Venezuela sues black market currency website in US

Go Lean Commentary

Circa 1983*, American banks came to grips with the new reality: the old days of 3-6-9 were over, it was now a 24-7-365 world.

3-6-9 refers to the only numbers bankers were required to know: Borrow at 3%; lend at 6%; open the doors at 9am; close the doors at 3pm.

These banks were then faced with these new agents-of-change: Technology, Competition and Deregulation.

Thus started the perilous slide of banking down the path of instability. Two crisis would present themselves in the next 25 years: Savings & Loans Crisis of 1980s/1990s and the Great Recession of 2008. The world is still reeling from these events; this applies to American and International markets; Wall Street and Main Street.

(* In Winter 1983, this writer was an MBA-Commercial Bank Administration student studying the unfurling of these events).

The book Go Lean…Caribbean,  and the underlying movement by the publishers SFE Foundation, was forged as a direct result of the 2008 crisis. The purpose was to apply lessons learned from this American experience in the quest to empower the Caribbean. The book identified additional agents-of-change (i.e. Globalization, Climate Change, Aging Diaspora, etc.) and the battle plan to contend with them all.

Now comes a crisis for Venezuela, but the opportunity is still the same: apply the lessons learned.

The Central Bank of Venezuela has filed a lawsuit in US courts against Miami-based entity DolarToday, alleging that this website undermines the Venezuelan bank, currency and economy by falsifying the country’s exchange rates.

CU Blog - Venezuela sues black market currency website in US - Photo 2

This is a serious issue! See the news article here and the Appendices below for detailed definitions:

Title: Venezuela sues black market currency website in United States
By: Andrew Cawthorne

CARACAS (Reuters) – Venezuela’s Central Bank filed a lawsuit on Friday with allegations of “cyber-terrorism” against a U.S.-based website that tracks the OPEC member’s currency black market.

The DolarToday site has enraged President Nicolas Maduro’s government by publishing a rate in Venezuelan bolivars for the greenback far higher than the three official levels under Venezuela’s 12-year-long currency controls.

The rate has become an unofficial marker in the crisis-ridden economy, with some Venezuelans using it in private transactions or to fix prices of imported goods.

The lawsuit, in the U.S. District Court for the District of Delaware, named three Venezuelans in the United States as being behind the site: Gustavo Diaz, Ivan Lozada and Jose Altuve.

A representative of DolarToday could not immediately be reached by email or telephone for comment.

The Central Bank requested both an injunction and damages, accusing the three of fanning inflation in Venezuela, the world’s highest, and enriching themselves by illegal trading.

“Defendants conspired to use a form of cyber-terrorism to wreak, and in fact they have wreaked, economic and reputational harm on the Central Bank by impeding its ability to manage the Republic’s economy and foreign exchange system,” the lawsuit said.

DolarToday, which takes an aggressively anti-Maduro stance in its publications and says it calculates its rate based on trades on the Venezuela-Colombia border, quoted the dollar at 820 bolivars on Friday.

That is 130 times the strongest official rate of 6.3 bolivars and four times the government’s weakest rate of 200.

Maduro, a former bus driver and foreign minister who won election to replace Hugo Chavez in 2013, frequently lambastes DolarToday as part of an international capitalist conspiracy to sabotage the economy and undermine socialism in Venezuela.

“Arbitrarily manufacturing currency exchange rates creates further turmoil in a country that is working to overcome the obstacles it already faces,” said Adam Fox, a lawyer for U.S. law firm Squire Patton Boggs, which represents the bank.

Critics say Venezuela’s economic mess, with Gross Domestic Product shrinking and shortages widespread, is the result of hardline state policies such as currency controls.

The Central Bank estimated a million people visit the DolarToday site daily. Its Twitter account has 1.93 million followers. “Defendants have been playing ‘a cyber cat-and-mouse game’,” to circumvent government blocks, it said.

Central Bank officials in Caracas had no immediate comment.

