E-gold is one of the oldest gold-backed digital currencies around, and certainly one of the most successful.
And it's squarely in the sights of the U.S. government.
On April 30, the Department of Justice indicted the operators of E-Gold on charges of money laundering, conspiracy, and operating an unlicensed money transmission business. It also has issued 24 seizure warrants on nearly 60 accounts it says are involved in money laundering.
Between May 3 and May 9, the government forced Omnipay, E-gold's payment system, to redeem all the gold backing these accounts and convert the proceeds to a U.S. dollar account owned by the U.S. government. The gold confiscated in this civil forfeiture has a market value exceeding US$11 million.
By using civil forfeiture laws to make these seizures, the government was able to close down the 58 accounts without accusing the owners of any crime. Indeed, the government doesn't need to reveal anything to the owners for at least 30 days, possibly longer. Until the government actually files a civil forfeiture complaint, these owners can do nothing to defend themselves or recover their assets.
It seems likely that E-gold was targeted because it permits the essentially anonymous transfer of money outside the banking system. Although there's a permanent record of all transfers, users only need a valid email address to use the services. The indictment of E-gold paints a lurid picture of the system being used by child pornographers, identity thieves, and investment scams, although founder Douglas Jackson claims that on numerous occasions, the company has voluntarily shut down accounts possibly tied to criminal activity.
Despite the indictments, E-gold is open for business—indeed, in the course of writing this blog, I opened an account there, although I haven't funded it.
Time will tell how the E-gold saga will play out. In the meantime, I wouldn't be surprised to see a mass exodus of E-gold's customers to other companies.
One company that offers services similar to E-gold—albeit with a strict "know your customer" policy—is Goldmoney.com. I have a Goldmoney account, and recommend it highly if only as a way to purchase an electronic form of gold that is 100% backed by gold bullion that can't be debased by a central bank.
Copyright © 2007 by Mark Nestmann
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