There was an entire selection of e-currencies to choose from before cryptocurrencies (Bitcoin being the first, and premier, example) were even invented by Satoshi in 2009. Liberty Reserve wasn't even the first example of such, but indeed an often trusted replacement for the original e-Gold service that came under fire by the US Department of Justice already over 6 years ago in 2007. There seems to be a basic confusion in the comments so far as to the blatant fundamental differences between services like LR (and e-Gold before it) and Bitcoin (and cryptocurrency derivatives thereof). As a user of centralised e-currencies multiple years before Bitcoin existed, I would like to make a couple of things clear:
The difference between services like Liberty Reserve and e-Gold and Bitcoin is that the former are centralised services operated and controlled by a single collection of people, often legally protected by an incorporated entity in the Central American/Carribean region of the Earth. The pioneers of Internet "e-currencies" such as these specifically chose to create their corporations in this part of the world within known tax havens. It is only natural for the creators to wish to legally establish such a corporation designed specifically to manage money transfers in a place that will minimally tax such transfers.
e-Gold's creators incorporated in the Carribbean island state of St. Kitts and Nevis, and the Liberty Reserve creators incorporated in Panama (altho I truly did not know where the masterminds lived or where from they operated until now, but it seems from this article the answer is España). The entire difference between them and the pseudonymos 'Satoshi Nakamoto' is that old generation e-currency operators maintained central control of monitary transactions using their service. You managed your account by connecting to their website, logging in, and checking your funds, managing transfers, and so forth, but all of this was always under their full control. If they had any issues with your use of your own account, they had the right to shut off your access to it and confiscate all of your funds, with essentially no capability of retrival (I know of people who lost access to thousands of USD this way). They taxed every transfer you wished to make, which affected both transfers between 2 users within the same system (sending LR LR) or to exit/enter the system (exchanging LR to/from USD). They could monitor all transactions made between every user and geolocate non-anonymised users' IP addresses to log all financial activity within their system; with Bitcoin, all transactions are public to all, as opposed to only a select few being able to monitor all else who use this system to transfer money.
The most essentially incorrect aspect of confusing this story with anything to do with Bitcoin, is that Bitcoin is exciting and inspiring exactly because it is the antithesis of centralised architecture, or at least the closest successful example thereof. When we were using Liberty Reserve (or other centralised e-currency), we were completely under the creator's control. LR eventually forced upon users a captcha based in Flash that prevented us from using Tor to login securely as we could for multiple years before. When LR attacked our technical ability to use the service anonymously, many moved to Pecunix. Whilst Pecunix has a better login system (one that blatantly allows for anonymous access), it was still a centralised e-currency controlled by a single group of people operating behind a legally incorporated entity.
We have, however, evolved beyond the necessity for these services. It is funny to read a story about Liberty Reserve now, because I and everyone I know have long-considered them anachronistic holdover from the bleak era before decentralised e-currencies. It has already been a preposterously uphill battle for even technologically inclined people to psychologically accept that Bitcoin (and derivatives thereof) are an obvious superior approach to currency generation and transfer than reliance on a select few bankers writing all of the rules behind closed doors. Trying to promote mainstream acceptance within even these otherwise intelligent Bitcoin skeptics of the reliance of such centralised e-currencies as e-Gold, LR, Pecunix, and their ilk seems downright impossible, in retrospect.
But as always, even before in the late 90's and early 00's with e-Gold and soon thereafter with its centralised clones such as Liberty Reserve, these e-currencies had/have value both because there are people who buy/sell goods with them and exchangers making active transfers between them and common fiat currencies such as USD, EUR, GBP, RUB, etc. This is the ultimate test of what defines currency in the modern era, that others we wish to do business with psychologically accept it as a currency. In a time where we have largely eschewed using heavy metals with intrinsic material value as currency long ago, and now have switched to abstract paper notes signifying value merely because a central bank issuing said notes defines certain quantitative rules for us all... and even beyond this time to the present, where such values are no long largely represented on paper notes, but simply numerical values in digital databases on bank-controlled mainframe computers or transfers running down undersea fiberoptic cables to signify wealth transfer....
What most Bitcoin opponents conveniently ignore is that the vast bulk of wealth transfer in currencies they support instead (usually USD or EUR) are already done electronically. To advocate these obsoleted currencies is to therefore merely to advocate for power centralisation of capitalistic control with whoever happens to be writing the rules in the central banks (Federal Reserve in the USA, European Central Bank in the Eurozone, etc.). To fight against Bitcoin and to call its proponents and users foolish is only to the benefit of an insanely tiny percentage of the human race. Before, to discount services like Liberty Reserve as discussed in this article, this would have merit, because it was never a safe system. Your funds, data, information, IP access info, etc. was all controlled by them, not so similar from modern bank branches, only with centralised e-currencies you could much more easily provide pseudonymous (or no) identity information. Bitcoin and other cryptocurrencies obsolete the need to any such centralised control.
LR is fundamentally different from Bitcoin because it was centrally controlled by a single corporation requiring logging in to their service to access USD/EUR/gold funds, just like your bank controls your access to your USD/EUR/xxx. Most modern currencies are mostly traded electronically anyway: thusly campaigning against Bitcoin is soley to the benefit of the select few old white men running most of the world's current currency systems. Only decentralised currencies implemented in Free/Libre Software have the true and honest potential to bring about egalitarian, global access to capitalistic activity and wealth transfer, making this story a non-issue (albeit interesting footnote) for anyone who has been paying attention to e-currency development in the past 3-4 years.