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⚫ {{Short description|Digital gold currency}}

] ]


E-gold was a ] operated by Gold & Silver Reserve Inc. (G&SR) under '''e-gold''' Ltd. that allowed users to open an account on their web site denominated in grams of gold (or other ]s) and the ability to make instant transfers of value ("spends") to other e-gold accounts. The e-gold system was launched online in 1996 and had grown to five million accounts by 2009, when transfers were suspended due to legal issues. At its peak in 2006 e-gold was processing more than US$2 billion worth of spends per year,<ref>{{cite web|author= |url=http://www.e-gold.com/stats.html |title=archive.org |publisher=archive.org |date=2006-11-09 |accessdate=2014-12-19 |deadurl=yes |archiveurl=https://web.archive.org/web/20061109161419/http://www.e-gold.com/stats.html |archivedate=November 9, 2006 }}</ref> on a monetary base of only USD $71 million worth of gold (~3.5 metric tonnes),<ref>{{cite web|url=http://www.e-gold.com/examiner.html |title=archive.org |publisher=archive.org |date= |accessdate=2014-12-19 |deadurl=yes |archiveurl=https://web.archive.org/web/20061109161001/http://www.e-gold.com/examiner.html |archivedate=November 9, 2006 }}</ref> indicating a high monetary turnover (velocity) of about 28 times per year (for comparison, annual velocity of USD is about 6 for M1 <ref>{{cite web|author= |url=http://research.stlouisfed.org/fred2/series/M1V |title=Federal Reserve FRED database, M1 |publisher=Federal Reserve Bank of St. Louis |date=2014-12-19 |accessdate=2014-12-19}}</ref> and less than 1.6 for M2 <ref>{{cite web|author= |url=http://research.stlouisfed.org/fred2/series/M2V |title=Federal Reserve FRED database, M2 |publisher=Federal Reserve Bank of St. Louis |date=2014-12-19 |accessdate=2014-12-19}}</ref>) . e-gold Ltd. was incorporated in ], ] with operations conducted out of Florida, USA. '''E-gold''' or '''eGold''' was a ] operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to make payments, which it called "spends", in grams of gold, silver, and other ]s. E-gold was launched in 1996 and grew to five million accounts by 2009, when transfers were suspended due to legal issues. At its peak in 2006, e-gold processed more than US$2 billion worth of spends per year,<ref>{{cite web|url=http://www.e-gold.com/stats.html |title=e-gold Statistics |date=2006-11-09 |access-date=2014-12-19 |url-status=dead |archive-url=https://web.archive.org/web/20061109161419/http://www.e-gold.com/stats.html |archive-date=November 9, 2006 }}</ref> backed by over {{US$}}85 million worth of gold, about {{convert|3.8|t|lb}}.<ref name="wired-2009-06-09" /> e-gold Ltd. was incorporated in ], ], and its operations were based in ].


==Beginnings== ==Beginnings==
⚫ e-gold was founded by oncologist Douglas Jackson<ref>{{cite web|author= |url=http://www.e-gold.com/unsecure/aboutus.html |title=archive.org capture of e-gold Director bios page |publisher=archive.org |date=2004-10-14 |accessdate=2014-12-19 |deadurl=yes |archiveurl=https://web.archive.org/web/20041014062818/http://www.e-gold.com/unsecure/aboutus.html |archivedate=October 14, 2004 }}</ref> and attorney Barry Downey in 1996. The pair originally backed the services accounts with gold coins stored in a bank ] in ].<ref>{{cite web|title=Synopsis of e-gold Transactions |url=http://www.e-gold.com/unsecure/synopsis.htm#redeem |website=web.archive.org |publisher=Gold & Silver Reserve, Inc. |accessdate=8 January 2015 |deadurl=yes |archiveurl=https://web.archive.org/web/19980627133928/http://www.e-gold.com/unsecure/synopsis.htm#redeem |archivedate=June 27, 1998 }}</ref> By 1998, G&SR (the system operator) was an Affiliate Member of ] <ref>{{cite web|author= |url=http://nacha.org/affiliates/affil-curnt-mems.htm |title=archive.org capture of NACHA Affiliates listing, circa 1998 |publisher=archive.org |date=1998-07-09 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/19980709053800/http://nacha.org/affiliates/affil-curnt-mems.htm |archivedate=July 9, 1998 }}</ref> and a Full Member of NACHA's The Internet Council.<ref>{{cite web|author= |url=http://www.e-gold.com/ |title=archive.org capture of e-gold homepage, circa 1998 |publisher=archive.org |date=1998-06-27 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/19980627133859/http://www.e-gold.com/ |archivedate=June 27, 1998 }}</ref>


⚫ E-gold was founded by Douglas Jackson, an ],<ref>{{cite web|url=http://www.e-gold.com/unsecure/aboutus.html |title=archive.org capture of e-gold Director bios page |date=2004-10-14 |access-date=2014-12-19 |url-status=dead |archive-url=https://web.archive.org/web/20041014062818/http://www.e-gold.com/unsecure/aboutus.html |archive-date=October 14, 2004 }}</ref> and Barry Downey, an attorney, in 1996. The pair originally backed e-gold accounts with gold coins stored in a ] in ].<ref>{{cite web|title=Synopsis of e-gold Transactions |url=http://www.e-gold.com/unsecure/synopsis.htm#redeem |publisher=Gold & Silver Reserve, Inc. |access-date=8 January 2015 |url-status=dead |archive-url=https://web.archive.org/web/19980627133928/http://www.e-gold.com/unsecure/synopsis.htm#redeem |archive-date=June 27, 1998 }}</ref> When e-gold was at its peak, the company stored its gold and platinum in bank vaults in London and Dubai.<ref name="wired-2009-06-09" />
The company was launched two years before ] but did not manifest exponential growth until 2000.<ref>{{cite web|author= |url=http://www.mail-archive.com/e-gold-list@talk.e-gold.com/msg02724.html |title=list post, March 4, 2001 |publisher=talk.e-gold.com (independent discussion list) |date=2001-03-04 |accessdate=2014-12-20}}</ref> By 2004 there were over a million accounts.<ref>{{cite web|author= |url=http://www.e-gold.com/stats.html |title=archive.org archive |publisher=archive.org |date=2004-07-11 |accessdate=2014-12-20 |deadurl=yes |archiveurl=https://web.archive.org/web/20040711020115/http://www.e-gold.com/stats.html |archivedate=July 11, 2004 }}</ref> It was the first successful digital currency system to gain a widespread user base and merchant adoption, noted July 13, 1999 in the Financial Times as “"the only electronic currency that has achieved critical mass on the web”.<ref>{{cite web|author= |url=http://blog.e-gold.com/1999/10/september-octob.html |title=e-gold blog post, October 31, 1999 |publisher=e-gold blog |date=1999-10-31 |accessdate=2014-12-20}}</ref><ref>{{cite web|author= |url=http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1173&context=facpub |title=Developments in the Law Concerning Stored Value Cards and Other Electronic Payments Products, footnote 154 |publisher=Maurer School of Law: Indiana University, Law Journal |date=2007-01-01 |accessdate=2014-12-20}}</ref> It was also the first non-credit-card ] to offer an ] (API) <ref>{{cite web|author= |url=http://www.e-gold.com/docs/e-gold_SCI.pdf |title=archive.org capture of e-gold Shopping Cart Interface Specification, ver. November 6, 1999 |publisher=archive.org |date=2000-08-15 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/20000815224815/http://www.e-gold.com/docs/e-gold_SCI.pdf |archivedate=August 15, 2000 }}</ref><ref>{{cite web|author= |url=http://e-gold.com/unsecure/sci_home.html |title=archive.org capture of e-gold API overview circa 2000 |publisher=archive.org |date=2001-01-01 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/20010123225700/http://e-gold.com/unsecure/sci_home.html |archivedate=January 23, 2001 }}</ref> enabling other services and ] transactions <ref>{{cite web|author= |url=http://www.e-gold.com/samplestore/samplestore.html |title=archive.org capture of e-gold Sample Store demo |publisher=archive.org |date=1999-10-09 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/19991009091924/http://www.e-gold.com/samplestore/samplestore.html |archivedate=October 9, 1999 }}</ref> to be built on top of it.


