Internet currency firm pleads guilty to money laundering

A digital currency business and its owners plead guilty to money laundering charges.

E-Gold, an Internet-based payment service, and three owners have pleaded guilty to criminal charges related to money laundering, the U.S. Department of Justice said Monday.

E-Gold, based in Nevis, West Indies, and corporate affiliate Gold & Silver Reserve each pleaded guilty in U.S. District Court for the District of Columbia to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money-transmitting business.

Douglas Jackson, 51, of Melbourne, Florida, the principal director of E-Gold and CEO of Gold & Silver Reserve, pleaded guilty to the charges, the DOJ said in a statement.

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 in April 2007.

Douglas Jackson, in a blog post Monday, announced changes to the E-Gold user agreement, including a temporary suspension of new accounts there. The company will also require users to have only one account, he wrote. A design flaw in the service "made it vexingly difficult for e-gold to expel a user, in a truly effective way, for criminal abuse of the system," he added.

Jackson called E-Gold more successful than most competitors, but also acknowledged problems with the service. One problem is E-Gold's "failure to transition from a marginal player for early adopters to a respected institution integrated into the global financial mainstream," he wrote. "E-gold's failure to emerge so far is a result of many factors but the root causes were design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse. Criminal abuse of the e-gold system, in turn, led to a self-reinforcing negative reputation."

E-Gold and Gold & Silver Reserve could face a fine of US$3.7 million at sentencing. 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.

E-Gold and Gold & Silver Reserve have also agreed to the forfeiture of $1.75 million. Sentencing for all defendants has been scheduled for Nov. 20.

As part of the plea agreement, the businesses will create a comprehensive money-laundering-detection program that will require verified customer identification and reporting of suspicious activity, the DOJ said.

Under U.S. and District of Columbia law, the E-Gold operation was required to be licensed and registered as a money transmitting business. However, according to information in plea materials, it had not registered with the federal government or obtained a license in the District of Columbia.

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, the DOJ said.

E-Gold provided digital currency services at E-gold.com and Omnipay.com. Users did not have to provide their identities, and E-Gold 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, the DOJ said. E-Gold assigned employees with no prior experience to monitor hundreds of thousands of accounts for criminal activity, the agency said.

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Struggling for Christmas presents this year? Check out our Christmas Gift Guide for some top tech suggestions and more.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Grant Gross

IDG News Service

Most Popular Reviews

Follow Us

Best Deals on GoodGearGuide

Shopping.com

Latest News Articles

Resources

GGG Evaluation Team

Kathy Cassidy

STYLISTIC Q702

First impression on unpacking the Q702 test unit was the solid feel and clean, minimalist styling.

Anthony Grifoni

STYLISTIC Q572

For work use, Microsoft Word and Excel programs pre-installed on the device are adequate for preparing short documents.

Steph Mundell

LIFEBOOK UH574

The Fujitsu LifeBook UH574 allowed for great mobility without being obnoxiously heavy or clunky. Its twelve hours of battery life did not disappoint.

Andrew Mitsi

STYLISTIC Q702

The screen was particularly good. It is bright and visible from most angles, however heat is an issue, particularly around the Windows button on the front, and on the back where the battery housing is located.

Simon Harriott

STYLISTIC Q702

My first impression after unboxing the Q702 is that it is a nice looking unit. Styling is somewhat minimalist but very effective. The tablet part, once detached, has a nice weight, and no buttons or switches are located in awkward or intrusive positions.

Latest Jobs

Shopping.com

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?