[gsc] A New Beginning (E-Gold)

Begin forwarded message:

From: Adam Selene Date: July 21, 2008 4:26:12 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: [gsc] A New Beginning (E-Gold)

This just went public @ http://blog.e-gold.com/

A New Beginning <http://blog.e-gold.com/2008/07/a-new-beginning.html

...

November 2008 will mark the 12th anniversary of e-gold's debut as an alternative global payment system enabling Users - individuals or businesses - to receive payment in gold at extremely low cost and without risk of the sort of payment reversals that characterize all credit based systems.

e-gold has been a pioneer in numerous areas and I am proud of its innovative accomplishments. Since 1996, the Internet has witnessed multiple online payment initiatives, several of them funded with $20-90 million of start-up capital, with distinguished founders and executive cadre, high profile brand name strategic allies, and favorable reception in the business press. But whereas Digicash, Cybercash, Beenz, Flooz, Peppercoin and a host of others each was promoted as the next big thing, all of them combined cumulatively [in their original incarnations - some have been restructured into other business models] executed less transaction volume than e-gold did in a typical single quarter.

But this note is not about success. It is about e-gold's failure to date to emerge, its failure to transition from a marginal player for early adopters to a respected institution integrated into the global financial mainstream. I am talking about a vision that has not yet been realized and a determination to fix what needs to be improved.

e-gold's failure to emerge so far is a result of many factors but the root causes were design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse. Criminal abuse of the e-gold system, in turn, led to a self-reinforcing negative reputation.

Ultimately, criminal abuse of e-gold reached the point where the US Department of Justice intervened, bringing criminal charges against e-gold Ltd., Gold & Silver Reserve., Inc., (the Operator of e-gold and also of the online exchange service OmniPay), myself, and the other directors for violations of 18 USC 1960 [Operation of an unlicensed Money Transmitting Business] and 18 USC 1956 [Conspiracy to Commit Money Laundering]. The criminal case has been resolved. The resolution of the criminal case however provides for a second chance, an opportunity to address the flaws embedded in the e-gold system and to transform the "e-gold Operation" into the institutions I, the other directors, and our longsuffering employees and contractors have always envisioned, one that serves to advance the material welfare of mankind.

In harmony with this transformation, we acknowledge that e-gold is indeed a Financial Institution or Agency as defined in US law and should be regulated as a Financial Institution. E-gold Ltd. has submitted an application to FinCEN to be registered as a Money Services Business and will be seeking licensure in all states that require it. Most importantly, working in conjunction with US government agencies, we will be exerting every effort to bring e- gold into compliance with US law and regulation as quickly as possible.

I am going to briefly describe the systemic problems we are undertaking to rectify and a roadmap of where the system is heading. Going from where we are now to where we need to be is going to be a bumpy road, especially at first. Many legitimate e-gold Users have already suffered loss over the past year as the measures undertaken by the government to prevent dissipation of assets have severely impacted exchange markets with resulting illiquidity of a magnitude as to effectively make it impracticable to exchange e-gold for conventional money. There will be more disruption in the next few months but it will be temporary and will set the stage for powerful new features that enhance the usability and global reach of e-gold. If there is a silver lining, it is that the more illiquid e-gold has become, the more valuable it has become due to the (apparently ongoing) decline of the US dollar relative to gold and other non- financial assets.

*e-gold User Agreement Changes*

Before proceeding, however, let me make something clear that should have been made more emphatically clear long ago. Use of the e-gold system for criminal activity will not be tolerated. Memorializing this resolve, the following provisions are being added to the e-gold Account User Agreement http://www.e-gold.com/unsecure/e-g-agree.htm:

*2.3.* User agrees to not use e-gold in any manner that violates the laws of whatever jurisdiction to which the User is subject.

*4.6.1.1.* If e-gold investigators reasonably suspect that the e- gold account of User is being used to launder the proceeds of crime or for any other criminal purpose, Issuer may freeze the e-gold account and any other e-gold accounts of User. Additionally, at the sole discretion of Issuer, User will be subject to damages and other penalties, including criminal prosecution where available and the notification of the general public of Users actions, at the sole discretion of Issuer.

