calling them, and I think we may have coined that term here at ProCoinNews.

What is the Satoshi Four?

Or more accurately WHO are the Satoshi Four?

Well, it comes from the recent revelation that despite leading the public to believe NO ONE in the U.S. Government knows who Satoshi is, that’s actually not true.

Not true at all, it turns out.

In fact, it turns out very early on the Feds went to interview Satoshi and they learned it was a group of four individuals.

Watch this video here:

Previously, even Joseph Lubin slipped up and admitted Satoshi was a “group”.

Funny, I wonder how he knows that?

Watch here:

Here’s one more fun video before we move on and really go deep.

Here is former SEC Chair Jay Clayton being asked if he knows who Satoshi is.

Joe Lubin’s elbow thinks this guy is nervous and has a really bad “tell”…

Watch here:

I’m no body language expert, but I’m pretty sure that’s one of the biggest lies I’ve ever seen.

Jay, don’t ever try to make a career in playing poker, you wouldn’t fare well.

So let’s recap quickly on what we’ve learned so far:

First, the Government has known from VERY early on who/what Satoshi is.

Second, they’ve been lying through their teeth claiming they didn’t know.

Third, most likely all big business, big banking and big investment houses know as well, because there’s no way someone like Michael Saylor is betting his entire company on Bitcoin if he doesn’t know who the Founder is, if the Founder might come back, if the Founder might be a foreign country, etc.  They know.  They all know.  And they’ve been lying to you.

That knowledge led to a great graphic The Working Money Channel posted recently:

That graphic suggests that Three of the Four members of “Satoshi” are most likely Jed McCaleb, David Schwartz, Arthur Britto and one more person.

We go into much more detail on that in this article:

Is David Schwartz Satoshi? “It’s certainly plausible I was part of a group…”

But now I want to advance the story…

Now I want to talk Jed McCaleb, Costa Rica, Japan, Mt.Gox, Liberty Reserve, and how all of this may be connected.

The man who seems to be at the middle of just about all of this is Jed McCaleb.

Jed has been a notorious figure in the XRP Community for several years due to his “Tacostand Wallet” where he has been systematically selling the billions of XRP he received when he left the company.

Many argue this has suppressed XRP’s price for years.

Others say it’s had no impact.

To me, the story here is much deeper.

Whether Jed’s sales of XRP have hurt the XRP price is far less interesting and far less important than these questions:

Why does Jed seem to be involved in just about everything in crypto dating back to the near beginning?

Why does Jed always seem to exit right before things crash?

Even after the crash, why does Jed never face any legal liability or legal restrictions of any kind?

For example, there is no dispute that Jed was one of the founding partners of Ripple Labs and there is also no dispute that Jed has been selling his XRP for years, both before and during the SEC lawsuit.

So why does the SEC sue Ripple Labs and Chris Larsen and Brad Garlinghouse but NOT Jed McCaleb?

Certainly, he’s well know.  He’s an undisputed co-founder of Ripple Labs (Garlinghouse is not).  He’s continued to sell millions if not billions of XRP during the lawsuit — which the SEC claims is an unregistered security.  Garlinghouse, to the best of my knowledge, has not.

So why sue Garlinghouse and not McCaleb?

That’s the first of many questions that just don’t seem to make sense.

Unless, Jed is a “made man”.

Has Jed been on the inside track since the very beginning?

We know David Schwartz is ex-CIA (which means CIA), so what is McCaleb?  Is he connected?

Here’s another question: XLM is mostly a clone of XRP with a few minor changes.  Why is Ripple Labs sued and not McCaleb’s current company, Stellar Labs?  Why wouldn’t both be sued?  Is it because that would be a little TOO close to comfort for McCaleb?

We’re just asking questions here and we’re only just scratching the surface.

Let’s keep going…

Now let’s talk Mt.Gox.

Jed founded Mt.Gox which we all know had one of the most infamous hacks (allegedly) in all of Bitcoin, almost leading to the end of the blockchain.

Once again, Jed was right at the heart of the story, but escapes unscathed.