(Additional reporting by Corina Pons in Caracas and Diane Bartz in Washington; editing by Grant McCool)
Source: Reuters News Wire – (Posted 10/23/2015; retrieved 10/26/2015) ––business.html

This article is in consideration of the book Go Lean…Caribbean; it serves as a roadmap for the introduction and implementation of the technocratic Caribbean Union Trade Federation (CU) and Caribbean Central Bank (CCB) to provide better stewardship, to ensure that the economic and currency failures of the past, in the Caribbean and other regions (like Venezuela), do not re-occur here … again in the homeland.

There is now interconnectivity of the financial systems; see VIDEO in the Appendix below. Troubles for any bank or any currency in foreign countries easily become trouble for the Caribbean region. Plus, Venezuela is a trading partner with most of the Caribbean with the PetroCaribe initiative. The assumption embedded in the Go Lean roadmap is that there could be elasticity from foreign financial structures, but that the Caribbean is big enough – when integrated into a Single Market of 42 million people in the 30 member-states – and can thusly streamline its own viable currency/financial/securities market.

There are many issues (and lessons) in play with the foregoing news story:

o   Cyber-terrorism – from distant corners of the world, a “bad actor” can wreak havoc on a society’s economic engines with the aid of Information & Internet Communication Technologies (ICT). This is a serious allegation the officials of Venezuela is leveling against this website; they have used the term cyber-terrorism, so as to avail themselves of prosecutorial resources in the US and other countries who are conducting a “War on Terrorism”.

o   Capital Controls – the Go Lean book dives deeply into the discussion for Capital Controls; consider this direct quotation from Page 315 of the book:

    Capital controls are residency-based measures such as transaction taxes, other limits, or outright prohibitions that a nation’s government can use to regulate flows from capital markets into and out of the country’s capital account. Types of capital control include exchange controls that prevent or limit the buying and selling of a national currency at the market rate, caps on the allowed volume for the international sale or purchase of various financial assets, transaction taxes, minimum stay requirements, requirements for mandatory approval, or even limits on the amount of money a private citizen is allowed to remove from the country.

o   Currency Manipulations – bad actors emerges in many different scenarios. While not assigning blame nor casting judgement on the case in the foregoing article, it is fully acknowledged that currency manipulators can inflict harm on a country’s resources and perceived brand or image … for their own financial gain.

o   Black Markets – the quest for economic command-and-control runs counter to Black Markets. But electronic payment systems are effective at mitigating these Black Markets.

o   Human & Capital Flight – when a country’s currency is in distress, there is the threat that citizens may flee with their capital so as to secure the value of their savings and investments. The Caribbean has been plagued with this occurrence again and again. Even now, the region has an alarming 70% brain drain rate among the college-educated populations of Caribbean heritage.

The lessons from this consideration must be applied in the technocratic administration of the Caribbean Union Trade Federation, and the Caribbean Central Bank’s (CCB) oversight of the Caribbean Dollar (C$). The Go Lean roadmap calls for a cooperative entity of the existing Central Banks in the region; this will foster interdependence from the political entities allowing only the motivation of the regional Greater Good.

The planners of the new Caribbean sympathizes with the Central Bank of Venezuela. We have learned hard lessons on the issue of currency, as many CU member-states have had to endure painful devaluations over the past decades – on more than one occasion. So we understand that any attempt to reboot the Caribbean economic landscape must first start with a strenuous oversight of the proposed C$ currency – as a mostly electronic currency. Early in the book, this need for regional stewardship of Caribbean currencies was pronounced (Declaration of Interdependence – Page 13) with these statements:

xxiv. Whereas a free market economy can be induced and spurred for continuous progress, the Federation must install the controls to better manage aspects of the economy: jobs, inflation, savings rate, investments and other economic principles. Thereby attracting direct foreign investment because of the stability and vibrancy of our economy.

xxv.  Whereas the legacy of international democracies had been imperiled due to a global financial crisis, the structure of the Federation must allow for financial stability and assurance of the Federation’s institutions. To mandate the economic vibrancy of the region, monetary and fiscal controls and policies must be incorporated as proactive and reactive measures. These measures must address threats against the financial integrity of the Federation and of the member-states.

