The charges against E-gold Ltd includes violation of the following:

  • 18 U.S.C. 371 Conspiracy;
  • 18 U.S.C. 982(a)(1): Criminal Forfeiture;
  • D.C. Code 26-1002 Money Transmitting Without a License;
  • 18 U.S.C. 1960: Operation of Unlicensed Money Transmitting Business;
  • 18 U.S.C. 2: Aiding and Abetting and Causing an Act to be Done;
  • 18 U.S.C. 1956: Conspiracy Launder Monetary Instruments;

The indictment covers various details of E-gold, e.g. how they function and what they have done wrong. It is definitely worth the time to read, esp. if you do not have previous dealings with them. You may also like to read Mark Herpel’s recent article regarding his view of illegal systems using E-gold as a means of getting paid.

E-gold has been widely used in these scams because they do not have a policy that prohibits the use of their “digital currency” for criminal activity. Other legal online payment services such as Paypal have clearly defined policies that forbids the use of their payment service for Ponzi and Matrix systems.

Since Apr 07, some news have reported that major accounts at E-gold had been blocked by the US government due to their support for criminal activities. According to the indictment, E-gold has accumulated a total of US$6.36 million equivalent in gold as of Nov 2005.

We have highlighted para. 23 of the indictment with regards to the use of self-developed “digital currency”) for popular scams and illegal activities including Pyramids, Matrix systems, Ponzis, HYIPs and Get-Rich-Quick Schemes.

“23. Because of the lack of controls as compared to those present with other payment systems, E-GOLD has been a highly-favored method of payment by operators of investment scams, which generally refers to pyramids, ponzis, HYIPs (i.e., high-yield investment programs) and other “get-rich-quick”schemes.

These scams typically promise abnormally high short-term returns on investments, but rather than paying investors any actual returns on real investments, the scams pay investors with new, incoming investment money from other investors in the scam. Eventually, the operators of the scam either disappear with all the investment money or the scam collapses because investment naturally slows as the scam grows and the operators are unable to continue paying out the promised returns. E-GOLD has been favored in this area particularly because of a user’s ability to operate accounts anonymously, and E-GOLD’s policy of making all transfers of “c-gold” irrevocable and not subject to reversal.”