Fwd: DIGITAL CURRENCY BUSINESS E-GOLD PLEADS GUILTY TO MONEY LAUNDERING AND ILLEGAL MONEY TRANSMITTING CHARGES

[Jay Goodman Tamboli]

Begin forwarded message:

> From: "USDOJ-Office of Public Affairs"
<USDOJ-Office.of.Public.Affairs at usdoj.gov
> >
> Date: July 21, 2008 17:52:39 EDT
> To: "USDOJ-Office of Public Affairs"
<USDOJ-Office.of.Public.Affairs at usdoj.gov
> >
> Subject: DIGITAL CURRENCY BUSINESS E-GOLD PLEADS GUILTY TO MONEY
> LAUNDERING AND ILLEGAL MONEY TRANSMITTING CHARGES
>
>
>
>
>
>
_____________________________________________________________________________
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> RELEASE
>
CRM
>
> MONDAY, JULY 21,
> 2008
>
(202
> ) 514-2007
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> WWW
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> 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.
>
> ###
>
> 08-635
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