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In 2007, a U.S. federal ] indicted e-gold, accusing it of serving ] and ]. 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. 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 news |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 |work=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 ]. 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. 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=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> In 2007, a U.S. federal ] indicted e-gold, accusing it of serving ] and ]. 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. 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 news |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 |work=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 ]. 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. 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=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>

=== Petition to vacate 2008 convictions ===
On July 2, 2020, e-gold Ltd, Gold & Silver Reserve, Inc, Douglas Jackson, Barry Downey, and Reid Jackson filed a ] petition in the United States District Court for the District of Columbia seeking to vacate, ], their 2008 convictions. The petitioners allege that the government intentionally withheld ] from its ] that would have resulted in the defendants declining to enter into ]s for any of the counts on the indictment and should have informed the court’s ruling on the defendants’ ] the ] specific counts on the ] against them.<ref name=":0">{{Cite web|title=Petition for Writ of Error Coram Nobis|url=https://legalupdate.e-gold.com/2020/07/petition-for-writ-of-error-coram-nobis.html|access-date=2020-07-03|website=e-gold® Legal Update}}</ref>

Specifically, the petitioners allege that a business substantially similar to that of E-gold Ltd<ref>{{Cite web|date=2015-12-30|title=Gold-Backed Digital Currency Ditches the Blockchain|url=https://www.americanbanker.com/news/gold-backed-digital-currency-ditches-the-blockchain|access-date=2020-07-03|website=American Banker|language=en}}</ref> was advised by the District of Columbia Department of Insurance, Securities, and Banking that it did not require a money transmitting license pursuant to D.C. law, causing  the petitioners to realize that the government may have misrepresented the applicability of state money transmitting laws to e-gold.<ref name=":0" /> The petitioners further allege that this resulted in ] requests which yielded evidence that the government had instructed the Florida Office of Financial Regulation to refrain from issuing or publishing its legal opinion that neither of the companies were money transmitters per Florida law during the pendency of the ] investigation of the companies.<ref name=":0" />


==See also== ==See also==

Revision as of 13:55, 23 October 2022

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

e-gold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to open an account on their web site denominated in grams of gold, or other precious metals, and that let users make instant transfers of value ("spends") to other e-gold accounts. The e-gold system was launched 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 transactions per year, on a monetary base of US$71 million worth of gold (about 3.5 metric tons). e-gold Ltd. was incorporated in Nevis, Saint Kitts and Nevis with operations conducted out of Florida, USA.

Beginnings

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e-gold was founded by oncologist Douglas Jackson and attorney Barry Downey in 1996. The pair originally backed the services accounts with gold coins stored in a bank safe deposit box in Melbourne, Florida. By 1998, G&SR (the system operator) was an Affiliate Member of NACHA and a Full Member of NACHA's The Internet Council.

The company was launched two years before PayPal but did not manifest exponential growth until 2000. By 2004, there were over a million accounts. 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". It was also the first non-credit-card payment service provider to offer an application programming interface (API) enabling other services and e-commerce transactions to be built on top of it.

After initial demonstration of an e-gold Spend via PalmPilot in February 1999, e-gold introduced support for wireless mobile payments.

e-gold was used by both individuals and merchants for services including metals trading, online merchants, online auctions, online casinos, political organizations, and non-profit organizations.

From 1996 through 1999, currency exchange services referred to as “InExchange” and “OutExchange” 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 restructured to separate 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., 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 brand.

Beginning in early 2000, there was a proliferation of independent exchange services 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 national currencies and e-gold, further extending e-gold's international user base.

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".

Criminal abuse

e-gold was a target of financial malware and phishing scams by criminal syndicates and was used for illegal activities.

Hackers

Because it did not sufficiently verify the identity of account holders, e-gold began to suffer from an increasing rate of criminal activity against its users. In addition to phishing, attackers exploited flaws in the Microsoft Windows operating systems and Internet Explorer web browser to collect account details from millions of computers to compromise e-gold accounts.

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. 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, allowed law enforcement to identify numerous criminal users of the service.

Fraud

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. e-gold enabled criminals and hackers in Romania to move money from victims in America. Several of the cyber crime gangs that plagued and used e-gold were based in Râmnicu Vâlcea, Romania.

Criminal prosecution

The USA Patriot Act 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. 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.

In 2007, a U.S. federal grand jury indicted e-gold, accusing it of serving identity thieves and child pornographers. The company denied the charges. In July 2008, the company and its three directors entered into a plea agreement. 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. 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. 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.

See also

References

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