By the way, what has been James Turk's take on all of this so far?
"He did not use such sane words when commenting publicly on a major media outlet recently. In fact he pretty much sided with the fed and trashed e-gold."
I'm not sure what "major media outlet" you are referring to, but I did
write the email appended below to Bill Murphy at www.lemetropolecafe.com
after he received questions from his subscribers.
I recommend that you read the indictment in which the feds lay out their
case. It is informative, particularly their statement that $145,535,374.26
of payment volume was made through accounts involved with ponzis, credit
card fraud and child porn.
http://www.usdoj.gov/criminal/pr/press_releases/2007/04/CRM_07-301_042707_eg...
The essence of the indictment rests upon something I discussed on this list
many times over the years. There are two different types of currency --
bearer instruments (the cash we carry in our pockets) and account-based
currency (bank deposits and the like). Account-based currency is highly
regulated, which is possible because the nature of the currency itself
enables regulation -- each transaction is recorded in an accounting system
(in contrast, to cash transactions). So if you operate an account-based
currency, it seems you would be expected to follow the law, doesn't it?
Back in June 2003 there was a lengthy exchange on this list that referred
to the EZ-BUCKS ponzi. It was just one of several exchanges over the
years referring to the ponzis in the gold economy. Here is what I said on
June 24, 2003, which itself refers to an even earlier post making the same
point:
quote
By allowing a book entry [i.e., account-based] system to harbor obviously
criminal activity like ponzis, the inevitable result to me seems clear. As
I noted earlier, "By allowing criminal activity to occur within their
system, a currency provider is forcing government involvement and action in
the gold economy. This result is inevitable..."
I don't think I am belaboring this point or my question by yet once again
repeating it, because it is important. "Do the gold currency providers
clean up themselves? Or do they wait for...the feds to go in and do it?"
unquote
So the federal indictments do not come as a surprise to me.
Here is what I wrote to Bill Murphy if you are not a subscriber to the Cafe:
quote
Hi Bill
In response to the comments you have received, GoldMoney and E-Gold are
very different, with very different business practices, and therefore
GoldMoney is not affected in any way by what's happening to E-Gold.
Based on my observations over the years, there is some merit to of these
charges brought against E-Gold.
There have been many investigative news stories (Forbes had a big expose
early last year, for example) demonstrating that E-Gold is being used for
all kinds of nefarious purposes. As an example, here's an example of a
typical HYIP spam I recently received. HYIP is an acronym for High Yield
Investment Program a/k/a a ponzi scheme.
Welcome to the Electronic Commercial Contribution of Money!
ECCM-Invest is a high yield private loan program, backed up by Forex market
trading. We have a team who are expert on their filed to manage the funds.
Launched our website on February 12, 2007. Our professionals take advantage
of currency price fluctuations to make profit for their clients by buying
and selling major currencies and stocks.
Our mission is to provide our investors with a stable value investment
opportunity for their capital,by investing in gold or gold futures
electronically to gain a stable rate in return.
Online program that mainly focused on FOREX and securities exchange.
Before we put the investment programs onto the Internet, we have been on
our business offline for several years. However, we are a group of
professional experts with years of trading experience, so we are a great
team that you can trust.
Here is what we offer:
- 7% Daily for life paid directly to e-gold
- Payments made every work day
- Minimum Spend: $1 USD
- Maximum Spend: $5000 USD
- Multiple spends allowed
- One month = 210%
- Referral bonus = 2% (E-Gold account number. To send on ours e-mail)
We don't make illusions and we don't promise sweet dreams.
We simply effectively perform the job.
The group of our experts works as one mechanism for achievement of the
greatest possible result.
P.S. Please have in view of, that Forex works only in the working days.
ECCM-Invest ) 2007. All Rights Reserved.
Now, to you and me "7% daily for life" is obviously a scam, but you may be
surprised to learn that there have multi-million dollar ponzi schemes
promulgated through E-Gold, which as a result has provided an open
invitation for the federal authorities to walk in and make E-Gold's life
difficult.