The Go Lean book, and previous blog/commentaries, stressed the key community ethos, strategies, tactics, implementations and advocacies necessary to establish a strong Caribbean financial eco-system and strong currency; plus mitigate Black Markets. These points are detailed in the book as follows:

Community Ethos – Economic Principles – Economic Systems Influence Individual Choices Page 21
Community Ethos – Economic Principles – Voluntary Trade Creates Wealth Page 21
Community Ethos – Economic Principles – Consequences of Choices Lie in the Future Page 21
Community Ethos – Economic Principles – Money Multiplier Page 23
Community Ethos – Governing Principles – Lean Operations Page 24
Community Ethos – Governing Principles – Return on Investments Page 24
Community Ethos – Ways to Impact the Future – Count on the Greedy to be Greedy Page 26
Community Ethos – Ways to Impact the Greater Good Page 37
Strategy – Mission – Fortify the Stability of the Currency and Securities markets Page 45
Strategy – Provide Proper Oversight and Support for the Depository Institutions Page 46
Strategy – e-Payments and Card-based Transactions Page 49
Tactical – Summary of Confederation Models Page 63
Tactical – Growing the Economy – Minimizing Bubbles Page 69
Tactical – Separation-of-Powers – Depository Insurance & Regulatory Agency Page 73
Anecdote – Turning Around CARICOM – Effects of 2008 Financial Crisis Page 92
Implementation – Assemble Caribbean Central Bank as a Cooperative Page 96
Implementation – Ways to Better Manage Debt – Optimizing Wall Street Role Page 114
Planning – 10 Big Ideas – Single Market / Currency Union Page 127
Planning – Lessons Learned from 2008 Page 136
Planning – Lessons Learned from New York City – Wall Street Page 137
Planning – Ways to Measure Progress Page 147
Anecdote – Caribbean Currencies Page 149
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Control Inflation Page 153
Advocacy – Ways to Better Manage Foreign Exchange Page 154
Advocacy – Ways to Mitigate Black Markets Page 165
Advocacy – Ways to Foster Electronic Commerce Page 198
Advocacy – Reforms for Banking Regulations Page 199
Advocacy – Ways to Impact Wall Street Page 200
Advocacy – Ways to Impact Main Street Page 201
Appendix – Tool-kits for Capital Controls Page 315
Appendix – Lessons Learned from Floating the Trinidad & Tobago Dollar Page 316
Appendix – Controlling Inflation – Technical Details Page 318
Appendix – e-Government and e-Payments Example: EBT mitigates Black Markets Page 353

A careful study of national economies – a task of the Go Lean book – relates that there is an ebb-and-flow associated with economic stewardship. This stewardship constitutes the prime directives of the CU:

  • Optimization of the economic engines in order to grow the regional economy and create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic engines.
  • Improvement of Caribbean governance/administration/oversight to support these engines.

The best practice for effective stewardship of an economy’s ebb-and-flow is the recovery; managing the ability to “bounce back” quickly. The points of effective, technocratic banking/economic stewardship, were further elaborated upon in these previous blog/commentaries: New Security Chip in Credit Cards Unveiled to Mitigate Fraud/Abuse Lessons from Iceland – Model of Recovery A Lesson in History – Panamanian Balboa European Central Banks unveils 1 trillion stimulus program Lessons from the Swiss unpegging the franc For Canadian Banks: Caribbean is a ‘Bad Bet’ A Christmas Present for the Banks from the Omnibus Bill Why India is doing better than most emerging markets ‘Too Big To Fail’ – Caribbean Version The Depth & Breadth of Remediating 2008 Canadian View: All is not well in the sunny Caribbean One currency, divergent economies Analyzing the Data – What Banks learn about financial risks

The Go Lean quest is the coveted role of protégé to our North American, South American and European trading partners, not the parasite role we have thus far assumed. Though this is heavy-lifting, this is conceivable, believable and achievable.

