E-Gold Founder Calls Indictment a Farce
by Kim Zetter
The charges were a year in coming but e-gold owner founder Doug Jackson was finally indicted on money laundering and other charges, according to a Department of Justice announcement last week.
I originally wrote about e-gold's legal troubles last December in this piece about the 2005 raid on the Florida offices of Gold and Silver Reserve, e-gold's parent company, and about e-gold's cooperation with law enforcement agencies to track criminals using its service.
The government says e-gold -- a digital cash service -- facilitates child pornography and identity theft crimes by allowing criminals to pay for porn with e-gold and launder other funds gained through credit card fraud and other illicit activities. But Jackson, who has been anticipating charges since the December 2005 raid, says the government's claims are a farce since e-gold has been cooperating with authorities for years to track child pornographers and other criminals. In the story I published, Jackson and his lawyer described tools they developed to track and halt criminals using their system. Through these efforts, they were able to cull extensive forensic evidence to help authorities trace illegal activities to their perpetrators. Other agencies recognized the value of this data. But for some reason, Jackson says, Justice officials and the Secret Service did not. He says it's a mark of their dysfunction that all the while they were trying to build a case against e-gold, they were missing out on evidence that could have helped them battle the real criminals.
"They've been married to this agenda of e-gold being the bad guy and as a result some real urgent important crime fighting didn't happen or took a backseat," Jackson told me by phone this morning. "So bad guys are essentially still walking the street because the DoJ and Secret Service decided to run with this idea that e-gold is the bad guy instead of the alternative reality which is that e-gold is their best weapon in the war against cybercrime."
Jackson and his lawyers say they've cooperated with hundreds of requests for information from the FBI, U.S. Postal Inspection Service and even foreign law enforcement agencies. They've also helped undercover agents set up e-gold accounts to transact with child pornographers. The requests came as often through formal legal channels -- such as subpoenas -- as they did through informal ones (simple email requests that Jackson honored, despite the fact that such requests violated the terms of his user agreement to not share data with law enforcement without a court order). Here's an example of an email Jackson received from one law enforcement group thanking him for information he supplied them (c/p in the email refers to child porn):
We are now in possession of the XXXX target information. Thankyou. Now I am working to provide background information on E-gold and more importantly supporting documentation on how to provide proof (evidence) that the subjects involved did infact purchase c/p. The first question that will be asked once a partner law enforcement agency receives such data will be "how do we know that they purchased access to c/p"? Normally I would require copies of the preview sites (images of c/p found) to indicate that thee were aware of the nature of their purchase. The mere name of the URL is not enough (eg www.lolita....) we need to go beyond this layer and check under the hood so to speak. If e-gold investigators actually checked the sites that access was purchased then we need either a copy of their notes decribing what they observed and any images captured that prove the site provided access to c/p. Again I appreciate the data and hope that this is something that won't overly task you. Thanks
Despite this cooperation, Jackson says the Secret Service and DoJ have continued to characterize him as aiding and abetting criminals.
Strangely, Jackson says that after the Wired News story came out, a high-level US attorney told him privately, "We know you guys aren't criminals, and the last thing we want is for anyone to go to jail. We don't want the company to fail we just want you to clean up your act." But Jackson says the agency has never described what cleaning up their act would entail since they already cooperate fully with law enforcement agencies.
The initial criminal affidavit, filed under seal in 2005, accused Jackson and Gold and Silver of aiding terrorists and child pornographers. But prosecutors later dropped the criminal claim, replacing it with a civil complaint charging Gold and Silver with operating as an unlicensed money-transmitting business. Jackson's lawyers say the charges are all bogus because Gold and Silver isn't a money transmitter, since the company doesn't accept cash from customers, only wire transfers.
Jackson is scheduled to turn himself in to authorities in DC on Thursday around 1:30 East Coast time.
Posted May 1, 2007