E-gold executives plead guilty to money laundering

Online criminals seek a new laundry

Three directors of the online currency company E-gold have pleaded guilty to charges of money laundering.

E-Gold and its corporate affiliate Gold & Silver Reserve Inc. each pleaded guilty to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money transmitting business and has paid a $1.7 million fine.

Chief executive Dr. Douglas Jackson pleaded guilty to conspiracy to engage in money laundering and operating an unlicensed money transmitting business and two senior directors each pleaded guilty to operating a money transmitting business without a license.

Jackson now faces a possible 20 years in prison and the company could be fined $3.7 million. The other directors could get five years in prison, and sentencing will be held in November.

"By failing to comply with money laundering laws and regulations, the E-Gold operation created an environment ripe for exploitation by criminals seeking anonymity in conducting online transactions," said Acting Assistant Attorney General Matthew Friedrich.

"This case demonstrates that online payment systems must operate according to the applicable rules and regulations created to ensure lawful monetary transactions."

E-gold has long been criticised by members of the security and law enforcement community for its system, which allows members to transfer funds online by buying portions of actual gold bars and using them as virtual funds.

A lax registration procedure that allowed anonymous accounts to be set up and making money transfers not returnable has made the site popular among the online criminal fraternity.

The company has now suspended all new accounts and is amending its terms and conditions to satisfy the demands of the Department of Justice. DR Jackson has now pledged to remake the company as a safe and legitimate online currency system.

“The criminal case has been resolved,” he said.

“The resolution of the criminal case however provides for a second chance, an opportunity to address the flaws embedded in the e-gold system and to transform the "e-gold Operation" into the institutions I, the other directors, and our longsuffering employees and contractors have always envisioned, one that serves to advance the material welfare of mankind.”