*How DARE anyone want to "use currency anonymously!" Vmann*/*
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.
*/
http://www.marketwatch.com/news/story/digital-currency-business-e-gold-pleads/story.aspx?guid=%7B4E147F3A-71BC-4FB1-BC26-B41C92645AC7%7D&dist=hppr
Digital Currency Business E-Gold Pleads Guilty to Money Laundering and
Illegal Money Transmitting Charges
Last update: 6:55 p.m. EDT July 21, 2008
WASHINGTON, July 21, 2008 /PRNewswire-USNewswire via COMTEX/ -- 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-Gold's 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 <http://www.e-gold.com> and
www.Omnipay.com <http://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 nation's 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. Attorney's Office for the District
of Columbia, Senior Counsel Kimberly Kiefer Peretti of the Criminal
Division's Computer Crime and Intellectual Property Section and Laurel
Loomis Rimon, Deputy Chief of the Criminal Division's Asset Forfeiture
and Money Laundering Section, with assistance from the Criminal
Division's Child Exploitation and Obscenity Section. William Cowden of
the U.S. Attorney's Office Asset Forfeiture Unit assisted with
forfeiture issues involved in the case.
SOURCE U.S. Department of Justice
http://www.USDOJ.gov