From The Observer:

That he sold out in 2011 to Mark “MagicalTux” Karpeles, a French programmer living in Japan. Mr. Karpeles rewrote the entire code, so Mr. McCaleb’s fingerprints, literally and figuratively, were nowhere near the scene. Mr. McCaleb even told that he himself had lost $50,000 in a Mt. Gox account when it tanked.

Even if the extent of Mr. McCaleb’s involvement in the Mt. Gox collapse is never completely known, its immolation hangs over him like a toxic cloud. According to a leaked 2014-2017 Mt. Gox business plan, “MtGox (Japan) has two principles [sic]: Tibanne, owned by Mark Karpeles (88 percent) and Jed McCaleb; the initial founder and creator of the MtGox exchange platform (12 percent).” The bankruptcy proceeding commenced in Japan listed Mr. McCaleb as one of two owners of Mt. Gox. And just last week, Charlie Shrem, the Bitcoiner who is headed to prison and is very close to Mr. McCaleb and Mr. Karpeles and has done business with them, shared his suspicion that the Mt. Gox money actually disappeared much earlier than had been revealed: “I think he lost those coins early on. Like many years ago in the first hack.” That would put the time of the hack much closer to Mr. McCaleb’s daily involvement. Mr. Shrem told the Observer that this “first hack” occurred after Mr. McCaleb had fully transferred control over to Mr. Karpeles. “Jed was still helping out when he could, like we all did, but Mark had completely controlled Mt. Gox at this point.”

Even Ripple Labs was excoriated on its own message boards for its association with Mr. McCaleb. One poster claimed that he knew for a fact that Mr. McCaleb maintained close ties to Mr. Karpeles after the sale, giving him his personal bank account information so Mt. Gox customers could deposit money through Mr. McCaleb. A reliable source could not confirm the details of the arrangement between the two Mt. Gox owners, but said it was “definitely Jed’s style to keep things loose and informal, such as trusting Mark with his personal bank account—and his administrator password, which then got hacked.”

The two indeed appeared to be very close and Jed’s sale and departure seem incredibly timed:

Tiffany Hayden has also raised a key point: was Jed ever actually IN Japan?

Mt.Gox was famously located in Japan and yet Jed appears to have no connection to Japan whatsoever.

Was Mt.Gox truly located in Japan?

Hayden wonders if, perhaps, Costa Rica was more important than Japan because McCaleb has many ties to Costa Rica:

Check out this infamous exchange between Hayden and David Schwartz where Hayden points out what we have been saying: isn’t it quite odd who McCaleb always continues to walk away completely unscatched?

Now let’s back up a little farther in time to before Mt.Gox.

The farther back in time we go, the farther we get to the source?  To the truth?  To the origin of all of this?

Let’s go back in time to something called LibertyReserve.

Ever heard of it?

Most people haven’t, but this is where the puzzle pieces will start to connect and your mind may start to get blown a bit.

Please keep your seatbelts fastened and your tray tables in the upright position…

According to Wikipedia, Liberty Reserve was a very early digital currency service and was based in (you guessed it) Costa Rica:

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”.[1] 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.[2]

Also from Wikipedia:

Costa Rica you say?

Very early digital currency service you say?

But what’s that have to do with Mt.Gox?

The two were closely commingled.

From DarkNetDiaries a wild story is told of what was going on behind the scenes:

KIM: In January of 2011 there was two exploits related to Mt. Gox integration of Liberty Reserve withdrawals.

JACK: Liberty Reserve was a company Mt. Gox used to transfer money from one person to another. It was a service tied to their back end which allowed money to be moved around but Jed made some mistakes when adding the service to his site.

KIM: A user would just be able to inject XML to override parameters in the API request sent to Liberty Reserve to get more money than they actually withdrew from Mt. Gox.

JACK: So hackers were withdrawing more than they should be allowed to withdraw by exploiting this poorly implemented code. But that wasn’t the only issue Jed had with Liberty Reserve. Users type in how much money they want to withdraw, but…

KIM: The code forgot to check for negative inputs.