*Design flaws in legacy e-gold system*

A systemic flaw in the e-gold design, present from the very beginning, made it vexingly difficult for e-gold to expel a User, in a truly effective way, for criminal abuse of the system. e-gold investigative staff might detect suspicious activity, block or freeze the offending account, and later discover the same perpetrator had created additional accounts.

One element was logic that allowed an e-gold account full privileges from the moment of creation and only revoked those privileges in the event of suspicion that the account holder was seeking to mask their identity or actually engage in illicit activity.

Compounding this weakness was an unrestricted ability for Users to create multiple accounts without any obligatory indicator that they were all under the control of one person.

The next generation of the e-gold application will undertake to enforce a "one-human being/one e-gold User" rule. Instead of the existing logic where a User logs directly into an account, a User in the next generation system logs in as a User. Only validated Users are empowered with the ability to create multiple accounts.

The advantage from the cybercrime-thwarting standpoint will be an ever-stronger ability to blacklist a person who has abused the e- gold system.

e-gold is intensively working on this next generation User-based log- in system but it is likely to be another 6-9 months to deployment. Meanwhile, emergency surgery is required NOW.

*Shock Therapy phase* [may it be brief!]

*1)* Effective immediately, new e-gold account creation is suspended until a compliant interim solution for Customer Identification can be ensured.

*2)* We are requesting that autoexchangers - even though the technical beauty of the autoexchanger concept is sublime  cease supporting exchanges to or from e-gold for the time being. The problem with the autoexchanger concept is that although the autoexchangers themselves may be perfectly compliant with requirements [promulgated by Webmoney and e-gold] to automatically put tracking data in their memo fields, and despite the fact that Webmoney is also committed to aiding in the suppression of cybercrime, the fact is that a substantial proportion of the cybercriminals that abuse e-gold have evolved into a modus operandi that involves autoexchanging possible proceeds of crime into Webmoney, sometimes within minutes of receiving the value, thus making interdiction a matter of catch-up or closing the barn door after the horse is gone.

*Looking Forward*

We are confident that a regulated e-gold rebuilt to a more systematic specification will be less hospitable to criminals, and more attractive to mainstream business use without being less accessible to those disregarded by legacy payment systems.

Please accept our apologies for the occasional turbulence you may experience on this journey. And, as always...

Thank you for using e-gold.

Begin forwarded message:

From: Wavyhill Date: July 21, 2008 5:20:26 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

...

especially at first. Many legitimate e-gold Users have already suffered loss over the past year as the measures undertaken by the government to prevent dissipation of assets have severely impacted exchange markets

Yeah, well, thanks very much for warning us they are on their way to becoming a gold-based version of paypal, and their asses are thereby saved. Great for them. Saved for what? But nary a word was said about my kilos stolen along with the 1mdc reserve egold accounts. How did /that/ figure into their /deal/ ?

wavyhill

Begin forwarded message:

From: Adam Selene Date: July 21, 2008 8:06:43 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: [gsc] E-Gold Pleads Guilty to Money Laundering

Appears "A New Beginning" was a sweetener from Doug to precede his Monday morning Plea Bargain the inevitable DOJ press release.

https://ecf.dcd.uscourts.gov/cgi-bin/CourtSched.pl

*Court Schedule: Monday, July 21, 2008

* 07-cr-109: USA v. E-GOLD, LTD. Judge Collyer 09:30AM Courtroom 2 Plea Agreement Hearing 07-cr-109: USA v. GOLD & SILVER RESERVE, INC. Judge Collyer 09:30AM Courtroom 2 Plea Agreement Hearing 07-cr-109: USA v. JACKSON Judge Collyer 09:30AM Courtroom 2 Plea Agreement Hearing 07-cr-109: USA v. DOWNEY Judge Collyer 09:30AM Courtroom 2 Plea Agreement Hearing 07-cr-109: USA v. JACKSON Judge Collyer 09:30AM Courtroom 2 Plea Agreement Hearing

