Digital currency firms face money laundering charges

Digital currency firms face money laundering charges
Digital currency firms face money laundering charges

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By Grant Gross
IDG News Service
April 27, 2007

A grand jury in Washington, D.C., has indicted two digital currency 
companies and their owners on charges of money laundering, accusing the 
companies of helping to fund illegal activities like child pornography 
and identity theft, the U.S. Department of Justice announced Friday.

The four-count indictment, handed down on April 24 and unsealed Friday, 
targets E=C2=ADGold; Gold & Silver Reserve; and their owners Douglas L. 
Jackson, of Satellite Beach, Florida; Reid A. Jackson, of Melbourne, 
Florida; and Barry K. Downey, of Woodbine, Maryland.

The defendants face charges on 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.

The DOJ also obtained a restraining order to prevent the defendants from 
unloading their assets as well 24 seizure warrants on more than 55 
accounts believed to be property involved in money laundering and the 
operation of an unlicensed money transmitting business.

The restraining order does not limit the E=C2=ADGold operation=E2=80=99s ability to 
use its existing funds to satisfy requests to exchange E-Gold into 
national currency for customers of nonseized accounts or its ability to 
sell precious metals, the DOJ said.

E=C2=ADGold=E2=80=99s digital currency, called E=C2=ADGold, functioned as an alternative 
payment system and was purportedly backed by stored physical gold, the 
DOJ said. Customers seeking to use the E=C2=ADGold payment system were only 
required to provide a valid e-mail address to open an E=C2=ADGold account, 
and no other contact information was verified.

Customers could then fund their accounts in a number of ways and convert 
national currency into E=C2=ADGold. 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=C2=ADGold has been highly favored by operators 
of investment scams, credit card and identity fraud, and sellers of 
online child pornography. The defendants conducted funds transfers on 
behalf of their customers knowing that the funds involved were the 
proceeds of illegal activity, the DOJ said.

The defendants operated the E=C2=ADGold operation without a license in the 
District of Columbia or any other state and without registering with the 
federal government and thereby violated federal and state money 
transmitting laws, the indictment said.

The conspiracy charge in the case relating to money transmitting and the 
federal violation of operating an unlicensed money transmitting business 
each carry a maximum sentence of five years in prison. The District of 
Columbia 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.

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