WASHINGTON – A federal grand jury in Washington, D.C. has indicted
two companies operating a digital currency business and their owners on
charges of money laundering, conspiracy, and operating an unlicensed
money transmitting business, Assistant Attorney General Alice S. Fisher of
the Criminal Division and U.S. Attorney for the District of Columbia
Jeffrey A. Taylor announced today.
The four-count indictment, handed down on April 24, 2007, and unsealed
today, charges E?Gold Ltd; Gold & Silver Reserve, Inc.; and their
owners Dr. Douglas L. Jackson, of Satellite Beach, Fla.; Reid A. Jackson, of
Melbourne, Fla.; and Barry K. Downey, of Woodbine, Md., each with one
count of conspiracy to launder monetary instruments, one count of
conspiracy to operate an unlicensed money transmitting business, one count of
operating an unlicensed money transmitting business under federal
law and one count of money transmission without a license under D.C.
law.
Subsequent to the indictment, the Department of Justice also obtained a
restraining order on the defendants to prevent the dissipation of
assets by the defendants, and 24 seizure warrants on over 58 accounts
believed to be property involved in money laundering and operation of an
unlicensed money transmitting business. The restraining order does not
limit the E?Gold operation’s ability to use its existing funds to satisfy
requests to exchange E-Gold into national currency for customers of
non-seized accounts, or its ability to sell precious metals to
accomplish the same, once approval has been received.
According to the indictment, E?Gold’s digital currency, “E?Gold,”
functioned as an alternative payment system and was purportedly backed
by stored physical gold. Persons seeking to use the E?Gold payment
system were only required to provide a valid email address to open an
E?Gold account – no other contact information was verified. Once an
individual opened an E?Gold account, he/she could fund the account using any
number of exchangers, which converted national
currency into E?Gold. Once open and funded, account holders could
access their accounts through the Internet and conduct anonymous
transactions with other parties anywhere in the world.
The indictment alleges that E?Gold has been a highly favored method of
payment by operators of investment scams, credit card and identity
fraud, and sellers of online child pornography. The indictment alleges that
the defendants conducted funds transfers on behalf of their customers,
knowing that the funds involved were the proceeds of unlawful activity;
namely child exploitation, credit card fraud, and wire (investment)
fraud; and thereby violated federal money laundering statutes. The
indictment further alleges that the defendants operated the E?Gold
operation without a license in the District of Columbia or any other state,
or registering with the federal government, and thereby violated
federal and state money transmitting laws. The indictment alleges that this
conduct occurred at various times from 1999 through December 2005.
“As alleged in the indictment, the E-Gold payment system has been a
preferred means of payment for child pornography distributors, identity
thieves, online scammers, and other criminals around the world to
launder their illegal income anonymously,” said Assistant Attorney General
Alice S. Fisher of the Criminal Division. “This indictment
demonstrates that the Department of Justice, in cooperation with its law
enforcement partners, will aggressively identify and prosecute those who
knowingly
enable and profit from transmitting the proceeds of criminal activity,
online or offline.”
“Douglas Jackson and his associates operated a sophisticated and
widespread international money remitting business, unsupervised and
unregulated by any entity in the world, which allowed for anonymous transfers
of value at a click of a mouse,” said U.S. Attorney Jeffrey A. Taylor
for the District of Columbia. “Not surprisingly, criminals of every
stripe gravitated to E-Gold as a place to move their money with
impunity. As alleged in the indictment, the defendants in this case knowingly
allowed
them to do so and profited from their crimes.”
“Today's indictment is the result of a two and a half year
investigation by the U.S. Secret Service Orlando Field Office into an alternative
payment system which has largely operated outside of normal banking
industry regulations,” said Secret Service Assistant Director for
Investigations Michael Stenger. “This system has been exploited for more
than 10 years by criminals who operate primarily via the Internet.
Cooperation among investigators, including the IRS, the FBI and other state
and
local law enforcement, has enabled us to more effectively address
emerging threats and evolving criminal methods, such as the use of
electronic or digital currency to facilitate trafficking in illicit goods and
services.”
“The advent of new electronic currency systems increases the risk
that criminals, and possibly terrorists, will exploit these systems to
launder money and transfer funds globally to avoid law enforcement
scrutiny and circumvent banking regulations and reporting,” said Assistant
Director James E. Finch, of the FBI’s Cyber Division. “The FBI will
continue to work closely with the Department of Justice and our federal
and international law enforcement partners to aggressively investigate
and
prosecute any, and all, persons or organizations that use these systems
to facilitate child pornography distribution, to support organized
crime, and to perpetrate financial crimes.”
“This is a new twist on laundering money through unlicensed money
transmitters but it is nothing new for financial investigators,” said
Eileen Mayer, Chief of IRS Criminal Investigation. “The combined
investigative skills of the law enforcement partners under the St. Cloud IRS
Criminal Investigation and Secret Service Task Force proved to be a
brick wall for E-Gold. We are proud to bring our financial expertise to
this type of investigation that ultimately unravels fraud.”
The conspiracy charge in the case relating to money transmitting
carries a maximum sentence of five years in prison. The federal law violation
of operating an unlicensed money transmitting business carries a
maximum sentence of five years in prison. The D.C. Code violation for money
transmission without a license carries a maximum sentence of five years.
The conspiracy charge relating to money laundering carries a maximum
sentence of 20 years in prison.
The case is being investigated by the U.S. Secret Service with the
assistance of the IRS and the FBI. The case is being prosecuted by the U.S.
Attorney’s Office for the District of Columbia and the Computer Crime
and Intellectual Property Section of the Criminal Division. Assistance
is also being provided by the Child Exploitation and Obscenity Section
and the Asset Forfeiture and Money Laundering Section of the Criminal
Division.
An indictment is merely an accusation and the defendants are presumed
innocent unless and until proven guilty.
(Source - the US Department of Justice:
http://www.usdoj.gov/opa/pr/2007/April/07_crm_301.html
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