Adam

----------------------------- FOR IMMEDIATE RELEASE

CRM

MONDAY, JULY 21, 2008

(202) 514-2007

WWW.USDOJ.GOV

TDD (202) 514-1888

DIGITAL CURRENCY BUSINESS E-GOLD PLEADS GUILTY

TO MONEY LAUNDERING AND ILLEGAL MONEY TRANSMITTING CHARGES

WASHINGTON  E-Gold Ltd. (E-Gold), an Internet-based digital currency business, and its three principal directors and owners, pleaded guilty to criminal charges relating to money laundering and the operation of an illegal money transmitting business, Acting Assistant Attorney General Matthew Friedrich for the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today.

E-Gold and its corporate affiliate Gold & Silver Reserve Inc. each pleaded guilty to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money transmitting business. The principal director of E-Gold and CEO of Gold & Silver Reserve Inc. (Gold & Silver Reserve), Dr. Douglas Jackson, 51, of Melbourne, Fla., pleaded guilty to conspiracy to engage in money laundering and operating an unlicensed money transmitting business. E-Golds other two senior directors, Barry Downey, 48, of Baltimore, and Reid Jackson, 45, of Melbourne, each pleaded guilty to felony violations of District of Columbia law relating to operating a money transmitting business without a license. E-Gold, Gold & Silver Reserve and the three company directors were charged in an indictment returned by a federal grand jury on April 24, 2007.

At sentencing, E-Gold and Gold & Silver Reserve face a maximum fine of $3.7 million. Douglas Jackson faces a maximum prison sentence of 20 years and a fine of $500,000 on the conspiracy to engage in money laundering charge, and a sentence of five years and a fine of $250,000 on the operation of an unlicensed money transmitting business charge. Downey and Reid Jackson each face a maximum of five years in prison and a fine of $25,000. Additionally, as part of the plea, E-Gold and Gold & Silver Reserve have agreed to forfeiture in the amount of $1.75 million in the form of a money judgment for which they are joint and severally liable. Sentencing for all defendants has been set for Nov. 20, 2008.

In addition to the fines and prison sentences, each of the defendants agreed that E-Gold and Gold & Silver Reserve will move to fully comply with all applicable federal and state laws relating to operating as a licensed money transmitting business and the prevention of money laundering which includes registering as money service businesses. Also as part of the plea agreement, the businesses will create a comprehensive money laundering detection program that will require verified customer identification, suspicious activity reporting and regular supervision by the Internal Revenue Services (IRS) Bank Secrecy Act Division, to which the Financial Crimes Enforcement Network delegated authority according to federal regulations. E-Gold and Gold & Silver Reserve will hire a consultant to ensure their compliance with applicable law and hire an auditor to verify the companies claims that all transactions are fully backed by gold bullion.

Under federal law and District of Columbia law, in addition to other jurisdictions, the E-Gold operation was required to be licensed and registered as a money transmitting business. However, according to information in plea materials, the E-Gold operation functioned as a money transmitting business without registering with the federal government and without a license in the District of Columbia. Because these businesses and individuals illegally failed to register and follow applicable regulations under federal and District of Columbia laws, the resulting lack of oversight and required procedures created an atmosphere where criminals could use e-gold, or digital currency, essentially anonymously to further their illegal activities.

Specifically, according to information contained in plea materials, the E-Gold operation provided digital currency services over the Internet through two sites: www.e-gold.com and www.Omnipay.com . Several characteristics of the E-Gold operation made it attractive to users engaged in criminal activity, such as not requiring users to provide their true identity, or any specific identity. The E-Gold operation continued to allow accounts to be opened without verification of user identity, despite knowing that e-gold was being used for criminal activity, including child exploitation, investment scams, credit card fraud and identity theft. In addition, E-Gold assigned employees with no prior relevant experience to monitor hundreds of thousands of accounts for criminal activity. They also participated in designing a system that expressly encouraged users whose criminal activity had been discovered to transfer their criminal proceeds among other e-gold accounts. Unlike other Internet payment systems, the E-Gold operation did not include any statement in its user agreement prohibiting the use of e-gold for criminal activity.