By 1998, G&SR was an affiliate member of ]<ref>{{cite web|url=http://nacha.org/affiliates/affil-curnt-mems.htm |title=archive.org capture of NACHA Affiliates listing, circa 1998 |date=1998-07-09 |access-date=2014-12-22 |url-status=dead |archive-url=https://web.archive.org/web/19980709053800/http://nacha.org/affiliates/affil-curnt-mems.htm |archive-date=July 9, 1998 }}</ref> and a full member of NACHA's Internet council.<ref>{{cite web|url=http://www.e-gold.com/ |title=archive.org capture of e-gold homepage, circa 1998 |date=1998-06-27 |access-date=2014-12-22 |url-status=dead |archive-url=https://web.archive.org/web/19980627133859/http://www.e-gold.com/ |archive-date=June 27, 1998 }}</ref> The company experienced exponential growth starting in 2000.<ref>{{cite web|url=http://www.mail-archive.com/e-gold-list@talk.e-gold.com/msg02724.html |title=list post, March 4, 2001 |publisher=talk.e-gold.com (independent discussion list) |date=2001-03-04 |access-date=2014-12-20}}</ref> In a July 13, 1999 article in the ''Financial Times'', ] (no relation to Douglas) described e-gold as "the only electronic currency that has achieved critical mass on the web".<ref name="ft-1999">{{cite news |last1=Jackson |first1=Tim |title=When gold makes cents: It may sound crazy, but the eGold payment mechanism based on deposits of precious metal, is cheap, efficient and easy |url=https://www.proquest.com/docview/248786094 |access-date=August 19, 2023 |work=Financial Times |date=July 13, 1999|id={{ProQuest|248786094}} }}</ref><ref>{{cite web|url=http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1173&context=facpub |title=Developments in the Law Concerning Stored Value Cards and Other Electronic Payments Products, footnote 154 |publisher=Maurer School of Law: Indiana University, Law Journal |date=2007-01-01 |access-date=2014-12-20}}</ref> In 2001, the company said that e-gold had more than 200,000 accounts and more than $14 million of digital gold currency in circulation.<ref>{{cite news |last1=Ballve |first1=Marcelo |title=GET READY TO TURN YOUR DOLLARS INTO GOLD -- ELECTRONICALLY |url=https://www.proquest.com/docview/387947777 |access-date=August 21, 2023 |work=South Florida Sun-Sentinel |date=June 24, 2001|id={{ProQuest|387947777}} }}</ref> By 2004, there were over a million accounts.<ref>{{cite web|url=http://www.e-gold.com/stats.html |title=archive.org archive |date=2004-07-11 |access-date=2014-12-20 |url-status=dead |archive-url=https://web.archive.org/web/20040711020115/http://www.e-gold.com/stats.html |archive-date=July 11, 2004 }}</ref>
After initial demonstration of an e-gold Spend via Palm Pilot in February 1999,<ref>{{cite web|author= |url=http://blog.e-gold.com/1999/02/e-gold-at-fc99.html |title=e-gold blog post, February 26, 1999|publisher=e-gold blog |date=1999-02-26 |accessdate=2014-12-21}}</ref> e-gold introduced support for wireless mobile payments.<ref>{{cite web|author= |url=http://blog.e-gold.com/1999/12/wireless-phone.html |title=e-gold blog post, December 31, 1999|publisher=e-gold blog |date=1999-12-31 |accessdate=2014-12-21}}</ref><ref>{{cite web|author= |url=http://pcs.e-gold.com/demo.html |title=archive.org capture of e-gold mobile payments demo |publisher=archive.org |date=2000-08-15 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/20000815232622/http://pcs.e-gold.com/demo.html |archivedate=August 15, 2000 }}</ref>


⚫ By the early ], the capability of immediate settlement, as implemented by e-gold, was recognized as key to the emergence of systems for peer-to-peer transfers of digital rights such as "]s".<ref>{{cite web|author=Mark Miller |url=http://www.erights.org/talks/pisa/paper/index.html |title=The Digital Path: Smart Contracts and the Third World |date=2002-12-17 |access-date=2015-01-12 |url-status=dead |archive-url=https://web.archive.org/web/20021217211546/http://www.erights.org/talks/pisa/paper/index.html |archive-date=December 17, 2002 }}</ref>
e-gold was used by both individuals and merchants for services including metals trading,<ref>{{cite web|author= |url=http://www.e-gold.com/news.html |title=archive.org capture of bullion dealer announcement |publisher=archive.org |date=2000-08-15 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20000815053908/http://www.e-gold.com/news.html |archivedate=August 15, 2000 }}</ref> online merchants,<ref>{{cite web|author= |url=http://magazinedepot.com/paymentmethods.asp |title=archive.org capture of Magazine Depot payment methods page |publisher=archive.org |date=2001-11-22 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20011122165604/http://magazinedepot.com/paymentmethods.asp |archivedate=November 22, 2001 }}</ref><ref>{{cite web|author= |url=http://www.superclubs.com/index.asp?LinkType=AF&LinkDetail=7037321S101 |title=archive.org capture, SuperClubs Resorts announcement |publisher=archive.org |date=2001-11-22 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20011220132932/http://www.superclubs.com/index.asp?LinkType=AF&LinkDetail=7037321S101 |archivedate=December 20, 2001 }}</ref> ]s, ]s,<ref>{{cite web|author= |url=http://www.thegoldcasino.com/ |title=archive.org capture of The Gold Casino website |publisher=archive.org |date=2004-07-15 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20040715032554/http://www.thegoldcasino.com/ |archivedate=July 15, 2004 }}</ref> political organizations,<ref>{{cite web|author= |url=http://www.ca.lp.org/ |title=archive.org capture of Libertarian Party of CA website |publisher=archive.org |date=2000-05-20 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20000520025802/http://www.ca.lp.org/ |archivedate=May 20, 2000 }}</ref> and non-profit organizations.<ref>{{cite web|author= |url=https://www.eff.org/support/joineff-egold.html |title=archive.org capture of EFF.org donations page |publisher=archive.org |date=2001-02-08 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/20010208085644/http://www.eff.org/support/joineff-egold.html |archivedate=February 8, 2001 }}</ref><ref>{{cite web|author= |url=http://www.mozilla.org/foundation/donate.html |title=archive.org capture of Mozilla Foundation donations page |publisher=archive.org |date=2005-11-06 |accessdate=2014-12-21 |deadurl=yes |archiveurl=https://web.archive.org/web/20051106013618/http://www.mozilla.org/foundation/donate.html |archivedate=November 6, 2005 }}</ref>


E-gold was a founding member of the ].<ref>{{Cite news |date=2006-03-16 |title=Sites selling child porn targeted |language=en-GB |url=http://news.bbc.co.uk/2/hi/technology/4812962.stm |access-date=2023-08-19}}</ref><ref>{{Cite web |date=2007-07-13 |title=Financial and Internet Industries to Combat Internet Child Pornography |url=http://www.ncmec.org/missingkids/servlet/NewsEventServlet?LanguageCountry=en_US&PageId=2314 |access-date=2023-08-20 |archive-url=https://web.archive.org/web/20070713174324/http://www.ncmec.org/missingkids/servlet/NewsEventServlet?LanguageCountry=en_US&PageId=2314 |archive-date=2007-07-13 }}</ref> In 2005 and 2006, the company took effective action to combat child exploitation.<ref name=":1" />
From 1996 through 1999, currency exchange services referred to as “InExchange”<ref>{{cite web|author= |url=http://www.e-gold.com/unsecure/synopsis.htm#CTM |title=archive.org capture of InExchange synopsis circa 1998 |publisher=archive.org |date=1998-06-27 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/19980627133928/http://www.e-gold.com/unsecure/synopsis.htm#CTM |archivedate=June 27, 1998 }}</ref> and “OutExchange”<ref>{{cite web|author= |url=http://www.e-gold.com/unsecure/synopsis.htm#MTC |title=archive.org capture of OutExchange synopsis circa 1998 |publisher=archive.org |date=1998-06-27 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/19980627133928/http://www.e-gold.com/unsecure/synopsis.htm#MTC |archivedate=June 27, 1998 }}</ref> were directly supported on the e-gold platform. This arrangement exposed the system’s operator, G&SR, to the financial risks attendant to provision of exchange services. It also tended to inhibit third parties from offering exchange services on an independent competitive basis.