We have so many lessons to learn from the Venezuelan Central Bank crisis. Let’s pay more than the usual attention to this bank’s effort to harness command-and-control of their currency and economic success. Let’s see how this lawsuit develops.

Class is now in session!

The Caribbean’s 30 member-states are urged to lean-in to this Go Lean roadmap for the CU, CCB and C$. This is the turn-by-turn directions, the heavy-lifting, to move the region to its new destination: a better homeland to live, work and play. 🙂

Download the book Go Lean … Caribbean – now!


Appendix A – VIDEO – Currency Exchange Rates and You –

Published on Apr 16, 2015 – You might not be an international banker, but you have more involvement in foreign currency exchange than you might realize. Kristen Fanarakis from the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business explains how.


Appendix B – Venezuelan bolívar

The bolívar fuerte (sign: Bs.F.[3] or Bs.;[4] plural: bolívares fuertes; ISO 4217 code: VEF) has been the currency of Venezuela since 1 January 2008. It is subdivided into 100 céntimos[5] and replaced the original bolívar (sign: Bs.;[3] plural: bolívares; ISO 4217 code: VEB) at the rate of Bs.F. 1 = Bs. 1,000 because of inflation.

CU Blog - Venezuela sues black market currency website in US - Photo 1The bolívar was adopted by the monetary law of 1879, replacing the short-lived venezolano at a rate of five bolívares to one venezolano. Initially, the bolívar was defined on the silver standard, equal to 4.5g fine silver, following the principles of the Latin Monetary Union. The monetary law of 1887 made the gold bolívar unlimited legal tender, and the gold standard came into full operation in 1910. Venezuela went off gold in 1930, and in 1934 the bolívar exchange rate was fixed in terms of the U.S. dollar at a rate of 3.914 bolívares = 1 U.S. dollar, revalued to 3.18 bolívares = 1 U.S. dollar in 1937, a rate which lasted until 1941. Until 18 February 1983 (now called Black Friday (Viernes Negro) by many Venezuelans [6]), the bolívar had been the region’s most stable and internationally accepted currency. It then fell prey to high devaluation. Exchange controls were imposed on February 5, 2003 to limit capital flight.[7] The rate was pegged to the U.S. dollar at a fixed exchange rate of 1600 VEB to the dollar.

Bolívar fuerte
The government announced on 7 March 2007 that the bolívar would be revalued at a ratio of 1 to 1000 on 1 January 2008 and renamed the bolívar fuerte in an effort to facilitate the ease of transaction and accounting.[8] The new name is literally translated as “strong bolívar”,[9][10] but also references an old coin called the Peso fuerte worth 10 Spanish reales.[11]. (Fuerte = Spanish Strong)

The name “bolívar fuerte” was only used temporarily to distinguish it from the older currency that was being used along with the bolívar fuerte.[12]

The Central Bank of Venezuela promoted the new currency with an ad campaign and the slogan: “Una economía fuerte, un bolívar fuerte, un país fuerte” (lit. “a strong economy, a strong bolívar, a strong country”).

Some estimations suggest that the government spent more than US$320 million to introduce the new currency.

On 8 January 2010, the value was changed by the government from the fixed exchange rate of 2.15 bolívares fuertes to 2.60 bolívares for some imports (certain foods and healthcare goods) and 4.30 bolívares for other imports like cars, petrochemicals, and electronics.[13]

On 4 January 2011, the fixed exchange rate became 4.30 bolívares for 1.00 USD for both sides of the economy.

It should be noted that the official exchange rate is restricted to individuals by National Center for Foreign Commerce (CADIVI), which imposes an annual limit on the amount available for travel (up to $3000 annually depending on the location and duration of travel) and $400 for electronic purchases.