By failing to comply with money laundering laws and regulations, the E-Gold operation created an environment ripe for exploitation by criminals seeking anonymity in conducting online transactions, said Acting Assistant Attorney General Matthew Friedrich. This case demonstrates that online payment systems must operate according to the applicable rules and regulations created to ensure lawful monetary transactions.

The operations of E-Gold Ltd. and the other defendants undermined the laws designed to maintain the integrity of our financial system and created opportunities for criminal activity, said U.S. Attorney Taylor. Because of the successful prosecution of these defendants, digital currency providers everywhere are now on notice that they must comply with federal banking laws or they will be subject to prosecution.

The Secret Service is pleased with the successful outcome of the E- gold investigation, said U.S. Secret Service Assistant Director for Investigations Michael Stenger. This case demonstrated that even the most sophisticated criminals cannot escape the combined resources of the Secret Service and our law enforcement partners. The Secret Service is committed to our mission of safeguarding the nations critical financial infrastructure and we will continue to pursue criminals seeking to use the Internet and new technologies to commit crimes.

The case was investigated by the U.S. Secret Service, IRS Criminal Investigation and the FBI. The case was prosecuted by Assistant U.S. Attorney Jonathan Haray of the U.S. Attorneys Office for the District of Columbia, Senior Counsel Kimberly Kiefer Peretti of the Criminal Divisions Computer Crime and Intellectual Property Section and Laurel Loomis Rimon, Deputy Chief of the Criminal Divisions Asset Forfeiture and Money Laundering Section, with assistance from the Criminal Divisions Child Exploitation and Obscenity Section. William Cowden of the U.S. Attorneys Office Asset Forfeiture Unit assisted with forfeiture issues involved in the case.

###

Begin forwarded message:

From: Kevin Wilkerson Date: July 21, 2008 8:33:44 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Wavyhill wrote:

...

But nary a word was said about my kilos stolen along with the 1mdc reserve egold accounts. How did /that/ figure into their /deal/ ?

As we know, that gold was already liquidated and wired to the feds. I see in the DOJ release that fines and jail time are pending, the exact amount of each to be determined by the judge, referencing the plea agreement of course.

My bet is for no jail time, or a suspended sentence, and fines totaling approximately the amount already vacuumed up. What a coincidence!

-Kevin

Begin forwarded message:

From: Adam Selene Date: July 21, 2008 8:43:32 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Kevin Wilkerson wrote:

...

My bet is for .... fines totaling approximately the amount already vacuumed up.

The civil (not criminal) court case ultimately must have some resolution regarding requested asset forfeitures, including the frozen/liquidated accounts.

The criminal case infers E-Gold will be an on-going business while the civil case had originally requested the forfeiture of absolutely all assets of E-Gold and *all their customers' gold*. I don't get how they can claim the latter.

Pleading guilty doesn't exactly help the civil case, not sure the criminal plea bargain can help.

Adam

Begin forwarded message:

From: "Bill St. Clair" Date: July 21, 2008 8:38:22 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

On Mon, Jul 21, 2008 at 5:20 PM, Wavyhill wrote:

...

Yeah, well, thanks very much for warning us they are on their way to becoming a gold-based version of paypal, and their asses are thereby saved. Great for them. Saved for what?

GoldPal (TM)

-Bill

Begin forwarded message:

From: Wavyhill Date: July 21, 2008 9:06:50 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Kevin Wilkerson wrote:

...

My bet is for no jail time, or a suspended sentence, and fines totaling approximately the amount already vacuumed up. What a coincidence!

