E-Gold cops to e-money laundering
Knowingly served child predators, feds say
Online payment service E-Gold and three of its principals have pleaded guilty to criminal money-laundering charges following accusations they knowingly allowed child pornographers, investment scammers and other internet-based criminals to transfer funds related to their misdeeds.
In an indictment handed down in April 2007, prosecutors accused E-Gold of knowingly offering services to a host of the net's most reviled actors. The company, which also did business under the name Omnipay, marketed itself as being outside the reach of US law enforcement, allowed customers to open accounts with names such as "Mickey Mouse" and "No Name," and made no requirements that customers not use the service for criminal activity.
On "numerous occasions," employees with the firm made notations in database records indicating the types of crime customers engaged in, including entries such as "child porn," "Scammer," and "CC fraud," according to the indictment. The company required law enforcement officials to send subpoenas to an address in Bermuda to give the impression the operation was based outside the US when in fact it was located in Florida.
E-Gold and its operator, Gold & Silver Reserve, each pleaded guilty to conspiracy to engage in money laundering and to operate an unlicensed money transmitting business. Douglas L. Jackson, 51, of Melbourne, Florida, who was the co-founder and CEO of the companies, pleaded guilty to similar charges. Two senior directors, Reid Jackson, 45, also of Melbourne, and Barry K. Downey, 48, of Baltimore, each pleaded guilty to felony violations of a Washington, DC, law requiring money transmitting businesses to be licensed.
In a blog entry posted Monday, Douglas Jackson blamed the criminal abuse of E-Gold on "design flaws in the account creation and provisioning logic." He vowed to overhaul the company, including the temporary suspension of new accounts. It was a stark reversal of his position shortly after the charges were filed, when he vigorously denied all charges.
"We are confident that a regulated e-gold rebuilt to a more systematic specification will be less hospitable to criminals, and more attractive to mainstream business use without being less accessible to those disregarded by legacy payment systems," he wrote.
Talk about looking on the bright side. Legitimate businesses tend to shun financial relationships with admitted felons, and rightfully so. Mainstream businesses have especially little tolerance for those with ties to child predators, identity thieves and other fraudsters.
Meanwhile, E-Gold faces a maximum fine of $3.7m, and Jackson faces a prison sentence of up to 25 years and a fine as high as $750,000. Downey and Reid Jackson face a maximum of five years in prison and fines of $25,000 each. Sentencing is set for November 20. ®