JACK: This had screwy results, allowing users to withdraw money they didn’t have. Jed found these bugs and fixed them but it wasn’t until he had already lost $50,000. Around that time, Jed McCaleb and Mark Karpelès started talking. Jed was realizing the site required more time than he could put into it. Then Mark showed an interest in taking over Mt. Gox from Jed. Mark was a web programmer from France but had recently moved to Tokyo, Japan where Mt. Gox was located.

KIM: Jed basically almost gave it away to Mark Karpelès in that very favorable price and sold it for almost no upfront money and just getting a cut of the revenue for the next six months, I think.

JACK: But just before the transfer of ownership to Mark, something terrible happened to Mt. Gox. Someone had broken into the Mt. Gox servers and stole the hot wallet file. The hot wallet is a Bitcoin wallet Mt. Gox used to conduct daily operational trades. This differs from a cold wallet, which was not stored on the Mt. Gox servers but in another location in a much safer place. The thief took the hot wallet and then transferred all the Bitcoins that were in it to their own wallet.

KIM: That was about 80,000 Bitcoins that disappeared and are actually still sitting untouched on the blockchain to this day. It’s quite possible they’ve been [00:10:00] accidentally destroyed or something. Since these 80,000 Bitcoins have been stolen there was of course, at this point, already a shortage. Mt. Gox was technically already insolvent as soon as Mark Karpelès took it over. I don’t think Mt. Gox was ever, in fact, solvent for a single moment for as long as it existed under Mark Karpelès.

So Jed is in Costa Rica, doesn’t appear to ever be in Japan, and suddenly he’s integrating this service called Liberty Reserve into Mt.Gox, which apparently has very serious exploits in the code and leads to all sorts of problems.

Jed then “unloads” Mt.Gox on Karpeles for next to nothing and sails off into the sunset unscathed, only to later launch Ripple Labs and then Stellar Labs.

From ComputerWorld, here is more on Liberty Reserve:

Liberty Reserve, incorporated in Costa Rica in 2006, worked by charging a small fee to help users send and receive payments anywhere in the world. Transfers were made through its own virtual currency, which could be converted into real dollars using pre-approved exchangers.

The online payment processor, however, did not verify the accounts of its users, requiring only a valid email address, along with a name and birthdate, which Liberty Reserve did not verify. This allegedly helped turn the online service into a hub for illegal transactions relating to credit card theft, investment fraud and computer hacking, among others. went offline, and the currency exchange’s founder Arthur Budovsky has been arrested.

Did you catch that last line?

It may not have jumped out at you, but read this next quote from the Liberty Reserve Wikipedia and see if you notice anything “strange”:

From 2002 to 2006, United States businessmen Arthur Budovsky and Vladimir Kats ran a digital currency exchange service known as Gold Age.[4] In July 2006, the duo were indicted[by whom?] on charges of operating an illegal financial business, a felony. They were sentenced to five years in prison in 2007, but the sentence was reduced to five years of probation.[4] Budovsky fled the country, settling in Costa Rica.[7] He subsequently became a naturalized citizen of Costa Rica when he married a Costa Rican woman in 2010, and renounced his American citizenship in 2012.[8][9]

Liberty Reserve was incorporated by Budovsky in Costa Rica in 2006.[2] A 2007 interview with Joul Lee, the company’s marketing manager, claimed it was founded as “a private currency exchange system for import/export businesses” and opened to the public in 2007.[5]

Criminal investigation and charges

Costa Rican authorities became aware of Liberty Reserve in 2009 and informed the business it needed a license to operate as a money transmitting business.[6] In 2011, Liberty Reserve was denied a business license in Costa Rica, according to state prosecutor José Pablo González, due to lack of transparency about how the business was funded. The business formally disbanded at that time, but company founder Arthur Budovsky continued to operate the business by funneling it through five other Costa Rican businesses, according to authorities.[1] A criminal investigation was launched March 7, 2011 following “suspicious” bank activity.[6] Later in 2011, the United States authorities asked Costa Rica to begin investigating Budovsky’s business dealings.[4] According to Bernardita Marín, associate director of the Costa Rican Drug Institute, Costa Rica seized funds from Liberty Reserve on three occasions from 2011 to 2013.[6]