That doesnt make sense either. (Most of) the gold stolen belonged not to egold, but to its customers. If you fine a bank for criminal activity, you dont take it from the depositors accounts. In order to justifiably keep assets taken from customer accounts, seems to me you have to convict them of something, or at least prove the assets are the proceeds of crime, even if you cant identify the offenders.

No one has charged me, much less convicted me, of anything criminal. My savings are gone. My self-styled masters have it. Where is my justice?

wavyhill

Begin forwarded message:

From: "George Hara" Date: July 22, 2008 1:56:16 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Wavyhill,

...

the gold stolen belonged not to egold, but to its customers. If you fine a bank for criminal activity, you dont take it from the depositors accounts. In order to justifiably keep assets taken from customer accounts, seems to me you have to convict them of something, or at least prove the assets are the proceeds of crime, even if you cant identify the offenders.

Their logic must be quite simple: if you're anonymous, you're not a person, hence you don't exist.

Begin forwarded message:

From: JP May Date: July 23, 2008 5:24:41 AM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold) - the reality

...

...

*Looking Forward*

We are confident that a regulated e-gold rebuilt to a more systematic specification will be less hospitable to criminals, and more attractive to mainstream business use without being less accessible to those disregarded by legacy payment systems.

Please accept our apologies for the occasional turbulence you may experience on this journey. And, as always...

Thank you for using e-gold.

Is it just me, or was anyone else looking for any sign from Douglas (?) as to what will become of the e-gold users and their monies that were stolen on April 24, 2007!

Is it just me, or was this the first question that blasted forth from your mouth after having read this piece! WHAT ABOUT THE E- GOLD USERS THAT HAVE BEEN SCREWED AS A RESULT OF YOUR FAILING IN YOUR FIDUCIARY DUTIES!

Bill,

The three egold guys are ABSOLUTE VICTIMS here.

They have been bent over and raped with steel poles by human filth masquerading as a government.

Law and order in the USA has decayed to a plain circus - an absolutely, outright kangaroo court fiasco.

The legal system in, say, the USSR, was no more corrupt ....... just a system of rubber-stamps for literally all-powerful prosecutors and bureaucrats. Rubber stamps.

That's EXACTLY what the USA "legal system" now amounts to.

Because the government never loses a prosecution, and the government is all-powerful, prosecutors can very simply literally say "You will now do this _ _ _ and this _ _ _ or you will go to jail." Then, a Judge rubber-stamps the arrangement.

That's all the USA is. That's IT. It's a rubber-stamp system where prosecutors and bureaucrats have TOTAL, COMPLETELY UNLIMITED power.

Prosecutors tell you what you have to do, and a Judge rubber-stamps it. The deal is you do it or you do ten years in jail.

You are completely wrong to blame the egold blokes in any way for anything.

If you've lost the odd hundred thousand bucks worth of gold (or whatever, I don't know what your particular tally is, but many people on this list had that much stolen by the government) - big deal.

The egold guys had MILLIONS stolen from them and are at risk of being thrown in the can for years by the system .... not to mention that their work of a decade of their life is crushed.

Plus, out of all the exchangers, operators, "merchants," plain large users of egold, etc etc -- the three egold dudes were the ones picked by the human filth in the government, to suffer on behalf of all of us, to be an example.

The only reason YOU or ANYONE on this list or that has ever had anything much to do with DGCs is not SITTING IN JAIL is because of a pure WHIM of the human filth in the various USA government offices.

The only reason everyone ELSE is not being put through the ringer, is because the three egold dudes were put through the ringer.

The USA government can put ANYONE - ANYONE - in jail any time they like, and that's absolutely the full extent of the situation.

It is a rough situation Bill. To blame the egold guys is totally wrong, man.

They are absolutely victims. Moreover, THEY were chosen as the "fall-guys" to go through the ringer when it could have been anyone.

...

WHAT ABOUT US AND WHAT ABOUT OUR GOLD!

Thanks, again, Adam, for the update.

All the best.