In 2000 the system was re-structured<ref>{{cite web|author= |url=http://e-gold.com/unsecure/transition.htm |title=archive.org capture of re-structuring announcement circa 2000 |publisher=archive.org |date=2000-12-05 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20001205230800/http://e-gold.com/unsecure/transition.htm |archivedate=December 5, 2000 }}</ref> to effect a separation of currency exchange activities from the core functions of e-metal issuance and settlement of transfers. G&SR devolved ownership and responsibility for these core functions to e-gold Ltd.,<ref>{{cite web|author= |url=http://blog.e-gold.com/2000/01/e-gold-ltd-assu.html |title=archive.org capture of devolution announcement circa 2000|publisher=archive.org |date=2000-01-31 |accessdate=2014-12-22}}</ref> a newly formed offshore company organized for that express purpose. G&SR itself, now a customer of e-gold, continued to offer exchange services under the newly created OmniPay <ref>{{cite web|author= |url=http://omnipay.com/default.asp |title=archive.org capture of Omnipay website circa 2003 |publisher=archive.org |date=2003-06-05 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20030605160457/http://omnipay.com/default.asp |archivedate=June 5, 2003 }}</ref> brand.

Beginning spring 2000, there was a proliferation of independent exchange services <ref>{{cite web|author= |url=http://www.icegold.com/ |title=archive.org capture of IceGold website circa 2003 |publisher=archive.org |date=2003-05-31 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20030531065248/http://www.icegold.com/ |archivedate=May 31, 2003 }}</ref><ref>{{cite web|author= |url=http://www.londongoldexchange.com/ |title=archive.org capture of London Gold Exchange website circa 2001 |publisher=archive.org |date=2001-11-29 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20011129194851/http://www.londongoldexchange.com/ |archivedate=November 29, 2001 }}</ref><ref>{{cite web|author= |url=http://www.goldchanger.com/ |title=archive.org capture of GoldChanger website circa 2001 |publisher=archive.org |date=2001-02-01 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20010201082500/http://www.goldchanger.com/ |archivedate=February 1, 2001 }}</ref><ref>{{cite web|author= |url=http://offshoremetals.com/ |title=archive.org capture of OffshoreMetals website circa 2001 |publisher=archive.org |date=2001-09-24 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20010924025531/http://offshoremetals.com/ |archivedate=September 24, 2001 }}</ref><ref>{{cite web|author= |url=http://www.canadiangold.ws/ |title=archive.org capture of CanadianGold.ws website circa 2001 |publisher=archive.org |date=2001-05-18 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20010518045121/http://www.canadiangold.ws/ |archivedate=May 18, 2001 }}</ref><ref>{{cite web|author= |url=http://www.ozzigold.com/ |title=archive.org capture of OzziGold website circa 2001 |publisher=archive.org |date=2001-05-16 |accessdate=2014-12-22 |deadurl=yes |archiveurl=https://web.archive.org/web/20010516202511/http://www.ozzigold.com/ |archivedate=May 16, 2001 }}</ref> marking the first emergence of an industry providing exchange between conventional national currencies and a privately issued brand of money. By 2001 several dozen companies and individuals from around the world were offering third party exchange services between ] and e-gold, further extending e-gold's international user base.

e-gold, which allowed transactions as small as one ten-thousandth of a gram of gold, was also the world's only successful ] system. The company's payment statistics were published live and showed hundreds of thousands of micro-transactions were being made daily by computer programs using the API.

From its inception in 1996, e-gold pioneered the decoupling of the numeraire for specifying a payment (Spend) instruction from the native unit of account of the settlement currency.<ref>{{cite web|author= |url=http://www.e-gold.com/unsecure/synopsis.htm#spend |title=archive.org capture of "Spend" explanation circa 1998 |publisher=archive.org |date=1998-06-27 |accessdate=2014-12-23 |deadurl=yes |archiveurl=https://web.archive.org/web/19980627133928/http://www.e-gold.com/unsecure/synopsis.htm#spend |archivedate=June 27, 1998 }}</ref> For example, while AUG®<ref>{{cite web|author= |url=http://www.uspto.gov/main/trademarks.htm |title=USPTO search utility, ref.serial number 76526152|publisher=USPTO |date=2014-12-23 |accessdate=2014-12-23}}</ref> (the trademarked designation for e-gold) was denominated in grams and decimal fractions (or in troy ounces since, as weight units, both are related by fixed arithmetic ratio), a Spend Instruction might be specified as “Pay 10 USD’ worth of e-gold”. Calculation of the actual quantity to convey was made using a table of reference exchange rates<ref>{{cite web|author= |url=http://www.e-gold.com/currentexchange.html |title=archive.org capture of e-gold reference exchange rates November 2, 2005 |publisher=archive.org |date=2005-11-07 |accessdate=2014-12-23 |deadurl=yes |archiveurl=https://web.archive.org/web/20051107021017/http://www.e-gold.com/currentexchange.html |archivedate=November 7, 2005 }}</ref> maintained by the company, reflecting current actual exchange rates published by exchange providers.<ref>{{cite web|author=Carl Mullan |url=http://www.palgrave.com/page/detail/the-digital-currency-challenge-p-carl-mullan/?K=9781137382542 |title=The Digital Currency Challenge (p.21)|publisher=Palgrave |date=2014-06-05 |accessdate=2014-12-22}}</ref>

⚫ By the early 2000s (decade), the capability of immediate settlement, as implemented by e-gold, was recognized as key to the emergence of systems for peer-to-peer transfers of digital rights such as “smart contracts”.<ref>{{cite web|author=Mark Miller |url=http://www.erights.org/talks/pisa/paper/index.html |title=The Digital Path: Smart Contracts and the Third World |publisher=archive.org |date=2002-12-17 |accessdate=2015-01-12 |deadurl=yes |archiveurl=https://web.archive.org/web/20021217211546/http://www.erights.org/talks/pisa/paper/index.html |archivedate=December 17, 2002 }}</ref>

===Governance===
e-gold was unique at the time in that they created the "e-gold Special Purpose Trust" which held title to the physical ] on behalf of the users.<ref>{{cite web|url=http://www.e-gold.com/contracts/egold-spt-111899.htm |archiveurl=https://web.archive.org/web/20020210033623/http://www.e-gold.com/contracts/egold-spt-111899.htm |archivedate=2002-02-10 |title=e-gold Bullion Reserve Special Purpose Trust |publisher=Web.archive.org |date=2002-02-10 |accessdate=2013-09-20}}</ref> They also created a real-time statistical reports page<ref>{{cite web|url=http://scbbs.net/craigs/stats.html |title=e-gold Statistics |publisher=Scbbs.net |date=2010-02-23 |accessdate=2013-09-20}}</ref> that showed the total holdings of each metal in the trust account, list of ]s with serial numbers, the total number of accounts, as well as the total number and value of transactions in the previous 24 hours. This transparency enabled many observations to be made about how e-gold was being used.


