Updated [This story was updated on May 1 to include comments from E-Gold strenuously denying the charges.]
Three owners of online payment processor E-Gold and an affiliated company have been indicted for money laundering and related crimes for allegedly allowing sellers of child pornography, operators of investment scams and other types of criminals to send and receive payments related to their misdeeds. The company vigorously denied the charges and accused prosecutors of fabricating testimony.
In addition to E-Gold, the four-count indictment names Gold & Silver Reserve and company owners Douglas L. Jackson of Satellite Beach, Florida; Reid A. Jackson of Melbourne, Florida; and Barry K. Downey of Woodbine, Maryland. They are charged with one count each of conspiracy to launder monetary instruments, conspiracy to operate an unlicensed money transmitting business, operating an unlicensed money transmitting business under federal law and money transmission without a license under the District of Columbia.
Prior to the indictment, the defendants had already received a restraining order preventing them from dispersing assets. The US Department of Justice had also obtained 24 seizure warrants on more than 58 accounts believed to be property involved in money laundering and operation of unlicensed money operation.
According to prosecutors, E-Gold's status as the preferred payment method from some of Earth's lowest life forms was for good reason. The online service was purportedly backed by stored physical gold, and all that was needed to open an account was a valid email address. No other contact information or background information was necessary.
"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 Jeffrey A. Taylor, US Attorney for the District of Columbia.
In a 1,900-word letter published online, Jackson offered a detailed rebuttal vigorously denying the charges and accusing the US Secret Service (USSS) of seriously bungling the case.
"With regard to child pornography, the government knows full well that their allegations are false, yet they highlight these irresponsible and purposely damaging statements in order to demonize e-gold in the eyes of the public," Jackson wrote. "e-gold, however, as a matter of incontrovertible fact, is the most effective of all online payment systems in detecting and interdicting abuse of its system for child pornography related payments."
He went on to accuse the USSS of deceiving a federal magistrate judge in December of 2005 in order to obtain search warrants in the case.
"Since this time, the government has been confronted with overwhelming evidence that the USSS had made a horrible mistake in its attack on the e-gold system and its repeated defamatory claims in the media that e-gold is anonymous, untraceable, and inaccessible to US law enforcement," Jackson wrote.
Three of the four counts each carry a maximum sentence of five years in prison. The count for conspiracy to launder money carries a sentence of up to 20 years.
The indictment is the result of a two-and-a-half year investigation by the US Secret Service, the Internal Revenue Service and the FBI.
The DOJ's press release is here. ®