Three directors of digital currency firm e-gold avoided a spell behind bars on Thursday after earlier pleading guilty to offences for money laundering and running an unlicensed money transfer business.
The three directors, along with the e-gold company itself and parent firm Gold & Silver Reserve, were charged in April 2007 with becoming a clearing house for child pornography payments and investment scams. Prosecutors charged that slack-shod verification meant the service had become a banker to cybercrooks. After initially disputing the charges the defendants pleaded guilty in July 2008.
At a sentencing hearing on Thursday, US District Judge Rosemary Collyer said the three men deserved leniency because they had not set out to service crooks. The trio were each sentenced to three years on probation in addition to 300 hours of community service and fines, the e-commerce Journal reports.
Chief exec Douglas Jackson was fined $200, after his lawyer successfully argued he was all but broke. Two other directors, Barry Downey and Reid Jackson, were ordered to pay a $2,500 fine each. Reid Jackson and Douglas Jackson are brothers. The three defendants were also ordered to obtain licences to operate money transferring businesses in those states where such a permit is required. e-gold recently registered with FinCEN and is in the process of signing-up with state regulators.
e-gold and Gold & Silver Reserve were each fined $300,000, with re-payments following an initial $10,000 payout only due to begin next May. Each might have been fined up to $3.7m.
The service remains open for business but has stopped allowing new accounts to be registered until it works out how to apply a stricter registration regime. During the federal prosecution, e-gold supporters said the Feds targeted it because it allowed virtually anonymous money transfers. Prosecutors dismissed the libertarian philosophy behind the service as irrelevant, contesting that e-gold's directors must have known crooks were using its services.
The firm has recently implemented a customer identification program so that its users are obliged to register details such as their tax particulars and dates of birth as well as addresses and points of contacts, information previously requested.
e-gold, established in 1996, allows the ownership of gold to be transferred between an estimated three million users, a quarter of whom actively use their accounts. At its peak $5m in fund transfers day passed through e-gold. ®