==Criminal abuse== ==Criminal abuse==
E-gold was a target of financial ] and ] scams by criminal syndicates and was used for illegal activities. In December 2005, the ] (FBI) raided G&SR's offices, seizing files and hardware, as part of an investigation into e-gold's use in criminal activities. A month later, no charges had been filed against Jackson or his businesses.<ref name="florida-today">{{cite news |last1=Monroe |first1=Brian |title=Internet company under scrutiny |url=https://www.proquest.com/docview/239413686 |access-date=August 21, 2023 |work=Florida Today |date=January 6, 2006|id={{ProQuest|239413686}} }}</ref>
E-gold's early success may have contributed to its demise. E-gold's store of value and large user base made it an early target of financial ] and ] scams by increasingly organized criminal syndicates. The first known phishing attack against a financial institution was made against members of the e-gold mailing list in June 2001.<ref>{{cite web|author= |url=http://financialcryptography.com/mt/archives/000609.html |title=GP4.3 - Growth and Fraud - Case #3 - Phishing |publisher=Financial Cryptography |date=2005-12-30 |accessdate=2013-09-20}}</ref> The technique was refined with attacks against the digital gold systems like e-gold and later used to attack other financial institutions starting in 2003.


===Hackers=== ===Hackers===
Failing to prospectively verify the identity of account holders, e-gold began to suffer from an increasing rate of criminal activity mainly perpetrated by Russian{{citation needed|date=December 2016}} and Ukrainian{{citation needed|date=December 2016}} hackers against its users. In addition to phishing, the attackers made widespread use of flaws in the ] operating systems and ] web browser to collect account details from millions of computers to compromise e-gold accounts.<ref>{{cite web|url=http://www.mail-archive.com/e-gold-list@talk.e-gold.com/msg02786.html |title=[e-gold-list&#93; Large Criminal Hacker Attack on Windows NT E-Banking and E-Commerce Sites |publisher=Mail-archive.com |date=2001-03-08 |accessdate=2013-09-20}}</ref> Because of e-gold's ] and ] policies, it was an early and particularly attractive target of ] attacks against its users.<ref name=":0">{{Cite web |title=Financial Cryptography: e-gold stomps on phishing? |url=https://www.financialcryptography.com/mt/archives/000190.html |access-date=2023-08-19 |website=www.financialcryptography.com}}</ref><ref>{{Cite journal |last=Mullan |first=P. Carl |date=2016 |title=A History of Digital Currency in the United States |url=https://link.springer.com/book/10.1057/978-1-137-56870-0 |journal=SpringerLink |language=en |doi=10.1057/978-1-137-56870-0|isbn=978-1-137-56869-4 }}</ref> Attackers also exploited flaws in the ] operating systems and ] web browser to collect account details from millions of computers to compromise online accounts, including e-gold accounts.<ref>{{cite web|url=http://www.mail-archive.com/e-gold-list@talk.e-gold.com/msg02786.html |title=]s to improve its security.<ref name=":0" />


Jackson's theory was that e-gold is a book entry system with account histories, making it simple to conduct an investigation to track down and identify users who had engaged in illicit activity after the fact.<ref>{{cite web|title=DELETING COMMERCIAL PORNOGRAPHY SITES FROM THE INTERNET: THE U.S. FINANCIAL INDUSTRY'S EFFORTS TO COMBAT THIS PROBLEM|url=http://www.gpo.gov/fdsys/pkg/CHRG-109hhrg31467/html/CHRG-109hhrg31467.htm|website=www.gpo.gov|publisher=U.S. Government Printing Office|accessdate=8 January 2015}}</ref> While the public perception was that e-gold accounts were anonymous, e-gold accounts were ],<ref>{{cite web|url=http://blog.e-gold.com/2007/09/buy-online-priv.html |title=e-gold Blog: Buy Online Privately (but not Anonymously) with e-gold |publisher=Blog.e-gold.com |date=2007-09-12 |accessdate=2013-09-20}}</ref> allowing the creator of the account to use any name or label he wished to use. However, account and transaction records—even failed log-in attempts—were permanently recorded, enabling linkage of seemingly unrelated accounts secretly under unified control. The data mining this enabled, combined with inputs from independent exchange services, enabled law enforcement to identify numerous criminal users of the service.<ref>{{cite web|last1=Dowd|first1=Kevin|title=Contemporary Private Monetary Systems|url=http://www.kevindowd.org/app/download/8477462997/Contemporary+Private+Monetary+Systems.pdf?t=1380159881|website=www.kevindowd.org|publisher=Kevin Dowd|accessdate=8 January 2015}}</ref> Jackson said that e-gold is a book entry system with account histories, making it possible to identify users who had engaged in illicit activity.<ref name=":1">{{cite web|title=DELETING COMMERCIAL PORNOGRAPHY SITES FROM THE INTERNET: THE U.S. FINANCIAL INDUSTRY'S EFFORTS TO COMBAT THIS PROBLEM|url=http://www.gpo.gov/fdsys/pkg/CHRG-109hhrg31467/html/CHRG-109hhrg31467.htm|website=www.gpo.gov|publisher=U.S. Government Printing Office|access-date=8 January 2015}}</ref> e-gold accounts were ],<ref>{{cite web|url=http://blog.e-gold.com/2007/09/buy-online-priv.html |title=e-gold Blog: Buy Online Privately (but not Anonymously) with e-gold |publisher=Blog.e-gold.com |date=2007-09-12 |access-date=2013-09-20}}</ref> allowing an account's creator to use any name. Law enforcement could use e-gold's account and transaction records, cross-referenced with data from exchangers, to identify criminal users of the service.<ref>{{cite web|url=http://www.kevindowd.org/app/download/8477462997/Contemporary+Private+Monetary+Systems.pdf?t=1380159881|title=Contemporary Private Monetary Systems|website=www.kevindowd.org|publisher=Kevin Dowd|archive-url=https://web.archive.org/web/20150108093517/http://www.kevindowd.org/app/download/8477462997/Contemporary+Private+Monetary+Systems.pdf?t=1380159881|url-status=dead|last1=Dowd|first1=Kevin|access-date=8 January 2015|archive-date=8 January 2015}}</ref>


===Fraud=== ===Fraud===
Various fraud artists from Western countries were also able to take advantage of the e-gold system as a means of funding their schemes, enabling for the first time in history, international Ponzi schemes.
Perpetrators of auction fraud on ] would sell fake or non-existent items on the site. These criminal syndicates preferred their victims to pay in e-gold because it was the fastest and easiest way for them to move the funds overseas.<ref name="e-gold.com">{{cite web|url=http://www.e-gold.com/unsecure/alert.html |title=e-gold Security Alerts |publisher=E-gold.com |date= |accessdate=2013-09-20}}</ref>


In a lengthy article in '']''{{'}}s January 9, 2006 issue, a reporter wrote that ] systems, including e-gold, have become popular among merchants engaged in ], ], and ]. Jackson said that his company has an investigative staff that responds to inquiries from law enforcement agencies, and that his company does not cater to criminals.<ref name="florida-today" />
The increase of online crime linked to e-gold led to complaints to government authorities by defrauded account holders, who often did not understand the difference between e-gold and the fraudulent person or company that encouraged them to open an e-gold account and wire money to fund it.<ref name="e-gold.com"/>


The Western Express Cybercrime Group, a five-man fraud syndicate based in Eastern Europe, engaged in carding, selling illegally obtained goods and using e-gold and other digital currencies to store the proceeds.<ref name="nytimes-2009-08-31">{{cite news |last1=Eligon |first1=John |title=Five More Accused in Credit Card Fraud Investigation |url=https://www.nytimes.com/2009/09/01/nyregion/01cyber.html |access-date=October 23, 2022 |work=The New York Times |date=September 1, 2009}}</ref>
===Systemic problems===
As an online transactions system with exchange agents worldwide, e-gold enabled criminals and hackers in Romania to move money quickly and easily from victims in America back to the country from which the attacks were originating. Several of the cyber crime gangs that plagued and used e-gold were based in ], ].<ref>{{cite web|author= |url=http://www.wired.com/magazine/2011/01/ff_hackerville_romania/ |title=How a Remote Town in Romania Has Become Cybercrime Central &#124; Wired Magazine |publisher=Wired.com |date=2012-08-27 |accessdate=2013-09-20}}</ref>


==Prosecution and closure==
e-gold was unknowingly part of a larger systemic problem with the banking system. The banking and credit system in the United States were not designed for a digital environment, and were therefore fundamentally insecure and highly vulnerable to ] and ], as well as trust based attacks such as phishing. The willingness of credit card companies to allow people to apply for a card without being identified in person enabled rapid growth of identity theft.<ref name="web.archive.org">{{cite web|url=http://www.davidgyoung.com/identitytheft.html |archiveurl=https://web.archive.org/web/20111119104214/http://www.davidgyoung.com/identitytheft.html |archivedate=2011-11-19 |title=Partners in Crime; The Fundamental Cause of Identity Theft |publisher=Web.archive.org |date= |accessdate=2013-09-20}}</ref> (Ironically, not verifying the identities of account holders would be one of the main criticisms raised against e-gold.)


