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

[Declan McCullagh]

Good question. I don't recall anymore; my article today linked to an 
archived Wired story that went into this in more detail and I believe 
linked to the appropriate regs. --Declan


At 05:51 PM 3/30/01 -0500, Phillip H. Zakas wrote:
>need a clarification: is it $5,000 for le and $10,000 or $25,000 for
>mandatory reporting to the irs? btw i do know banks will volunteer
>suspicious transactions, no matter how small, to the irs.  i believe this is
>how a fed. treasury worker was caught...he thought depositing smaller
>amounts (<$9,000) would go unnoticed.
>
>this link to declan's article which raises my above question.
>http://www.wired.com/news/print/0,1294,20498,00.html
>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.
>
>    [...]