e-gold directors avoid jail

[R.A.Hettinga]

<http://www.theregister.co.uk/2008/11/21/e_gold_sentencing/print.html>

The Register

e-gold directors avoid jail
Controversial money transfer service given second chance
By John Leyden
Posted in Crime, 21st November 2008 17:19 GMT

Three directors of digital currency firm e-gold avoided a spell behind  
bars on Thursday after earlier pleading guilty to offences for money  
laundering and running an unlicensed money transfer business.

The three directors, along with the e-gold company itself and parent  
firm Gold & Silver Reserve, were charged in April 2007 with becoming a  
clearing house for child pornography payments and investment scams.  
Prosecutors charged that slack-shod verification meant the service had  
become a banker to cybercrooks. After initially disputing the charges  
the defendants pleaded guilty in July 2008.

At a sentencing hearing on Thursday, US District Judge Rosemary  
Collyer said the three men deserved leniency because they had not set  
out to service crooks. The trio were each sentenced to three years on  
probation in addition to 300 hours of community service and fines, the  
e-commerce Journal reports (http://ecommerce-journal.com/node/11427).

Chief exec Douglas Jackson was fined $200, after his lawyer  
successfully argued he was all but broke. Two other directors, Barry  
Downey and Reid Jackson, were ordered to pay a $2,500 fine each. Reid  
Jackson and Douglas Jackson are brothers. The three defendants were  
also ordered to obtain licences to operate money transferring  
businesses in those states where such a permit is required. e-gold  
recently registered with FinCEN and is in the process of signing-up  
with state regulators.

e-gold and Gold & Silver Reserve were each fined $300,000, with re- 
payments following an initial $10,000 payout only due to begin next  
May. Each might have been fined up to $3.7m.

The service remains open for business but has stopped allowing new  
accounts to be registered until it works out how to apply a stricter  
registration regime. During the federal prosecution, e-gold supporters  
said the Feds targeted it because it allowed virtually anonymous money  
transfers. Prosecutors dismissed the libertarian philosophy behind the  
service as irrelevant, contesting that e-gold's directors must have  
known crooks were using its services.

The firm has recently implemented a customer identification program so  
that its users are obliged to register details such as their tax  
particulars and dates of birth as well as addresses and points of  
contacts, information previously requested.

e-gold, established in 1996, allows the ownership of gold to be  
transferred between an estimated three million users, a quarter of  
whom actively use their accounts. At its peak $5m in fund transfers  
day passed through e-gold.