In 2007, a U.S. federal ] indicted e-gold, accusing it of ], ], and operating an unlicensed ], stating that it knew its service was being abused by ] and ] but did not do enough to stop them. The company denied the charges.<ref name="nbcnews-2007-05">{{cite news |last1=Sullivan |first1=Bob |title=Feds accuse E-Gold of helping cybercrooks |url=https://www.nbcnews.com/business/consumer/feds-accuse-e-gold-helping-cybercrooks-flna6c10406525 |access-date=October 23, 2022 |work=NBC News |date=May 2, 2007 |language=en}}</ref> In July 2008, the company and its three directors entered into a plea agreement. Douglas Jackson pleaded guilty to operation of an unlicensed money transmitting business and conspiracy to engage in money laundering.<ref name="wired-2008-07-25">{{cite magazine |last1=Zetter |first1=Kim |title=E-Gold Founder Pleads Guilty to Money Laundering |url=https://www.wired.com/2008/07/e-gold-founder/ |access-date=October 23, 2022 |magazine=Wired |date=July 25, 2008}}</ref> In November 2008, Jackson was sentenced to 300 hours of ], a $200 fine, and three years of supervision, including six months of electronically monitored ]. Jackson had faced a maximum sentence of 20 years in prison and a $500,000 fine. Judge ] opted for a much more lenient sentence because of Jackson's significant personal debt. "Dr. Jackson has suffered, will continue to suffer, and may never be successful with e-Gold," said the judge.<ref name=spares>{{cite news|url=https://www.cnet.com/tech/tech-industry/judge-spares-e-gold-directors-jail-time/|title=Judge spares e-Gold directors jail time|author=Stephanie Condon|date=2008-11-20|publisher=CNET}}</ref>
==Cybercrime==
There were early reports where e-gold had actively helped to catch and collar cyber criminals, such as the one who stole ]' ] code and offered it for sale to be paid in e-gold.<ref name="smartdevicecentral.com">{{cite web|url=http://www.smartdevicecentral.com/article/Egold+Tracks+Cisco+Code+Thief/138637_1.aspx |title=E-gold Tracks Cisco Code Thief |publisher=Smartdevicecentral.com |date=2004-11-05 |accessdate=2013-09-20}}</ref> In June 2007, Jackson claimed to have "aided 300 investigations and reported 3,000 suspected ] buyers to the ]".<ref name="nydailynews.com">{{cite web|url=http://www.nydailynews.com/news/crime/feds-bust-24-karat-web-worry-article-1.219589 |title=Feds out to bust up 24-karat Web worry |publisher=NY Daily News |date=2007-06-03 |accessdate=2013-09-20}}</ref> Goldmoney, and then federal law enforcement agencies began to characterize e-gold as the payment system of choice for criminals, terrorists and child pornographers.<ref name="nydailynews.com"/>


Reid Jackson, Douglas's brother, and Barry Downey, a company director, were each sentenced to three years of probation and 300 hours of community service, and ordered to pay a $2,500 fine and a $100 assessment.<ref name=spares />
==Criminal prosecution==


E-gold's plea agreement included a forfeiture of about $1.2 million to the government, a $300,000 fine, and a condition that Douglas Jackson impose ] (KYC) rules on e-gold customers. Customers who lived in high-risk countries or who had not completed KYC verification were limited to low or no transaction rates.<ref name="wired-2009-06-09">{{cite magazine |last1=Zetter |first1=Kim |title=Bullion and Bandits: The Improbable Rise and Fall of E-Gold |url=https://www.wired.com/2009/06/e-gold/ |access-date=October 23, 2022 |magazine=Wired |date=June 9, 2009}}</ref> e-gold announced a claims process in December 2010, and launched it in June 2013, for account holders to access the funds they had deposited. As of November 2013, users could not use e-gold's web site for other purposes.<ref name="catojournal">{{cite news |last1=White |first1=Lawrence H. |title=THE TROUBLING SUPPRESSION OF COMPETITION FROM ALTERNATIVE MONIES: THE CASES OF THE LIBERTY DOLLAR AND E-GOLD |url=https://www.proquest.com/docview/1532503869 |access-date=October 23, 2022 |work=Cato Journal |issue=34/2 |publisher=Cato Institute |date=Spring 2014 |pages=281–301|id={{ProQuest|1532503869}} }}</ref> Jackson told the '']'' in a November 2013 article that he had hoped to resurrect e-gold himself, but that he had not been able to obtain the licenses required in most US states.<ref>Stephen Foley, November 28, 2013 , Financial Times</ref>
===Changing definition of a money transmitter===
The USA ], passed in the wake of the ] more than five years after e-gold had been launched, made it a federal crime to operate a money transmitter business without a state money transmitter license in any state that required such a license. At the time a ] was in most states defined as a business that cashed checks or accepted cash remittances to send from one person to another person across international borders, such as Western Union or ]. For example, prior to 2010, ] regulated money transmitters under the "Transmission of Money Abroad Law".<ref name="venable.com">{{cite web|author=Authors Jonathan L. Pompan |url=http://www.venable.com/california-enacts-sweeping-new-law-targeting-money-transmitters-10-05-2010/ |title=Venable LLP &#124; News & Insights &#124; Publications &#124; Newsletters &#124; Credit Counseling Alert |publisher=Venable.com |date= |accessdate=2013-09-20}}</ref> One of e-gold's competitors, the ] company, applied for a money transmitter license from the State of California in 2002, but was informed by the State of California that their business which dealt in gold accounts did not fall under the state's definition of a money transmitter.

In 2005 G&SR requested that the IRS SB/SE Division conduct a BSA (Bank Secrecy Act) Compliance examination in order to clarify what regulations, if any, e-gold fell under.<ref>{{cite web|url=https://www.e-gold.com/letter2.html |title=e-gold® welcomes |publisher=Web.archive.org |date=2006-03-22 |accessdate=2013-09-20 |deadurl=yes |archiveurl=https://web.archive.org/web/20060322134922/https://www.e-gold.com/letter2.html |archivedate=March 22, 2006 }}</ref> The United States Treasury issued a report on January 11, 2006 confirming that e-gold accounts were excluded from the definition of "currency" under the ] and ] definitions.

However, in its actions from 2006-2008 the U.S. Treasury Department in conjunction with the ] stretched the definition of money transmitter in the USA Patriot Act to include any system that allows transfer of any kind of value from one person to another, not merely national currency or cash. Using this new interpretation they then proceeded to prosecute the USA-based gold systems, e-gold (and later e-Bullion) under the USA Patriot Act for not having money transmitter licenses, even though these companies had previously been cooperating with regulatory authorities and told they did not fall under the definition of money transmitter. The charge of not having a money transmitter license was eventually dropped against e-bullion. Several years later ] further expanded this definition to apply to foreign companies allowing US persons to open accounts, which forced the ] based Goldmoney.com to suspend the ability to transfer value from one holder to another in December 2011.<ref>{{cite web|url=http://issuu.com/dgcmagazine/docs/digital-gold-currency-mag-december-2011 |title=DGC Magazine December 2011 by DGC Magazine |publisher=ISSUU |date= |accessdate=2013-09-20}}</ref>

A November 2013 article in '']'' noted that "For several years, Mr Jackson had hoped to resurrect e-gold himself, but it became clear he would not be able to obtain the money transmitter licenses required in most US states."<ref>Stephen Foley, November 28, 2013 , Financial Times</ref>

===Allegations against e-gold===
Banks suffer from the same problems with criminal activity, phishing, ponzi schemes and money laundering on a much larger scale, and some of the biggest banks have even knowingly participated in money laundering.<ref>{{cite web|last=Thompson |first=Jennifer |url=http://www.ft.com/cms/s/0/8ce703aa-c48f-11e2-9ac0-00144feab7de.html |title=HSBC ‘humbled’ by magnitude of Mexico money laundering scandal |publisher=FT.com |date=2013-05-24 |accessdate=2013-09-20}}</ref> e-gold's status as a controversial ] system made it an attractive target.