GoldMoney has a zero tolerance policy to ponzis, and we will close any
account being used in ponzis. Many HYIP operators list our name on their
site in an attempt to give them credibility, but people cannot use
GoldMoney to make a payment to the ponzi because they do not have an
account with us.
E-Gold could also have had a zero tolerance policy to ponzis, but chose not
to. The federal indictments indicate that E-Gold allows accounts to be
opened and operated anonymously, thereby attracting crooks and scammers to
use their system. If E-Gold followed best business practices, they would
have closed the account of the ponzi listed in the spam quoted above, as
well as the accounts of what I suspect are thousands of other ponzis. But
E-Gold apparently turns a blind-eye, allowing these scammers to operate. I
think the federal indictments are therefore an inevitable consequence.
Additionally, GoldMoney is very different from E-Gold for other reasons.
First of all, we are based in the British Channel Islands, and therefore
not under US jurisdiction. But more importantly, we are careful that
GoldMoney is not used unlawfully. We have a customer acceptance policy just
like banks and other financial institutions, so in contrast to E-Gold, one
cannot open and operate an account anonymously in GoldMoney.
What's more, GoldMoney complies with all anti-money laundering legislation
in Jersey, British Channel Islands, whose stringent standards are accepted
worldwide. Given that GoldMoney does not tolerate the illicit use of its
system and will close customer accounts that are used for illegal
activities, GoldMoney therefore follows the same high standard achieved by
banks and other financial institutions.
So to conclude, my view is that the indictment of the E-Gold principals
relates solely to E-Gold's business practices, and is not part of any
attempt to dissuade gold's use as currency in legitimate ways.
unquote
I think the above clearly explains my point of view, but there is another
theme that is relevant to this discussion. It is a point that I have made
numerous times on this list over the years. It is the comparison of our
new gold economy to the time-share industry. Here's a quote from a post in
July 2003 referring to a newspaper article about criminal activity in
E-Gold:
quote
I can't say if it is the "norm", but it is typical. And this is what I rail
against - press like this hurts the entire industry - the entire gold
economy.
When time-sharing began circa 30 years ago, some companies allowed crooked
salesmen and operators. Pretty soon the crooks were running rampant through
the time-sharing industry. Those crooks spoiled that nascent industry,
tarnishing the name time-sharing for twenty years, and only then after the
name was changed to shared ownership and other variations did it begin to
revive. The criminal activity was so bad that even the legitimate operators
were painted with the same brush because of all the bad press being given
to the crooked operators (bad press just like this one in the St. Louis
Post).
So is history about to repeat with the gold economy? I hope not, but the
outlook is dubious if the crooks are allowed to run rampant throughout the
industry. What's sad is that it doesn't have to be that way. There is no
technological impediment preventing anyone from stopping obvious criminal
activity.
All the currency provider has to do is close the account of the crook. In
this newspaper article, the crook changed his site, which is obviously a
scam, but will his E-Gold account be closed? And even if it is, will E-Gold
stop the crook from opening another account and start doing the same thing?
unquote
The indictment in essence say the same thing, namely, that E-Gold allowed
the criminal activity to take place, when all E-Gold had to do was close
the account, or even easier, make it less likely the crook will open an
account in the first place by establishing a know-your-customer policy that
is required these days for all account-based currencies. But there is
another point here worth considering. It is how badly the reputation of
DGC and the gold economy has been hurt by the E-Gold indictments, which
have been well publicized.
Hopefully the gold economy can get off the path taken by the nascent
time-share industry, and I think these indictments are an important message
in that regard. These indictments are saying that criminal activity
(ponzis and the like) in the gold economy will not be tolerated, and that's
a good thing. Let common sense prevail. The gold economy should be built
upon productive economic activity -- not ponzis, credit card fraud and
child porn.
Regards
James
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R. A. Hettinga