Begin forwarded message:

From: Steven Schear <steven.schear@googlemail.com> Date: June 11, 2009 1:07:23 PM GMT-04:00 To: "R.A. Hettinga" <rah@shipwright.com> Cc: Various Other People Subject: Re: Bullion and Bandits: The Improbable Rise and Fall of E- Gold

I have little sympathy for Jackson. For years, he was repeatedly warned by his largest exchangers and supporters that the Feds would not treat him fairly, just as they have not treated fairly foreigners operating offshore gambling sites which accept American players. He was pushed and prodded to establish a rational and jurisdictionally distributed legal and operating structure and either become and ex-patriot and/or sell key parts of the business to foreigners to insulate him and the business from just the sort of events that later transpired, but his follow through was incomplete.

His ego and naivety were his undoing. If nothing else, his plight has educated and served as the primary example, to new entrants in digital currencies, what paths not to follow.

Steve

<http://www.wired.com/threatlevel/2009/06/e-gold/>

Bullion and Bandits: The Improbable Rise and Fall of E-Gold

By Kim Zetter June 9, 2009 | 12:00 am | Categories: Crime, The Courts

MELBOURNE, Florida  In a sparsely decorated office suite two floors above a neighborhood of strip malls and car dealerships, former oncologist Douglas Jackson is struggling to resuscitate a dying dream.

. . .

Douglas Jackson and his associates operated a sophisticated and widespread international money remitting business, unsupervised and unregulated by any entity in the world, which allowed for anonymous transfers of value at a click of a mouse, said U.S. Attorney Jeffrey A. Taylor for the District of Columbia in a press release. Not surprisingly, criminals of every stripe gravitated to E-Gold as a place to move their money with impunity. As alleged in the indictment, the defendants in this case knowingly allowed them to do so and profited from their crimes.

Clement, the attorney, disputes the governments depiction of Jackson. They automatically assume that E-Gold somehow made it easy for these people involved in money laundering, or [sought criminals] as clients, says Clement. But thats completely the opposite of Dougs attitude toward any kind of illegal behavior. It would be crazy for somebody to seek out that kind of business.

Jackson, whod hocked his future to start E-Gold, now faced the potential of a federal prison term. He was frustrated and confused.

It never crossed my mind that anyone could seriously want people like us in prison, he says. But I guess my bigger fear was that we would go bankrupt, and there would be a train wreck of people that had trusted value to us who couldnt get their money.

Timberlake, the economics professor, is convinced that Jacksons radical dream, his goal of upsetting the economic status quo and overturning the governments monopoly on money, is what really got E-Gold targeted.

No matter how innocent a person is you can always find a law that government agents can use to convict him of something, Timberlake says, And this is a perfect example of it. Any time anybody tries to produce money, the federal government is going to be on their tail.

After a year-and-a-half of court wrangling and negotiations, Jackson pleaded guilty last year to conspiracy to operate an unlicensed money transmitting service and conspiracy to commit money laundering. In November he was sentenced to 36 months of supervised released  including six months of house arrest and electronic monitoring, and 300 hours of community service. In addition to forfeiting about $1.2 million to the government, his two companies  Gold and Silver Reserve and E-Gold Limited  were fined $300,000, to be paid in $10,000 monthly installments beginning last month.

The plea agreement is conditional on Jackson revamping his business to comply with regulations governing money-transmitting services  a goal that, Jackson concedes, faces many hurdles. To begin the process of compliance, he suspended the creation of new accounts. Existing customers are now required to submit a government-issued photo ID and proof of residence to authenticate their name, address and other details, and are limited to $1,000 to $3,000 a month in transactions until they pass muster. Customers in high-risk countries  such as Nigeria, Russia and Ukraine  are suspended from making any transactions at all for now. Their money is locked indefinitely in E-Golds servers.

Jackson, who always considered himself one of the good guys, acknowledges today that he might have done a better job of policing his system from the start. In hindsight theres any number of things that would have been a smarter or better way of approaching things, he says.