While e-gold had begun implementing stronger controls against abuse by users of the system by 2005, and was actively combating the use of its system for child pornography as a founding member of the ],<ref>{{cite web|url=http://www.ncmec.org/missingkids/servlet/NewsEventServlet?LanguageCountry=en_US&PageId=2314 |archiveurl=https://web.archive.org/web/20070713174324/http://www.ncmec.org/missingkids/servlet/NewsEventServlet?LanguageCountry=en_US&PageId=2314 |archivedate=2007-07-13 |title=Financial and Internet Industries to Combat Internet Child Pornography |publisher=Web.archive.org |date= |accessdate=2013-09-20}}</ref> the Justice Department indicted the e-gold directors on four counts of violating money laundering regulations and knowingly allowing a transaction to purchase child pornography.<ref name="fraudwar.blogspot.com">{{cite web|author=Ed Dickson |url=http://fraudwar.blogspot.com/2007/04/e-gold-accused-of-being-money.html |title=Fraud, Phishing and Financial Misdeeds: E Gold accused of being a money laundering vehicle for financial fraudsters and child pornographers |publisher=Fraudwar.blogspot.com |date=2007-04-30 |accessdate=2013-09-20}}</ref> The government action against e-gold was a case of first impression. As noted by the prosecutor, “Digital currencies are on the forefront of international fund transfers. e-Gold is the most prominent digital currency out there. It has the attention of the entire digital currency world. That world is a bit of a wild west right now. People are looking for what are the rules and what are the consequences.”<ref>{{cite web|author= |url=http://legalupdate.e-gold.com/2008/11/transcript-of-sentence-before-the-honorable-rosemary-m-collyer-united-states-district-judge.html |title=Transcript of Sentencing Hearing, p. 95 |publisher=from Pacer |date=2008-11-20 |accessdate=2015-01-13}}</ref>

===Resolution===
The case against e-gold was brought under Title 18 USC section 1960 in UNITED STATES OF AMERICA v. E-GOLD, LTD, District of Columbia court. e-gold filed a motion to dismiss the case on the grounds that they did not fit the definition of a money transmitter. The court ruled against e-gold, stating that "a business can clearly engage in money transmitting without limiting its transactions to cash or currency and would commit a crime if it did so without being licensed."<ref>{{cite web|url=http://obtainingforeignevidence.blogspot.com/2008/05/international-crimes-e-currency-subject.html|title=International crimes: E-currency subject to licensing requirements|author=Linda Friedman Ramirez|date=2008-05-13}}</ref> This ruling enshrined in case law the Treasury Department's expansion of the definition of a money transmitter to include any system by which stored value of any kind may be transferred from one person to another, even if the stored value is neither cash, nor national currency.

After vigorously contesting the charges for a year, in July 2008 the company and its three directors entered into a plea agreement. Dr. Jackson pleaded guilty to "operation of an unlicensed money transmitting business" and "conspiracy to engage in money laundering".<ref>{{cite web|author= |url=http://legalupdate.e-gold.com/2008/07/plea-agreement-as-to-douglas-l-jackson-20080721.html |title=Plea Agreement, Dr. Douglas Jackson|publisher=from Pacer |date=2008-07-21 |accessdate=2015-01-09}}</ref> The agreement detailed actions required to bring the companies into compliance with laws and regulations governing operation of a Money Transmitting Business. Concurrently, the companies agreed to a consent order of forfeiture, dropping their action to recover funds previously seized by the government.<ref>{{cite web|author= |url=http://legalupdate.e-gold.com/2008/07/consent-order-of-forfeiture-20080721.html |title=Consent Order of Forfeiture|publisher=from Pacer |date=2008-07-21 |accessdate=2015-01-09}}</ref>

Sentencing was scheduled to occur 120 days following entry of the Plea Agreements in order to afford a 90-day interval to implement compliance requirements. A status report detailing progress with regard to mandated compliance measures was filed November 8, 2008.<ref>{{cite web|author= |url=http://legalupdate.e-gold.com/2008/11/defendants-status-report-regarding-compliance-pursuant-to-the-july-21-2008-plea-agreements-and-notice-of-filing-2008-11-0.html |title=Compliance Status Report, November 2008|publisher=from Pacer |date=2008-11-05 |accessdate=2015-01-09}}</ref>

In November 2008, Gold & Silver Reserve CEO Douglas Jackson was sentenced to 300 hours of ], a $200 fine, and three years of supervision, including six months of electronically monitored ].<ref name=spares>{{cite news|url=http://news.cnet.com/8301-13578_3-10104677-38.html|title=Judge spares e-Gold directors jail time|author=Stephanie Condon|date=2008-11-20|publisher=CNET}}</ref> He had faced a maximum sentence of 20 years in prison and a $500,000 fine. Commenting on her substantial deviation from Federal Sentencing Guidelines (in the direction of leniency), Judge ], having already noted “no doubt that Dr. Jackson has respect for the law” and that “the intent was not there to engage in illegal conduct”, determined: “there is no reason to shut down e-Gold and G&SR, and every reason to have them come into legal compliance”.<ref>{{cite web|author= |url=http://legalupdate.e-gold.com/2008/11/transcript-of-sentence-before-the-honorable-rosemary-m-collyer-united-states-district-judge.html |title=Transcript of Sentencing Hearing |publisher=from Pacer |date=2008-11-20 |accessdate=2015-01-13}}</ref> Jackson's lawyer claimed Jackson was spared the heavier fine because he was deeply in debt - the Judge said "Dr. Jackson has suffered, will continue to suffer, and may never be successful with e-Gold". Reid Jackson, Douglas Jackson's brother, and e-Gold director Barry Downey were each sentenced to three years of probation and 300 hours of community service, and ordered to pay a $2,500 fine and a $100 assessment.<ref name=spares/>

===Suspension of service and e-gold Value Access Plan (VAP)===

The 2007 e-gold indictment was accompanied by seizures (and forced redemption) of the e-gold balances of multiple exchange providers, resulting in an almost overnight decline in the amount of e-gold in circulation (and gold reserves) from 3.5 to 2.6 metric tonnes. Additionally, the government filed a Post-Indictment Restraining Order (PIRO) which prohibited redemption of e-gold for gold bullion without the approval of the prosecutor. The primary purpose of the PIRO was to prevent dispersion of assets (the gold reserves) which the government had been unable to seize due to the custodial arrangements whereby the e-gold Bullion Reserve Special Purpose Trust held title to the gold.

The combination of adverse publicity and disrupted exchange markets led to a precipitous decline in e-gold usage and demand. Whereas under normal circumstances a decrease in demand would have resulted in a decrease in circulation (without impacting exchange rates), this combination led to e-gold Users being unable to exchange their e-gold for conventional money and discouraged any potential recipient from accepting payment in e-gold.

In 2008, the Plea Agreement detailed requirements for e-gold to resume operation as a regulated financial institution. While e-gold had already complied with the majority of requirements by the time of sentencing, it was discovered that the guilty Plea itself effectively precluded the companies (or any company controlled by the e-gold directors) from being licenseable in any US state. In accordance with the Plea, e-gold suspended all remaining Spend activity, in effect locking up all e-gold account balances.

The challenge was then how to restore customer access to the value in their e-gold accounts. Lacking licenses as a money transmitting business, any plan to liquidate the system and distribute value to customers would risk being construed as an additional violation of operating without required licenses.

