E-gold

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File:G&SR (e-gold Operator) office, 1998-2014.jpg
G&SR (e-gold Operator) office, 1998-2014

E-gold or eGold was a digital gold currency operated by Gold & Silver Reserve Inc. (G&SR) that allowed users to make payments, which it called "spends", in grams of gold, silver, and other precious metals. E-gold was launched in 1996 and grew to five million accounts by 2009, when transfers were suspended due to legal issues. At its peak in 2006, e-gold processed more than US$2 billion worth of spends per year,[1] backed by over US$85 million worth of gold, about 3.8 tonnes (8,400 lb).[2] e-gold Ltd. was incorporated in Nevis, Saint Kitts and Nevis, and its operations were based in Florida.

Beginnings

E-gold was founded by Douglas Jackson, an oncologist,[3] and Barry Downey, an attorney, in 1996. The pair originally backed e-gold accounts with gold coins stored in a safe deposit box in Melbourne, Florida.[4] When e-gold was at its peak, the company stored its gold and platinum in bank vaults in London and Dubai.[2] By 1998, G&SR was an affiliate member of NACHA[5] and a full member of NACHA's Internet council.[6] The company experienced exponential growth starting in 2000.[7] In a July 13, 1999 article in the Financial Times, Tim Jackson (no relation to Douglas) described e-gold as "the only electronic currency that has achieved critical mass on the web".[8][9] In 2001, the company said that e-gold had more than 200,000 accounts and more than $14 million of digital gold currency in circulation.[10] By 2004, there were over a million accounts.[11] By the early 2000s, the capability of immediate settlement, as implemented by e-gold, was recognized as key to the emergence of systems for peer-to-peer transfers of digital rights such as "smart contracts".[12]

Criminal abuse

E-gold was a target of financial malware and phishing scams by criminal syndicates and was used for illegal activities. In December 2005, the Federal Bureau of Investigation (FBI) raided G&SR's offices, seizing files and hardware, as part of an investigation into e-gold's use in criminal activities. A month later, no charges had been filed against Jackson or his businesses.[13]

Hackers

Because of e-gold's hard money and non-repudiation policies, it was an early and particularly attractive target of phishing attacks against its users.[14][15] Attackers also exploited flaws in the Microsoft Windows operating systems and Internet Explorer web browser to collect account details from millions of computers to compromise online accounts, including e-gold accounts.[16][17] In the first half of 2004, e-gold implemented one-time passwords to improve its security.[14]

Fraud

In a lengthy article in BusinessWeek's January 9, 2006 issue, a reporter wrote that online payment systems, including e-gold, have become popular among merchants engaged in carding, identity theft, and money laundering. Jackson said that his company has an investigative staff that responds to inquiries from law enforcement agencies, and that his company does not cater to criminals.[13] The Western Express Cybercrime Group, a five-man fraud syndicate based in Eastern Europe, engaged in carding, selling illegally obtained goods and using e-gold and other digital currencies to store the proceeds.[18]

Prosecution and closure

Reid Jackson, Douglas's brother, and Barry Downey, a company director, were each sentenced to three years of probation and 300 hours of community service, and ordered to pay a $2,500 fine and a $100 assessment.[19] E-gold's plea agreement included a forfeiture of about $1.2 million to the government, a $300,000 fine, and a condition that Douglas Jackson impose know your customer (KYC) rules on e-gold customers. Customers who lived in high-risk countries or who had not completed KYC verification were limited to low or no transaction rates.[2] e-gold announced a claims process in December 2010, and launched it in June 2013, for account holders to access the funds they had deposited. As of November 2013, users could not use e-gold's web site for other purposes.[20] Jackson told the Financial Times in a November 2013 article that he had hoped to resurrect e-gold himself, but that he had not been able to obtain the licenses required in most US states.[21]

See also

References

  1. ↑ "e-gold Statistics". 2006-11-09. Archived from the original on November 9, 2006. Retrieved 2014-12-19.
  2. ↑ 2.0 2.1 2.2 Zetter, Kim (June 9, 2009). "Bullion and Bandits: The Improbable Rise and Fall of E-Gold". Wired. Retrieved October 23, 2022.
  3. ↑ "archive.org capture of e-gold Director bios page". 2004-10-14. Archived from the original on October 14, 2004. Retrieved 2014-12-19.
  4. ↑ "Synopsis of e-gold Transactions". Gold & Silver Reserve, Inc. Archived from the original on June 27, 1998. Retrieved 8 January 2015.
  5. ↑ "archive.org capture of NACHA Affiliates listing, circa 1998". 1998-07-09. Archived from the original on July 9, 1998. Retrieved 2014-12-22.
  6. ↑ "archive.org capture of e-gold homepage, circa 1998". 1998-06-27. Archived from the original on June 27, 1998. Retrieved 2014-12-22.
  7. ↑ "list post, March 4, 2001". talk.e-gold.com (independent discussion list). 2001-03-04. Retrieved 2014-12-20.
  8. ↑ Jackson, Tim (July 13, 1999). "When gold makes cents: It may sound crazy, but the eGold payment mechanism based on deposits of precious metal, is cheap, efficient and easy". Financial Times. ProQuest 248786094. Retrieved August 19, 2023.
  9. ↑ "Developments in the Law Concerning Stored Value Cards and Other Electronic Payments Products, footnote 154". Maurer School of Law: Indiana University, Law Journal. 2007-01-01. Retrieved 2014-12-20.
  10. ↑ Ballve, Marcelo (June 24, 2001). "GET READY TO TURN YOUR DOLLARS INTO GOLD -- ELECTRONICALLY". South Florida Sun-Sentinel. ProQuest 387947777. Retrieved August 21, 2023.
  11. ↑ "archive.org archive". 2004-07-11. Archived from the original on July 11, 2004. Retrieved 2014-12-20.
  12. ↑ Mark Miller (2002-12-17). "The Digital Path: Smart Contracts and the Third World". Archived from the original on December 17, 2002. Retrieved 2015-01-12.
  13. ↑ 13.0 13.1 Monroe, Brian (January 6, 2006). "Internet company under scrutiny". Florida Today. ProQuest 239413686. Retrieved August 21, 2023.
  14. ↑ 14.0 14.1 "Financial Cryptography: e-gold stomps on phishing?". www.financialcryptography.com. Retrieved 2023-08-19.
  15. ↑ Mullan, P. Carl (2016). "A History of Digital Currency in the United States". SpringerLink. doi:10.1057/978-1-137-56870-0. ISBN 978-1-137-56869-4.
  16. ↑ "[e-gold-list] Large Criminal Hacker Attack on Windows NT E-Banking and E-Commerce Sites". Mail-archive.com. 2001-03-08. Retrieved 2013-09-20.
  17. ↑ "Three organisations targeted by email scams". The Sydney Morning Herald. December 17, 2003. Retrieved October 23, 2022.
  18. ↑ Eligon, John (September 1, 2009). "Five More Accused in Credit Card Fraud Investigation". The New York Times. Retrieved October 23, 2022.
  19. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named spares
  20. ↑ White, Lawrence H. (Spring 2014). "THE TROUBLING SUPPRESSION OF COMPETITION FROM ALTERNATIVE MONIES: THE CASES OF THE LIBERTY DOLLAR AND E-GOLD". Cato Journal. No. 34/2. Cato Institute. pp. 281–301. ProQuest 1532503869. Retrieved October 23, 2022.
  21. ↑ Stephen Foley, November 28, 2013 E-gold founder backs new Bitcoin rival, Financial Times

External links

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