Digital Money World

Understanding This Comment: “Anyone Using E-gold Can End Up In Jail” Pt. 2 of 3

by Mark on February 16th, 2007

Separating fact from fiction.

Here is what Chris says about the current e-gold situation. Based on his post, I’m assuming that he heard this from the 1mdc admin.

“The USA government has 3 us officials (investigators) constantly filling out paperwork, to 100% freeze e-gold accounts that have had dirty money or dodgy transactions in them. This could be from as little as investing in a hyip! E-gold is getting into trouble with the US government because it is effectively breaking the law by allowing … and fraudulent activities to commerce anonymously… and they aren’t trying to crack down - which is why the fbi started raiding their offices quite frequently).”

First, I’m only aware of the one government visit to e-gold in December of 2005. That visit was pretty well documented in Businessweek. A public response from e-gold is also available here. Finally, in late January of 2006 Dr. Jackson wrote a public letter explaining the situation from his angle and you can view it here. I’d like to also say that the government’s only allegation during that time was that G&SR had operated as a currency exchange without the proper license. As far as we know, that was the extent of the case.

Second, these charges or allegations have been dismissed or dropped and they no longer exist. There seems to now be a civil action in their place. We may hear more about that in April.

There is no public information or proof of any other visits, so they are NOT being frequently raided. It is public knowledge that e-gold often receives court orders for information and fully complies with the agencies including the FBI, the Securities & Exchange Commission, and the U.S. Postal Inspection Service. They are all seeking customer information.

Its also important to understand that the combined package of e-gold’s cutting edge unregulated Internet business and ten years of continuous operation under their belt, its no surprise that mixed in with all that big money international business there are some bad apples(crooks).

This is a brand new financial invention developed by the creative mind and driving force of Dr. Jackson. Its the first of its kind and ground breaking. With a decade of new experiences now behind them, I’m sure they have adapted a lot since that first gram moved from one account to another back in 1996. I see these recent months as more of adaptation to the changing financial landscape of the Internet. Its not a bad thing. Its expected.

Chris seems to be warning users of the potential surveillance on their e-gold accounts. It sounds like a warning directed towards those who may be attempting to misuse the e-gold system… ‘beware all of these events took place and now they are watching the accounts’. The unfortunate thing, is that this ‘warning’ has gained an audience across the Internet. Regular users are now concerned with the future of their assets as often evidenced from email lists and forum posts. Here are a few examples from a December 2006 post entitled, What Does The Future Hold For e-Gold? .

The two questions Chris’s post bring to light are:

1. What has happened in the past 14 months between e-gold and law enforcement?
2. Where are they now headed? (fast growth? closing? becoming more regulated? just biz as usual?)

If you connect the dots from the past few years, what emerges is an unusual situation. The press has labeled e-gold potentially negligent, law enforcement says they could be criminal, the HYIP (victims) see it as a scam, but for industry insiders its just another day at the office.

How can so many people have such different visions of the same business?

The answer is simple, ‘Digital Gold Currency‘ is one of those brand new inventions given birth to by the Internet which which has basically blind sided lawmakers and legislators. The rules for DGC, simply have not yet been created. Going back almost a decade before the December 2005 ‘raid’, e-gold’s position was explained like this: We operate the currency, if you feel that something improper is occurring, please get a court order and we will comply.

Here are some published examples of this position dating as far back as April 2000. This first one is a Businessweek article which quotes, e-gold’s co-founder, Barry W. Downer

“….e-gold is not a safe way to launder money because his firm keeps meticulous transaction records that federal regulators could easily obtain through court order.

Then, from a Businessweek Article in January 2006, Dr. Jackson and e-gold’s attorney, Mitchell Fuerst, further reinforce that old company line:

He [Dr. Jackson] said he responds as quickly as possible to official inquiries.

As for the idea that he should systematically monitor customer identities and money flows, he argues that’s not his job: “We don’t validate because we’re unlike any other system.”

He [Dr. Jackson] says that e-gold responds as quickly as possible to inquiries from law enforcement agencies and readily provides them with user names, account numbers, and transaction histories.

Once informed, “we can set a value limit to prevent an account from receiving further payments,” he says. “If we get an appropriate court order, we can monitor and assist in a sting that freezes value.”

E-gold’s outside attorney, Mitchell S. Fuerst…argues that the responsibility for policing the identity and activities of e-gold account holders lies with the banks and other regulated institutions from which money is transferred into e-gold’s system.

Does this responsibility for policing the activities of e-gold account holders still lie with someone else?

My guess…..not anymore.

Even going as far back as the 90’s that seemed to be the company’s position and it has lasted up until about August 2006. I’ll add that I agreed with e-gold throughout that time, the law only required such and e-gold complied.

Where does it stand today, 14 months after the governments visit?

Today, Dr. Jackson and e-gold are fully cooperating with the government types but NOW that occurs with or without a court order. Their attorney tells us all about it in a recent article in Wired.

[Dr. Jackson] …has been wading deep into his customer transaction logs to identify and fight back against people who misuse his system. In the last month, he’s blocked about 2,000 accounts from his system, and he’s voluntarily turned over detailed account and transaction histories to federal law enforcement…Jackson acknowledges some discomfort over the decision to give information to the feds without legal process — a move that could save e-gold from further law enforcement aggression, while tarnishing its libertarian sheen. http://www.wired.com

So are all HYIP accounts, investment scams, ‘paid auto surf’ accounts and other ’schemes’ now in jeopardy of being limited, frozen or seized? YES, that would appear correct. Despite the fact that e-gold does not specifically disclose that in their ‘Terms of Use or e-gold Account User Agreement‘, they do have the right to stop any business that is illegal under US law.
A good example of this happening was the closing of all Iranian accounts. Clearly, e-gold does not have to give any warning or specifically write that regulation into any terms of service. If an account is in blatant violation with US law they can close it. All you scammers out there, please write that down, this year if you are breaking the law you will not get any warning from e-gold or even Christmas card. That means, if just one person in your ‘investment’ complains to e-gold they have the right to limit or seize the account. That should give new meaning to ‘dropping the dime’ on your competition. Please remember, this is my opinion, I don’t speak for e-gold.
I say GREAT, however, like PayPal it may be appropriate to clarify that position and add it to the Terms of Use or User Account Agreement. However, I could be wrong.

Where do we go from here?

…continued.

part 1

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POSTED IN: Online Currency, e-gold