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E-Gold pleads guilty to money laundering
Robert Lemos, SecurityFocus 2008-07-23

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The United States' investigation had significantly hampered E-Gold's business, making it hard for account owners to turn e-gold into cash, Dr. Jackson said in his statement. With the agreement, the company has a chance to emerge as a viable business, he said in an e-mail interview with SecurityFocus.

"From our perspective, the possibility of resolving the legal case in a manner that allows for a path forward, that provides an explicit roadmap enabling e-gold to emerge as a regulated financial institution in full compliance with U.S. law is greatly preferred over continued conflict," Jackson said. "We acknowledge that we made mistakes and fully accept responsibility for those mistakes."

While E-Gold's executives face likely prison terms and the company itself must re-engineer its entire service, Jackson believes that the company can reinvigorate itself. Unlike previous digital currencies, E-Gold's focus on backing its accounts with gold provides more value than merely having money in a bank, especially in volatile markets, he said.

With previous currencies, "there was no reason for anyone to maintain a balance in digital-cash-branded-dollars when they had the option of holding value in Citibank or Bank America deposit liabilities," Jackson said. "More importantly, there was never an incentive for anyone to pay (a) ... spread to exchange their bank account dollars for digital cash liabilities."

As for current customers, Jackson hopes they will stay despite the criminal prosecution and the service disruptions that undoubtedly be seen in the future. As part of the plea agreement, E-Gold has made it explicitly against its terms-of-service agreement to use the service to transfer money from criminal proceeds.

"There will be more disruption in the next few months but it will be temporary and will set the stage for powerful new features that enhance the usability and global reach of e-gold," he said in his statement. "If there is a silver lining, it is that the more illiquid e-gold has become, the more valuable it has become due to the -- apparently ongoing -- decline of the US dollar relative to gold and other non-financial assets."

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