In 2011, Liberty Reserve was linked to (unrelated) attempts to sell thousands of stolen Australian bank account numbers and British bank cards.[10][11] In 2012, a group of hackers attempted to blackmail anti-virus software company Symantec into transferring $50,000 into a Liberty Reserve account.[12]

2013 seizure

Domain name seizure notice, citing 18 U.S.C. § 982(a)(1)

After a multi-year investigation by officials in 17 countries, a sealed indictment was issued by the U.S. government in May 2013.[3] U.S. prosecutors filed a case against Liberty Reserve, alleging it had handled $6 billion of criminal proceeds.[3] Arthur Budovsky was arrested by Spanish police at Madrid’s Barajas International Airport as he attempted to return to Costa Rica where he had citizenship.[13][14] Budovsky and a second man were ordered jailed by Spanish authorities pending an extradition hearing.[14] Earlier three homes and the five apparent shell businesses owned by Budovsky were raided.[15] Four others, including Kats, were arrested across three countries: Costa Rica, Spain, and the United States. Two others are at large in Costa Rica.[3]

The Liberty Reserve website was taken offline on May 24 and replaced with a notice saying the domain had been “seized by the United States Global Illicit Financial Team.”[1][16] In Costa Rica, a court order was issued to seize the “financial products and services” of Budovsky, Maxim Chukharev, and the six apparent shell companies.[6] More than a million dollars of luxury automobiles alone were seized.[6]

I bolded some of the names to help you out.

Could just be ENTIRELY a coincidence, but I do believe this gives us an “Arthur B” (no relation to Arthur Britto, I’m sure) and then we have reference to a “second man” who is never named (is that the Fourth Member of Satoshi, or perhaps McCaleb skating again?) and then we have Vladamir Kats and Joul Lee.

Kats….why does that sound so familiar?  Where have I heard that before?

Oh right…David Schwartz’ Twitter handle is @joelkatz, do I have that correct?

I’m sure the fact you have one guy named Joul (Joel?) and one guy named Kats (Katz?) both at Liberty Reserve is ENTIRELY a coincidence.  But it sure is an interesting one!

Forbes has a much better explanation…according to Forbes, the @joelkatz moniker did not come from Liberty Reserve at all (of course not) it came from the Ren & Stimpy Show cartoon:

Along the way, Schwartz developed an online persona, JoelKatz (the name was inspired by Stimpson J. Cat from The Ren & Stimpy Show), to pseudonymously publish his philosophical meanderings. His widely read JoelKatz blog is subtitled “Democracy is vulnerable to a 51% attack,” an allusion to the tipping point at which one party could gain majority control of a cryptocurrency, no longer making it decentralized. @JoelKatz, his Twitter handle, has more than 100,000 followers.

See, I told you it had nothing to do with Liberty Reserve!

So there you have it folks.

It sure does seem like we have the same players all circling around this story for a long time, doesn’t it?

Aren’t you dying to know who the 4th Member was?

And wouldn’t you love to see a picture of Arthur Britto?

We’re not nearly smart enough here at ProCoinNews to figure out how all of this fits together, we just report on some things that seem a bit odd to us.

But that’s just our opinion, we’d love to hear what you think!

Drop a comment below…

Much ado about nothing?

Random coincidences with little connection, or something much larger at play here?

We do know a few things are not in dispute to the best of our knowledge:

Jed has never faced any serious prosecution for any venture.

Jed has not been sued by the SEC.

Jed has been allowed to sell his XRP (a very dangerous “unregistered security” according to the SEC) with no restriction all while during a pending lawsuit.

The U.S. Government DID allegedly know who the Satoshi Four were, despite leading us to believe they just couldn’t figure it out.

Major corporations and investment firms are buying Bitcoin either because they know who Satoshi is or in the face of massive risk.

To quote a prominent YouTuber…do we file all of this in the Red File?

We report, you decide.

Join the conversation!

We have no tolerance for comments containing violence, racism, profanity, vulgarity, doxing, or discourteous behavior. If a comment is spam, instead of replying to it please click the icon below and to the right of that comment. Thank you for partnering with us to maintain fruitful conversation.