Three directors of E-Gold, in addition to its Gold & Silver Reserve parent company, indicted in April 2007 of running a platform that have become a haven for criminal activities like processing investment scams and payments for child pornography on Thursday, 20 November, received their sentences. However, a United States of America federal judge decided last Thursday not to impose a prison sentence on the senior directors of E-Gold. Instead each of them was sentenced to three years of probation and 300 hours of community service with some fees to be paid.
Gold & Silver Reserve CEO, Douglas Jackson, who faced a maximum sentence of 20 years in prison and a $500,000 fine was spared the heavy fine because, according to his attorney, he’s deeply in debt. Thus he was sentenced to pay only $200 fine with 300 hours of community service time of supervision.
Reid Jackson, Douglas Jackson’s brother, and E-Gold director Barry Downey were each sentenced to three years of probation, 300 hours of community and ordered to pay a $2,500 fine and a $100 assessment fee each. Online sources say the maximum fine E-Gold and Gold & Silver Reserve faced could have been $3.7 million, but because neither company could pay that much, they were fined $300,000 with the condition that $10,000 be paid on Monday, with further monthly payments to start in May 2009.
E-Gold and its corporate affiliate, Gold & Silver Reserve Inc. had, each, pleaded guilty to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money transmitting business. The principal director of E-Gold and CEO of Gold & Silver Reserve Inc. (Gold & Silver Reserve), Dr. Douglas Jackson, 51, of Melbourne, Fla., pleaded guilty to conspiracy to engage in money laundering and operating an unlicensed money transmitting business. E-Gold’s other two senior directors, Barry Downey, 48, of Baltimore, and Reid Jackson, 45, of Melbourne, each pleaded guilty to felony violations of District of Columbia law relating to operating a money transmitting business without a license. E-Gold, Gold & Silver Reserve and the three company directors were charged in an indictment returned by a federal grand jury on April 24, 2007.
Interestingly, when Douglas Jackson acknowledged the company was under investigation in 2004, the illegal activity still went on with E-Gold, the company during trial ascribed this to bad legal counsel, which convinced them the site does not have to be licensed as a money transmitting business. The court accepted the argument of Downey that he was unaware of the company’s need for a license, even though he is a practicing lawyer.
The defendants argued they made every effort to cooperate with investigators while the prosecutors questioned the use of E-Gold’s cooperation as the directors’ tried to circumspect government investigation.
In addition to the fines and prison sentences, each of the defendants agreed that E-Gold and Gold & Silver Reserve will move to fully comply with all applicable federal and state laws relating to operating as a licensed money transmitting business and the prevention of money laundering which includes registering as money service businesses. Also, as part of the plea agreement, the businesses will create a comprehensive money laundering detection programme that will require verified customer identification, suspicious activity reporting and regular supervision by the Internal Revenue Services’ (IRS) Bank Secrecy Act Division, to which the Financial Crimes Enforcement Network delegated authority according to federal regulations. E-Gold and Gold & Silver Reserve will hire a consultant to ensure their compliance with applicable law and hire an auditor to verify the companies’ claims that all transactions are fully backed by gold bullion. Under federal law and District of Columbia law, in addition to other jurisdictions, the E-Gold operation was required to be licensed and registered as a money transmitting business. However, according to information in plea materials, the E-Gold operation functioned as a money transmitting business without registering with the federal government and without a license in the District of Columbia. Because these businesses and individuals illegally failed to register and follow applicable regulations under federal and District of Columbia laws, the resulting lack of oversight and required procedures created an atmosphere where criminals could use “e-gold”, or digital currency, essentially anonymously to further their illegal activities. Specifically, according to information contained in plea materials, the E-Gold operation provided digital currency services over the Internet through two sites: www.e-gold.com and www.Omnipay.com “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.” “The operations of E-Gold Ltd. and the other defendants undermined the laws designed to maintain the integrity of our financial system and created opportunities for criminal activity,” said U.S. Attorney Taylor. “Because of the successful prosecution of these defendants, digital currency providers everywhere are now on notice that they must comply with federal banking laws or they will be subject to prosecution.” The case was investigated by the U.S. Secret Service, IRS Criminal Investigation and the FBI. The case was prosecuted by Assistant U.S. Attorney Jonathan Haray of the U.S. Attorney’s Office for the District of Columbia, Senior Counsel Kimberly Kiefer Peretti of the Criminal Division’s Computer Crime and Intellectual Property Section and Laurel Loomis Rimon, Deputy Chief of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with assistance from the Criminal Division’s Child Exploitation and Obscenity Section. William Cowden of the U.S. Attorney’s Office Asset Forfeiture Unit assisted with forfeiture issues involved in the case.