In 2009, the e-gold directors approached the US government with a proposal whereby the government might serve as middleman for disbursing the value due to e-gold customers. Following a year of negotiation, the e-gold VAP was approved calling for monetization of reserves and a claims mechanism, under the authority and oversight of Judge Hollander.<ref>{{cite web|title=e-gold Value Access Plan – Monetization Preparation|url=http://blog.e-gold.com/2010/12/value-access-plan-approved.html|website=blog.e-gold.com|accessdate=2015-01-14|date=31 December 2010}}</ref> The VAP protocol entailed the companies consenting to a voluntary seizure action of the aggregate e-gold. The companies were then responsible for “monetizing” the value, that is, redeeming the e-gold, liquidating the bullion released from reserves and turning over the proceeds to the Secret Service.

Due to a fortuitous drop in USD value relative to e-gold, the net realized monetization rate for VAP was $1583 per troy ounce, over twice the maximum e-gold exchange rate during the interval Spend activity was curtailed and then suspended c. 2007-2009. Altogether, G&SR turned over more than $92.8 million to the Secret Service in 2012.

Some of the e-metal in e-Gold accounts was criminally derived, but much of the e-metal was owned by innocent account holders.<ref name="claim">{{cite web|title=E-Gold Claims Process Administrator homepage |url=https://egoldclaimsprocess.com/ |accessdate=14 January 2015 |year=2013 |deadurl=yes |archiveurl=https://web.archive.org/web/20140208053858/https://egoldclaimsprocess.com/ |archivedate=February 8, 2014 }}</ref> The court ordered Rust Consulting, a private company in Maryland, to process refunds to account holders following validation of their identity by e-gold.<ref>{{cite web|title=e-gold Claims Process FAQ |url=http://www.egoldclaimsprocess.com/FrequentlyAskedQuestions.aspx |publisher=Rust Consulting |accessdate=14 January 2015 |deadurl=yes |archiveurl=https://web.archive.org/web/20130508085718/http://www.egoldclaimsprocess.com/FrequentlyAskedQuestions.aspx |archivedate=May 8, 2013 }}</ref> The balance of unclaimed funds will be forfeited to the US government. A three-month window was set from June 3, 2013 to October 1, 2013 for e-gold account holders to submit a claim on their funds, then extended to December 31, 2013.<ref>{{cite web|url=http://blog.e-gold.com/2013/12/e-gold-value-access-plan-claims-filing-deadline-extended-a-third-time.html |title=e-gold Value Access Plan – Claims Filing Deadline Extended a Third Time |publisher=Blog.e-gold.com |date= |accessdate=2013-12-19}}</ref>

===Aftermath===
After the e-gold and e-Bullion cases, California (2010)<ref name="venable.com"/> and several other states amended their regulations to follow the federal ] to define all digital value transfer systems as money transmitters. However, California's 2010 law is worded as to define a range of Internet startup companies, such as the room booking service ], as "money transmitters".<ref>{{cite web|author=Owen Thomas |url=http://www.businessinsider.com/california-money-transmitter-act-startups-2012-7 |title=This Innovation-Killing California Law Could Get A Host Of Startups In Money Trouble |publisher=Business Insider |date=2012-07-11 |accessdate=2013-09-20}}</ref>

e-gold was an early pioneer of Internet payments. The company was the first successful online payment system which pioneered many of the systems and techniques of e-commerce, including making payments over an ] encrypted connection, and offering an API to enable other websites to build services using e-gold's transaction system.

Though e-gold was ultimately shut down by the US government, the federal judge on the case ruled that the founders of e-gold "had no intent to commit illegal activity."<ref name=spares/> After the resolution of the criminal case, the directors of e-gold Ltd vowed to continue operations following the new Federal ] guidelines.

e-gold's failure was ultimately due to their inability to provide a system of reliable user identification and the failure to provide a workable dispute resolution system to identify and cut off illegal and abusive activity in their user community. Other transaction systems such as Webmoney.ru<ref>{{cite web|url=http://passport.wmtransfer.com/asp/WMCertify.asp |title=WebMoney.Passport - Verification Service |publisher=Passport.wmtransfer.com |date= |accessdate=2013-09-20}}</ref> and Goldmoney.com<ref>{{cite web|author= |url=http://www.runtogold.com/2008/12/goldmoney-introduces-automated-cap-verification/ |title=GoldMoney Introduces Automated CAP Verification |publisher=Runtogold.com |date=2008-12-17 |accessdate=2013-09-20}}</ref> learned from e-gold's mistakes and were able to successfully field similar systems with low rates of abuse by addressing these deficiencies. While PayPal has done a better job of addressing abuse than e-gold did, they now contend with the same kind of ] that took down e-gold.<ref>{{cite web|url=http://www.auditmypc.com/pay-pal.asp |title=Pay Pal - Paypal Fraud, Hack, Email Scam, Account Warning |publisher=Auditmypc.com |date= |accessdate=2013-09-20}}</ref><ref>{{cite web|author= |url=http://www.ebay.com.au/gds/PAYPAL-FRAUD-BUYERS-SCAMMING-SELLERS/10000000005362471/g.html |title=Paypal Fraud : Buyers Scamming Sellers |publisher=eBay |date= |accessdate=2013-09-20}}</ref> Financial cryptographers have observed that ] has repeated the same fundamental errors that e-gold made, and that despite its decentralized nature the cyber crime-wave might bring Bitcoin to a similar ending.<ref>{{cite web|author= |url=http://financialcryptography.com/mt/archives/001363.html |title=FC++: Bitcoin & Gresham's Law - the economic inevitability of Collapse |publisher=Financial Cryptography |date=2012-02-23 |accessdate=2013-09-20}}</ref><ref>{{cite web|last=Wheeler |first=Lynn |url=http://financialcryptography.com/mt/archives/001327.html |title=BitCoin - the bad news |publisher=Financial Cryptography |date=2011-06-14 |accessdate=2013-09-20}}</ref> According to ]'s website, ] announced <ref>{{ cite web|date=2015-05-22|accessdate=2015-08-12| author=| url=https://www.goldmoney.com/company/news/bitgold|title=BitGold announces acquisition of GoldMoney }} {{Dead link|date=October 2016}}</ref> the acquisition of GoldMoney on May 22, 2015.


==See also== ==See also==
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==References== ==References==
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*{{official website|http://www.e-gold.com/}} *{{official website|http://www.e-gold.com/}}
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{{Digital gold currencies}}


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Latest revision as of 22:20, 29 November 2024

Digital gold currency
G&SR (e-gold Operator) office, 1998-2014

E-gold or eGold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to make payments, which it called "spends", in grams of gold, silver, and other precious metals. E-gold was launched in 1996 and grew to five million accounts by 2009, when transfers were suspended due to legal issues. At its peak in 2006, e-gold processed more than US$2 billion worth of spends per year, backed by over US$85 million worth of gold, about 3.8 tonnes (8,400 lb). e-gold Ltd. was incorporated in Nevis, Saint Kitts and Nevis, and its operations were based in Florida.

Beginnings

E-gold was founded by Douglas Jackson, an oncologist, and Barry Downey, an attorney, in 1996. The pair originally backed e-gold accounts with gold coins stored in a safe deposit box in Melbourne, Florida. When e-gold was at its peak, the company stored its gold and platinum in bank vaults in London and Dubai.

By 1998, G&SR was an affiliate member of NACHA and a full member of NACHA's Internet council. The company experienced exponential growth starting in 2000. In a July 13, 1999 article in the Financial Times, Tim Jackson (no relation to Douglas) described e-gold as "the only electronic currency that has achieved critical mass on the web". In 2001, the company said that e-gold had more than 200,000 accounts and more than $14 million of digital gold currency in circulation. By 2004, there were over a million accounts.

By the early 2000s, the capability of immediate settlement, as implemented by e-gold, was recognized as key to the emergence of systems for peer-to-peer transfers of digital rights such as "smart contracts".

