U.S. Secret Service raids E-Gold currency exchanger

Phillip H. Zakas pzakas at toucancapital.com
Fri Mar 30 14:46:51 PST 2001



is this related to the raid?
http://www.caymannetnews.com/Archive/Archive%20Articles/November%202000/Issu
e%2031/IRSnowgoing.html

summary: irs cracking down on offshore banks using credit cards as access
mechanism to overseas accounts.  perhaps this is related to the case noted
below.
phillip

-----Original Message-----
From: owner-cypherpunks at Algebra.COM
[mailto:owner-cypherpunks at Algebra.COM]On Behalf Of Declan McCullagh
Sent: Friday, March 30, 2001 2:21 PM
To: cypherpunks at cyberpass.net; fight-censorship at vorlon.mit.edu
Subject: U.S. Secret Service raids E-Gold currency exchanger




http://www.wired.com/news/politics/0,1283,42745,00.html

   Secret Service Raids E-Gold
   by Declan McCullagh (declan at 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.

   [...]






More information about the cypherpunks-legacy mailing list