Sincerely, Bill Bochynski

-- --------------------------------------------------------------------------

Begin forwarded message:

From: "ADMIN, GOLD COMPANIES" Date: July 22, 2008 7:08:46 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Adam Selene wrote:

...

Kevin Wilkerson wrote:

...

My bet is for .... fines totaling approximately the amount already vacuumed up.

The civil (not criminal) court case ultimately must have some resolution regarding requested asset forfeitures, including the frozen/liquidated accounts.

The criminal case infers E-Gold will be an on-going business while the civil case had originally requested the forfeiture of absolutely all assets of E-Gold and *all their customers' gold*. I don't get how they can claim the latter.

Pleading guilty doesn't exactly help the civil case, not sure the criminal plea bargain can help.

Adam

Here is another article on the events of yesterday, and frankly, the last sentence of the article really concerns me:

"...Authorities said E-gold did not ask for account holders' true identity, *and company officials helped criminals distribute their money to other accounts if they were caught.*" (emphasis added).

The total article is here:

http://www.usatoday.com/news/world/2008-07-22-money_N.htm

Dean

Begin forwarded message:

From: YAlwaysWar@EarthLink.Net Date: July 23, 2008 1:55:15 AM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Dear Adam:

At 01:26 PM 7/21/2008, you wrote:

<snip>

Thank you for the post, Adam!

<snip>

...

*Looking Forward*

We are confident that a regulated e-gold rebuilt to a more systematic specification will be less hospitable to criminals, and more attractive to mainstream business use without being less accessible to those disregarded by legacy payment systems.

Please accept our apologies for the occasional turbulence you may experience on this journey. And, as always...

Thank you for using e-gold.

<snip>

Is it just me, or was anyone else looking for any sign from Douglas (?) as to what will become of the e-gold users and their monies that were stolen on April 24, 2007!

Is it just me, or was this the first question that blasted forth from your mouth after having read this piece! WHAT ABOUT THE E-GOLD USERS THAT HAVE BEEN SCREWED AS A RESULT OF YOUR FAILING IN YOUR FIDUCIARY DUTIES!

WHAT ABOUT US AND WHAT ABOUT OUR GOLD!

Thanks, again, Adam, for the update.

All the best.

Sincerely, Bill Bochynski

Begin forwarded message:

From: YAlwaysWar@EarthLink.Net Date: July 23, 2008 2:08:38 AM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

Dear Wavyhill:

At 06:06 PM 7/21/2008, you wrote:

<snip>

...

No one has charged me, much less convicted me, of anything criminal. My savings are gone. My self-styled masters have it. Where is my justice?

wavyhill

Ditto!

Thanks for saying so.

All the best.

Sincerely, Bill Bochynski

Begin forwarded message:

From: "Jeffrey Lyon" Date: July 22, 2008 3:28:32 PM GMT-04:00 To: gold-silver-crypto@rayservers.com Subject: Re: [gsc] A New Beginning (E-Gold)

My biggest concern is that exchangers and merchants will fall into the trap of being identified by e-gold as launders of their customer's funds and have their entire accounts seized accordingly.

I'd be in favor of the e-Bullion model where the funds are basically considered cleared after a 24 hour hold.

Jeff

On Tue, Jul 22, 2008 at 12:56 PM, George Hara wrote:

...

Wavyhill,

...

the gold stolen belonged not to egold, but to its customers. If you fine a bank for criminal activity, you dont take it from the depositors accounts. In order to justifiably keep assets taken from customer accounts, seems to me you have to convict them of something, or at least prove the assets are the proceeds of crime, even if you cant identify the offenders.

Their logic must be quite simple: if you're anonymous, you're not a person, hence you don't exist.

-- Jeffrey Lyon, President Level III Information Systems Technician jeffrey.lyon@blacklotus.net | http://www.blacklotus.net Black Lotus Communications of The IRC Company, Inc.

Talk for 4h 45m from the U.S. to Latin America for $10.00: http://www.defensecalling.com