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E-Gold charged with money laundering
Robert Lemos, SecurityFocus 2007-04-30

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E-Gold has become a popular way -- and possibly, the most popular way -- for online identity thieves, bot masters and fraudsters to transfer money.

Online criminals have tried to sell stolen bank account credentials, credit-card numbers, denial-of-service attacks, and even the holographic dove stickers needed to make counterfeit credit cards, designating E-Gold as the method of payment, said Mikko Hyppönen, chief research officer for antivirus firm F-Secure.

"E-Gold is anonymous and irreversible, which makes it attractive to the the underground as a method of payment," Hyppönen said.

In 2005, the company advertised that in one 24-hour period it transfered more than $6.36 million between E-Gold members accounts, a rate that would add up to more than $2 billion annually.

The company, founded by Dr. Jackson, a board-certified oncologist, and Downey in 1996, was raided in December 2005 by FBI and Secret Service agents. At the time, the U.S. government seized about $800,000 in assets from E-Gold's parent company G&SR, according to Dr. Jackson. On Friday, law enforcement agents seized another $762,000 from E-Gold and $736,000 from G&SR, stated Dr. Jackson in the e-mail statement sent to SecurityFocus.

"Having taken virtually the entire operating funds of G&SR and E-Gold Ltd., that is, the E-Gold in both companies' own E-Gold accounts, it is unclear if the government has even a basic grasp of the operations it has been investigating for three years at a taxpayer expense in the millions," Dr. Jackson stated.

The indictment filed on Friday names the U.S. Secret Service as the primary investigators on the case with the aid of the FBI and the Internal Revenue Service.

"The advent of new electronic currency systems increases the risk that criminals, and possibly terrorists, will exploit these systems to launder money and transfer funds globally to avoid law enforcement scrutiny and circumvent banking regulations and reporting,” James E. Finch, assistant director of the FBI’s Cyber Division, said in a statement. "The FBI will continue to work closely with the Department of Justice and our federal and international law enforcement partners to aggressively investigate and prosecute any, and all, persons or organizations that use these systems to facilitate child pornography distribution, to support organized crime, and to perpetrate financial crimes.”

E-Gold's parent company, Gold & Silver Reserve, is a Delaware corporation, but the company claims the payment service is based in Nevis, West Indies. In the indictment, investigators stated that all the company's files and assets are based in Melbourne, Fla.

United States authorities have obtained a restraining order against the companies' owners to prevent them from moving their assets as well as warrants enabling law enforcement agents to seize more than 58 accounts.

Federal prosecutors have charged the company and its owners with 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 and one count of transmitting money without a license. The money laundering conspiracy charge has a maximum sentence of 20 years, while the three other charges each carry a maximum penalty of 5 years in prison.

The charges of conspiracy to launder money and conspiracy to transfer money without a license allow the U.S. to seize all assets resulting from the profit of the alleged crime.

UPDATE: The article was updated with comments and information from E-Gold founder and CEO Douglas Jackson, denying the charges against the company and its owners and, in particular, criticizing federal prosecutors for alleging that the company aided child pornographers.


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E-Gold charged with money laundering 2007-04-30
Anonymous (2 replies)
Re: E-Gold charged with money laundering 2007-05-01
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E-Gold charged with money laundering 2007-05-01
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E-Gold charged with money laundering 2007-05-03
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E-Gold charged with money laundering 2007-05-08
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E-Gold charged with money laundering... help 2007-05-09
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Re: What's going on? 2007-09-02
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Re: Re: What's going on? 2007-10-14
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E-Gold charged with money laundering 2007-05-15
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Guilty: E-Gold or the Gov? 2007-09-16
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