The Department of Justice has indicted e-Gold.
Online digital currency business e-Gold has been indicted by a
federal grand jury in Washington, D.C. The company and its owners
have been accused of running an unregulated financial network that
catered to criminals moving money.
Founded in the 1990s, e-Gold allows users to move monetary funds
across the internet by transferring ownership of gold bars. A user
can move money on the internet simply by transferrring a tiny
amount of gold to another user's account instantly, and e-Gold
earns a commission on each transfer. Unlike credit cards, e-Gold
transactions are non-reversible and all transactions are final.
According to a statement by the
Department of Justice, the indictment alleges that the owners of
e-Gold allowed their service to conduct fund transfers despite
knowing that the money being moved was the result of illegal
activity such as credit card and investment fraud and child
exploitation. The indictment further alleges that e-Gold was
operating without a license and without registering with the
federal government, violating money transmitting laws.
"E-Gold has drawn criticism in the past because it has been
claimed the company does not do background checks on people
applying for accounts, and it's too easy to create an account in a
phoney name," said Graham Cluley, senior
technology consultant for Sophos. "Criminals may have been
attracted to use systems like e-Gold for illegal ends because of
the anonymity provided to them compared to high street banks. It is
essential that online digital currencies work within the law,
assist authorities with their enquiries, and work hard to ensure
that their money transfer systems are not being used by
Accounts connected with the alleged illegal activity have been
frozen as part of the investigation.
The US Secret Service is investigating e-Gold and its owners Dr
Douglas L. Jackson, Reid A. Jackson and Barry K. Downey, with the
assistance of the Internal Revenue Service and FBI. The money
laundering conspiracy charge carries a maximum 20 year prison
Experts at SophosLabs™, Sophos's global
network of threat research centers, have identified many instances
of malcious code designed to steal usernames and passwords from
e-Gold customers and email scams inviting people to transfer money
to criminals via the system. For example, a year ago Sophos
identified the Zippo-A Trojan horse that encrypted victims'
computer data, and then created another file informing the
victim that they needed to pay $300 to an e-gold account in order
to recover their files.
Last year, BusinessWeek published an
investigation which claimed that e-Gold was becoming the
currency of choice for cybercriminals.