E-gold Owners Plead Guilty To Money Laundering

Slashdot announces that the three owners of the Internet currency service called 'e-gold' pleaded guilty to money laundering in the U.S. District Court for the D.C.

Principal Director of E-Gold Douglas Jackson announced changes to the E-Gold user agreement, including a temporary suspension of new accounts. He called E-Gold more successful than most of its competitors, but also acknowledges problems with the service.

One problem is E-Gold's

"failure to transition from a marginal player for early adopters to a respected institution integrated into the global financial mainstream," he wrote. "E-gold's failure to emerge so far is a result of many factors but the root causes were design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse. Criminal abuse of the e-gold system, in turn, led to a self-reinforcing negative reputation."

E-Gold and its affiliate 'Gold & Silver Reserve' could be fined $3.7 million at sentencing and Jackson could be sentenced 20 years in prison and a fine of $500,000.

Although the E-Gold operation was required by law to be licensed and registered as a money transmitting business, it had not done so. The resulting lack of required procedures fostered an atmosphere where criminals could use "e-gold" (digital currencry) anonymously to further their illegal activities, the Department of Justice said.

See The Industry Standard for more information.