http://www.wired.com/news/politics/0,1283,42745,00.html Secret Service Raids E-Gold by Declan McCullagh (declan@wired.com) 11:10 a.m. Mar. 30, 2001 PST WASHINGTON -- The Secret Service has raided a New York state business that exchanged dollars for grams of the digital currency called e-gold. A bevy of agents from the Secret Service, Postal Service and local police recently detained the owners of Gold-Age, based in Syracuse, and seized computers, files and documents from the fledgling firm. U.S. Attorney Daniel French said Friday that the investigation involved charges of credit card fraud. "We haven't brought charges yet," French said. "We're in the investigative phase." Gold-Age owner Parker Bradley says that during his eight-hour interrogation on March 12, the Secret Service seemed less interested in credit card fraud and more interested in the mechanics of e-gold. Until last year, Bradley accepted credit cards and paid out e-gold, but said he quit because too many people used stolen credit cards when conducting business with him. "The interrogation became less about me and more about politics and e-gold," Bradley said. "They were trying to get me to blame e-gold for fraud. Just to be blunt, these guys have no clue about how e-commerce works, how e-gold works or what I was doing." E-gold is a 5-year-old firm based on the Caribbean island of Nevis that provides an electronic currency backed by physical metal stored in vaults in London and Dubai. The company says it has 181,000 user accounts and stores about 1.4 metric tons of gold on behalf of its customers. Bradley's Gold-Age company, which he ran with his wife out of their home until the raid, was one of about a dozen e-gold currency exchange services: He took dollars and credited grams of gold, silver, platinum and palladium to a customer's account, less a modest fee. [...] Still unclear is why the raid took place. French indicated that it could be more than a routine credit card investigation, saying "at this point, it's being investigated as a credit card fraud." One possibility is a broader investigation directed at some users of e-gold, which is less anonymous than cash but more anonymous than credit cards. Former Treasury Secretary Lawrence Summers has warned of malcontents using the Net and encryption to dodge taxes, and it's possible that the feds don't exactly approve of a system that's more privacy-protective than the heavily regulated banking system. Current federal regulations require banks and credit unions -- about 19,000 in all -- to inform federal law enforcement of all transactions $5,000 and above that have no "apparent lawful purpose or are not the sort in which the particular customer would normally be expected to engage." Because e-gold is not a bank that lends money -- it's more akin to a warehouse that stores gold on behalf of its customers -- it's not covered by those rules. Mike Godwin said the raid evokes memories of the notorious Steve Jackson Games raid by the Secret Service a decade ago, which led to the formation of the Electronic Frontier Foundation. [...]