E-gold was a founding member of the Financial Coalition Against Child Pornography. In 2005 and 2006, the company took effective action to combat child exploitation.

Criminal abuse

E-gold was a target of financial malware and phishing scams by criminal syndicates and was used for illegal activities. In December 2005, the Federal Bureau of Investigation (FBI) raided G&SR's offices, seizing files and hardware, as part of an investigation into e-gold's use in criminal activities. A month later, no charges had been filed against Jackson or his businesses.

Hackers

Because of e-gold's hard money and non-repudiation policies, it was an early and particularly attractive target of phishing attacks against its users. Attackers also exploited flaws in the Microsoft Windows operating systems and Internet Explorer web browser to collect account details from millions of computers to compromise online accounts, including e-gold accounts. In the first half of 2004, e-gold implemented one-time passwords to improve its security.

Jackson said that e-gold is a book entry system with account histories, making it possible to identify users who had engaged in illicit activity. e-gold accounts were pseudonymous, allowing an account's creator to use any name. Law enforcement could use e-gold's account and transaction records, cross-referenced with data from exchangers, to identify criminal users of the service.

Fraud

In a lengthy article in BusinessWeek's January 9, 2006 issue, a reporter wrote that online payment systems, including e-gold, have become popular among merchants engaged in carding, identity theft, and money laundering. Jackson said that his company has an investigative staff that responds to inquiries from law enforcement agencies, and that his company does not cater to criminals.

The Western Express Cybercrime Group, a five-man fraud syndicate based in Eastern Europe, engaged in carding, selling illegally obtained goods and using e-gold and other digital currencies to store the proceeds.

Prosecution and closure

In 2007, a U.S. federal grand jury indicted e-gold, accusing it of money laundering, conspiracy, and operating an unlicensed money transmitting business, stating that it knew its service was being abused by identity thieves and child pornographers but did not do enough to stop them. The company denied the charges. In July 2008, the company and its three directors entered into a plea agreement. Douglas Jackson pleaded guilty to operation of an unlicensed money transmitting business and conspiracy to engage in money laundering. In November 2008, Jackson was sentenced to 300 hours of community service, a $200 fine, and three years of supervision, including six months of electronically monitored home detention. Jackson had faced a maximum sentence of 20 years in prison and a $500,000 fine. Judge Rosemary Collyer opted for a much more lenient sentence because of Jackson's significant personal debt. "Dr. Jackson has suffered, will continue to suffer, and may never be successful with e-Gold," said the judge.

Reid Jackson, Douglas's brother, and Barry Downey, a company director, were each sentenced to three years of probation and 300 hours of community service, and ordered to pay a $2,500 fine and a $100 assessment.

E-gold's plea agreement included a forfeiture of about $1.2 million to the government, a $300,000 fine, and a condition that Douglas Jackson impose know your customer (KYC) rules on e-gold customers. Customers who lived in high-risk countries or who had not completed KYC verification were limited to low or no transaction rates. e-gold announced a claims process in December 2010, and launched it in June 2013, for account holders to access the funds they had deposited. As of November 2013, users could not use e-gold's web site for other purposes. Jackson told the Financial Times in a November 2013 article that he had hoped to resurrect e-gold himself, but that he had not been able to obtain the licenses required in most US states.

See also

References

  1. "e-gold Statistics". 2006-11-09. Archived from the original on November 9, 2006. Retrieved 2014-12-19.
  2. ^ Zetter, Kim (June 9, 2009). "Bullion and Bandits: The Improbable Rise and Fall of E-Gold". Wired. Retrieved October 23, 2022.
  3. "archive.org capture of e-gold Director bios page". 2004-10-14. Archived from the original on October 14, 2004. Retrieved 2014-12-19.
  4. "Synopsis of e-gold Transactions". Gold & Silver Reserve, Inc. Archived from the original on June 27, 1998. Retrieved 8 January 2015.
  5. "archive.org capture of NACHA Affiliates listing, circa 1998". 1998-07-09. Archived from the original on July 9, 1998. Retrieved 2014-12-22.
  6. "archive.org capture of e-gold homepage, circa 1998". 1998-06-27. Archived from the original on June 27, 1998. Retrieved 2014-12-22.
  7. "list post, March 4, 2001". talk.e-gold.com (independent discussion list). 2001-03-04. Retrieved 2014-12-20.
  8. Jackson, Tim (July 13, 1999). "When gold makes cents: It may sound crazy, but the eGold payment mechanism based on deposits of precious metal, is cheap, efficient and easy". Financial Times. ProQuest 248786094. Retrieved August 19, 2023.
  9. "Developments in the Law Concerning Stored Value Cards and Other Electronic Payments Products, footnote 154". Maurer School of Law: Indiana University, Law Journal. 2007-01-01. Retrieved 2014-12-20.
  10. Ballve, Marcelo (June 24, 2001). "GET READY TO TURN YOUR DOLLARS INTO GOLD -- ELECTRONICALLY". South Florida Sun-Sentinel. ProQuest 387947777. Retrieved August 21, 2023.
  11. "archive.org archive". 2004-07-11. Archived from the original on July 11, 2004. Retrieved 2014-12-20.
  12. Mark Miller (2002-12-17). "The Digital Path: Smart Contracts and the Third World". Archived from the original on December 17, 2002. Retrieved 2015-01-12.
  13. "Sites selling child porn targeted". 2006-03-16. Retrieved 2023-08-19.
  14. "Financial and Internet Industries to Combat Internet Child Pornography". 2007-07-13. Archived from the original on 2007-07-13. Retrieved 2023-08-20.
  15. ^ "DELETING COMMERCIAL PORNOGRAPHY SITES FROM THE INTERNET: THE U.S. FINANCIAL INDUSTRY'S EFFORTS TO COMBAT THIS PROBLEM". www.gpo.gov. U.S. Government Printing Office. Retrieved 8 January 2015.
  16. ^ Monroe, Brian (January 6, 2006). "Internet company under scrutiny". Florida Today. ProQuest 239413686. Retrieved August 21, 2023.
  17. ^ "Financial Cryptography: e-gold stomps on phishing?". www.financialcryptography.com. Retrieved 2023-08-19.
  18. Mullan, P. Carl (2016). "A History of Digital Currency in the United States". SpringerLink. doi:10.1057/978-1-137-56870-0. ISBN 978-1-137-56869-4.
  19. "[e-gold-list] Large Criminal Hacker Attack on Windows NT E-Banking and E-Commerce Sites". Mail-archive.com. 2001-03-08. Retrieved 2013-09-20.
  20. "Three organisations targeted by email scams". The Sydney Morning Herald. December 17, 2003. Retrieved October 23, 2022.
  21. "e-gold Blog: Buy Online Privately (but not Anonymously) with e-gold". Blog.e-gold.com. 2007-09-12. Retrieved 2013-09-20.
  22. Dowd, Kevin. "Contemporary Private Monetary Systems" (PDF). www.kevindowd.org. Kevin Dowd. Archived from the original (PDF) on 8 January 2015. Retrieved 8 January 2015.
  23. Eligon, John (September 1, 2009). "Five More Accused in Credit Card Fraud Investigation". The New York Times. Retrieved October 23, 2022.
  24. Sullivan, Bob (May 2, 2007). "Feds accuse E-Gold of helping cybercrooks". NBC News. Retrieved October 23, 2022.
  25. Zetter, Kim (July 25, 2008). "E-Gold Founder Pleads Guilty to Money Laundering". Wired. Retrieved October 23, 2022.
  26. ^ Stephanie Condon (2008-11-20). "Judge spares e-Gold directors jail time". CNET.
  27. White, Lawrence H. (Spring 2014). "THE TROUBLING SUPPRESSION OF COMPETITION FROM ALTERNATIVE MONIES: THE CASES OF THE LIBERTY DOLLAR AND E-GOLD". Cato Journal. No. 34/2. Cato Institute. pp. 281–301. ProQuest 1532503869. Retrieved October 23, 2022.
  28. Stephen Foley, November 28, 2013 E-gold founder backs new Bitcoin rival, Financial Times

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