Digital currency firms face money laundering charges

[R.A. Hettinga]

<http://www.infoworld.com/archives/emailPrint.jsp?R=printThis&A=/article/07/04/27/HNdigitalcurrencycharges_1.html>

InfoWorld


Digital currency firms face money laundering charges

EGold and Gold & Silver Reserve are accused of operating without the proper
permits as well as using their digital currency operations to launder money


By Grant Gross, IDG News Service

April 27, 2007

A grand jury in Washington, D.C., has indicted two digital currency
companies and their owners on charges of money laundering, accusing the
companies of helping to fund illegal activities like child pornography and
identity theft, the U.S. Department of Justice announced Friday.

The four-count indictment, handed down on April 24 and unsealed Friday,
targets E-Gold; Gold & Silver Reserve; and their owners Douglas L. Jackson,
of Satellite Beach, Florida; Reid A. Jackson, of Melbourne, Florida; and
Barry K. Downey, of Woodbine, Maryland.

The defendants face charges on one count of conspiracy to launder monetary
instruments, one count of conspiracy to operate an unlicensed money
transmitting business, one count of operating an unlicensed money
transmitting business under federal law, and one count of money
transmission without a license under D.C. law.

The DOJ also obtained a restraining order to prevent the defendants from
unloading their assets as well 24 seizure warrants on more than 55 accounts
believed to be property involved in money laundering and the operation of
an unlicensed money transmitting business.

The restraining order does not limit the E-Gold operation's ability to use
its existing funds to satisfy requests to exchange E-Gold into national
currency for customers of nonseized accounts or its ability to sell
precious metals, the DOJ said.

E-Gold's digital currency, called E-Gold, functioned as an alternative
payment system and was purportedly backed by stored physical gold, the DOJ
said. Customers seeking to use the E-Gold payment system were only required
to provide a valid e-mail address to open an E-Gold account, and no other
contact information was verified.

Customers could then fund their accounts in a number of ways and convert
national currency into E-Gold. Account holders could access their accounts
through the Internet and conduct anonymous transactions with other parties
anywhere in the world.

The indictment alleges that E-Gold has been highly favored by operators of
investment scams, credit card and identity fraud, and sellers of online
child pornography. The defendants conducted funds transfers on behalf of
their customers knowing that the funds involved were the proceeds of
illegal activity, the DOJ said.

The defendants operated the E-Gold operation without a license in the
District of Columbia or any other state and without registering with the
federal government and thereby violated federal and state money
transmitting laws, the indictment said.

The conspiracy charge in the case relating to money transmitting and the
federal violation of operating an unlicensed money transmitting business
each carry a maximum sentence of five years in prison. The District of
Columbia Code violation for money transmission without a license carries a
maximum sentence of five years. The conspiracy charge relating to money
laundering carries a maximum sentence of 20 years in prison.

The case is being investigated by the U.S. Secret Service with the
assistance of the IRS and the FBI.

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
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