Since the government of Hugo Chavez established strict currency controls in 2003, there have been a series of five currency devaluations, disrupting the economy.[14] The last devaluation was on 13 February 2013 (to 6.30 bolivars per dollar), in an attempt to counter budget deficits.[15]

Currency black market
The black market value of the bolívar fuerte has been significantly lower than the fixed exchange rate. In November 2013, it was almost 10 times lower than the official fixed exchange rate of 6.3 bolívares per U.S. dollar.[16] In September 2014, the currency black market rate for the Bolivar Fuerte reached 100 VEF/USD;[17] on 25 February 2015, it went over 200 VEF/USD.[18] on 07 May, 2015, it was over 275 VEF/USD and on 22 September, 2015, it was over 730 VEF/USD.[19] Venezuela still had the highest inflation rate in the world, As of July 2015[update].[20]

It is illegal to publish the “parallel exchange rate” in Venezuela.[2] One company that publishes parallel exchange rates is DolarToday, which has also been critical of the Maduro government.[21]

Source: retrieved October 26, 2015.


Appendix C – DolarToday

DolarToday is an American website that focuses on Latin American politics and finance. The company is more known for being an exchange rate reference to the Venezuelan bolívar, a currency which is not freely convertible;[2] it also known for the company’s focus in monitoring the Venezuelan economy.[3]

DolarToday was founded on May 18, 2010. It is headquartered in Miami, Florida, United States. Prior to the election of Nicolás Maduro in 2013, DolarToday was the second most popular exchange rate reference in Venezuela, behind of Lechuga Verde. However, when a scandal had caused the demise of the Lechuga Verde,[4] DolarToday became the most popular exchange rate reference.[2]

According to BBC Mundo, DolarToday was founded as “a form of protest against a dictatorship increasingly committed to silence and intimidate the media in Venezuela.”[5] Up until today, the company’s website publishes criticisms about the Maduro administration which the founder states “are selected by the site’s writers based in Venezuela”.[2][1]

Exchange rates
Since its inception, DolarToday has provided black market exchange rates that are updated daily for Venezuelans who cannot exchange currencies with the Venezuelan government for the dwindling supply of the US dollar.[1] The company based its computed exchange rates of the Venezuelan bolívar to the United States dollar from the fees on trades in Cúcuta, Colombia, a city near the border of Venezuela.[6] Currently, with no other reliable source other than the black market exchange rates, these rates are used by Reuters, CNBC, and several media news agencies and networks.[7][8] The Economist states that the rates calculated by DolarToday are “erratic”, but that they are “more realistic than the three official rates” released by the Venezuelan government.[9] The website maintains that the rates are not manipulated in order to undercut the Venezuelan government.[2]

Today the exchange rate of Venezuelan currency, monitored and governed by the Central Bank of Venezuela, is prohibited by the Venezuelan government from being accessed by its citizens. Thus, the exchange rates posted by DolarToday are only accessible outside Venezuela.[10]

According to DolarToday, the Venezuelan government had been attempting to censor the website since November 2013.[1] In March 2015, in a televised appearance, Maduro told the nation that he will ask United States [President] Barack Obama for the capture of the owners of the company.[13] In a press statement published in the government’s website, Maduro’s government said that it will exert all legal means against the company in response for defaming the Venezuelan economy.[14] That month, the Venezuelan government attempted to censor the website and brought down websites Amazon, Snapchat, and Pinterest in the process.[15]

Since President Maduro made such comments, DolarToday began to face blockages of their website almost every hour in Venezuela.[1] DolarToday then began using mirror sites on content distribution networks, placing cryptic links on their social media pages to such sites since foreign social media sites are difficult for the Venezuelan government to censor.[1] Each time a mirror site is blocked by the Venezuelan government, DolarToday begins to use a new one, with website engineers finding “ways to automatically create a new mirror site every 20 minutes”. [1]

Source: retrieved October 26, 2015.

Share this post:
, , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *