E-gold owners plead guilty to money laundering

E-gold owners plead guilty to money laundering

Summary: Wow, big morning!  If anyone has seen Nitesh Dhanjani and Billy Rios's talk on phishing and identity theft, which was presented at the last couple Black Hat conferences, and will be on display again at Black Hat Vegas, you know that the identity theft market is a huge problem.

TOPICS: Security

Wow, big morning!  If anyone has seen Nitesh Dhanjani and Billy Rios's talk on phishing and identity theft, which was presented at the last couple Black Hat conferences, and will be on display again at Black Hat Vegas, you know that the identity theft market is a huge problem.  You might also remember that the market is an individual ecosystem that has market swings, fluctuations in cost based on local of the stolen identity, etc.  If you were really paying attention, you might even remember hearing that these criminals were blatantly accepting payment for their services, as advertised on their websites, through e-gold.

Well, well, well, strike another win for the good guys in the battle against identity theft, which is great news considering we just had a big victory last week as well!

Read the rest below.

From Slashdot this morning:

The three owners of Internet currency service e-gold have pled guilty to money laundering in the U.S. District Court for D.C.. The service is based in the West Indies, but the directors apparently live in Florida. They haven't been sentenced yet, but potentially face decades in prison and millions in fines. In addition, the principal director (Douglas Jackson) posted a blog entry yesterday saying that 'criminal activity will not be tolerated,' and pledging to eliminate the loopholes that allowed money laundering to thrive on the service. He also claims that e-gold has more transaction volume in a single quarter than all of the first-generation Web currency services like Cybercash, Beenz, and Flooz completed over their lifetimes. Ironically, one of the reasons that contributed to Flooz's demise in 2001 was rampant money laundering.

I find it interesting that in the course of laying out his "we're changing for the good message", Douglas Jackson goes on to speak of his company's success, claiming that "e-gold has more transaction volume in a single quarter than all of the first-generation Web currency services..."  Um, yeah, we know... you just mentioned the criminal element of your business, so what you're telling us is that you are really, really good at money laundering?

Of course, I'm sure we can expect something else to pop up, but for the short term, this is a victory.


Topic: Security

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  • Goodbye privacy?

    Cash leads to crime, too. Should we enforce credit/debit card payments only? If so, let's ban gold trading altogether!
    • Umm..

      No idea where that tie in comes from. We're talking about punishing an online payment system that effectively is allowing money laundering for criminals.

      • Come on, Nate...figure it out.

        Some people just can't read a story for what it is. They feel superior if they can question it's content...no matter how absurd the question or comment.
        • Yeah

          I mean, I'm giving him the benefit of the doubt, so maybe he will clarify, and it's just me misunderstanding his point.

  • I will be obvious and boring then...

    [Please excuse my poor "Engrish" and my rushed-up style.]

    Hi guys.

    I don't agree with your opinion and thought a very simple comment by example would suffice.

    A digital payment system with similar characteristics as plain old cash will always be prone to have illegal activities. This has been discussed for ages in cryptography and security circles, nothing new.

    From what is reported (and what I understand) the owners are pleading guilty mostly because they live in USA and have a financial services company in a tax heaven country. Also they are operating the company fully from USA.

    How many of the users were related to crime? A tiny fraction. How much money was involved? Not even a couple of millions.

    "As part of the plea agreement, the businesses will create a comprehensive money-laundering-detection program that will require verified customer identification and reporting of suspicious activity, the DOJ said."

    IMNSHO, that was the US DOJ goal from day 1.

    How representative is this money-laundering scheme within the world financial system? Even hard to even register in any scale. Hundreds of thousands? This is criminals that can't even afford a crooked lawyer/accountant or financial tax-dodging service from high street bank spin-offs .

    Do you send money overseas often? I do sometimes. A normal bank transaction takes days. Yes, days. And they charge you high. Have you seen the fees of Western Union and the like? If you send more than a couple of hundred dollars/euros/pounds they ask you for bank statements with account activity. And they keep copies of that. (How is it that nobody shouts about ID theft on this standard abusive behavior?)

    Now I have one less option to send money legitimately to a relative with financial woes supporting a child while having two jobs. And US authorities will have full information (to misinterpret) on this even though the transfers have nothing to do with US (thanks to SWIFT.) Well done.

    This isn't about stopping id theft, child pornography, or money laundering. This is about eroding our rights by governments and keeping us within the traditional financial system paying high fees and getting a poor service.

    How to stop ID theft: Credit shouldn't be given on ridiculous amount of information and without any kind of guarantee. It's too relaxed but hey, commissions are fantastic! Get Homer more credit card financing.

    How to stop or at least decrease significantly child abuse and pornography: Full block and sanctions to all the known countries doing it, specially the ones westerners go to have a little vacation (you know Thailand, some places in Eastern Europe, just check the child abuse organizations.)

    How to stop money laundering: This is a tough one, the whole system was born out of money laundering a few centuries ago, it's endemic. Closing e-gold will not stop it. And now with a "credit crunch" the need for cash will make laws relax more (taking billions out of dictators like Switzerland has been doing for ages will be quite attractive.)

    This is the DOJ who was caught spying illegally their own citizens.

    "We're talking about punishing an online payment system that effectively is allowing money laundering for criminals." Do you really think this will make a difference on money laundering? I am not an expert on the subject but after having my own company, some knowledge on accounting and finance, and reading a few books it seems quite clear this is one of the most insignificant shops in the world.

    It is a sad outcome for me and many other legitimate, tax-paying, law-abiding citizens of the world.


    PS: This blog is one of my favorites, but I ain't-no-fanboy :)
    • Much Better

      Ok, now I see what you are driving at. Makes sense, but my understanding is that the crime component was significant. If it was not, it wouldn't have been went after. I don't send money overseas, so no I don't understand your frustrations, but I do understand the want to not be frustrated.

      Surely there has to be a better way though, E-gold's lax stance on crime put them where they are.

    • An additional comment

      "Money laundering" wouldn't be necessary if (1) all the "illegal" things that lead to criminal activity were decriminalized - drug trafficking and gambling would top that list, and (2) stop treating legitimately self-made wealthy people like criminals and punishing them for their success via criminally-high tax rates that drive the money offshore to begin with. Ending both the drug wars and the class envy (flat tax anyone?) would stop 90% of the money laundering.

      But if we stopped money laundering, how would the CIA fund its Black Ops?
  • RE: E-gold owners plead guilty to money laundering

    You said:
    "Come on, Nate...figure it out"
    "Some people just can't read a story for what it is."
    ***"They feel superior if they can question it's content."***

    Aren't you doing exactly that with that comment of mine?

    Yes, it was written poorly. Yes it jumped from cash to gold. But if you are smarter than Ned (and me) it shouldn't be that hard for you to see my point on privacy loss. It's not a riddle.
  • RE: E-gold owners plead guilty to money laundering

    "Much Better" Thanks?

    I beg to differ on just every other point you say in that reply. But defending my stance would take many lines and I doubt it would change anything.

    Cheers. Keep up the good posts coming.

    • Thanks?

      It was meant honestly. The first post you wrote totally lost me. I'm completely open to debate on any subject, I'm not sure where we differ on the replies, but if you have a stance, you should take it and defend it. That's why I write these articles is to stimulate thought on things like this, not just report the news.

      • Interview at Threat Level


        'In addition to possible jail time, Jackson faces a possible fine of up to $500,000 for money laundering and $250,000 for operating an unlicensed business. Jackson told me last year, however, that a high-level U.S. attorney had told him privately, "We know you guys aren't bad guys, 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."'

    Date: 23-08-2008
    From: Erik J Young. An United Nations Human Rights Ambassador investigating laundered HEROIN drugs money through a plethora of financial mechanisms


    Ashraf Marwan, 62; suspected double agent in Yom Kippur War
    From Times Wire Services
    June 30, 2007

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    The death of Marwan, suspected of being a double agent during the 1973 war with Israel, comes amid a controversy in Egypt about his role in the intelligence and business worlds.

    Some opposition lawmakers recently demanded an investigation after Egyptian newspapers carried reports from Israeli media about Marwan's possible role as a double agent during the war, when Egypt and Syria waged a joint attack against Israel on Yom Kippur. The Egyptian government has never commented on those allegations.

    Maj. Gen Eli Zeira, who was fired from his position as head of military intelligence over Israel's failure to predict the 1973 Arab attack, said in a 1993 book that Israel was caught by surprise because it was led astray by a double agent, whom he did not identify.

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    But the similarity doesn???t end there. Lord Westbury is currently serving as Chief Executive Officer of Defense Systems Limited (DSL), which, as we have already seen, is an integral member of the London network of the Palace Group (named so because of its close proximity to the royal family???s official London residence, Buckingham Palace). 46
    Moreover, Executive Outcomes has been described as "the advance guard for major business interests engaged in a latter-day scramble for the mineral wealth of Africa". 47

    This is a particularly incisive description, and readers of the first part of this series will recall that one aspect of Project Hammer apparently involved the disappearance of substantial quantities of gold reserves, as well as stocks of De Beers diamonds, just prior to the takeover of the Republic of South Africa in 1994 by Nelson Mandela and the ANC. This theft has become known as "apartheid???s missing billions".

    Defense Systems Limited has a client list that comes straight from the top drawer and includes oil and gas companies like British Petroleum, Shell and British Gas of the UK and Amoco, Chevron, Exxon, Mobil and Texaco of the United States. Major mining and mineral extraction companies such as Canada???s Cambior and De Beers and Anglo American of South Africa also feature, as does the giant US construction firm, Bechtel.

    Another client is Canadian-based Ranger Oil, which by happy coincidence is the same name as an entity that forms part of the Palace Group and which is run by arms trader Mick Ranger. By miraculous good fortune, Mick Ranger was also a board member of Bridge SA --one of the entities formed and run by Rolf van Rooyen and Riaan Stander. Meanwhile, Sandline, which many knowledgeable insiders believe is Executive Outcomes by another name, has a client base that includes Rio Tinto Zinc.

    DSL is now owned by Armor Holdings, Inc. of Jacksonville, Florida, but is still headquartered in London. This affiliation seems, on the face of it, to be a particularly binding one, for Armor Holdings is said to have its very own US spook-type "network". 48
    The senior executives of Armor Holdings are predominantly bankers of one strain or another. Take, for example, Thomas W. Strauss, formerly a Vice Chairman of Salomon Brothers, the Wall Street investment bank that was once minority owned by the Oppenheimers??? Anglo American and De Beers strategic holding company, Minorco. 49
    Until 1993, Salomons owned the controlling interest in the Bank of New York, which, as you will recall, is the current affiliated clearing bank of Gregory Serras???s Vanguard Capital. Today, Salomons is owned by Citigroup. 50

    We might also mention Armor Holdings director Burtt R. Ehrlich, whose family securities firm, Ehrlich and Boger, is owned by Cater Allen Bank of the Channel Islands, which specializes in "offshore finance"; likewise, Nicholas Sokolow, formerly a partner in the Wall Street firm of Coudert Brothers, and Warren B. Canders, a former Senior Vice President of Orion Bank Ltd, a merchant bank owned by the Royal Bank of Canada.

    A subsidiary of Armor Holdings is the very shadowy United States Defense Systems, Inc. (USDS), which on paper is based in Chantilly, Virginia, although its real operating headquarters are in Manassas, Virginia. Staff recruited by USDS are usually former military types or specialists with criminal intelligence backgrounds and possessing surveillance skills. They are usually told they will be working in support of Department of Defense programmes and will require a DoD security clearance. Operations in the past have included surveillance of US citizens during Fourth of July events at Capitol Mall in DC. 51


    A Google Internet search using the search term "Armor Holdings, Inc." revealed a curious message dated September 2001 from an aggrieved investor:
    "I???m horrified to find one of my investments is in a company with links to bin Laden. Apparently it is common knowledge in London that a senior figure in Armor, Ambrose Cary, has familial ties to bin Laden and uses those in his work. How can it be allowed that a US company providing security to US companies, embassies and airports round the world can deal simultaneously with this type of person? Does anyone else have further information on this?"
    Unsurprisingly, no answer to the question has been posted. 52

    Had this been the first bin Laden connection, it is likely I would have ignored it. However, the name had already arisen during a deposition given by Rolf van Rooyen to German police in 1995, following his detention and questioning. At that time, he admitted to being "involved" with a Jean Ruiz, of Saudi Finance. 53

    Saudi Finance (Saudifin), headquartered in Geneva, owned a controlling interest in Banque Al Saoudi via the Paris-based holding company, Saudi Arab Finance Corporation. Banque Al Saoudi was, according to a 1999 PBS Online Frontline story, one of the principal international financing vehicles for the bin Laden family.
    Interestingly, in 1989 --in the early stages of Project Hammer???s timeline-- Banque Al Saoudi would have collapsed in bankruptcy had it not been for the timely intervention of the French central bank, the Banque de France, which shored it up prior to a partial takeover by none other than Banque Indosuez, which decided to change its name to Banque Fran??aise pour l???Orient. A year later, the bank merged with the Mediterran??e Group. Of note is the fact that a subsidiary, Saudifin SA, was active in Panama until 1997, when it was dissolved. 54

    Moreover, the Frontline story revealed that both Banque Al Saoudi and Banque Indosuez were "instrumental" in financing a portion of Middle East weapons contracts during the 1970s and 1980s.

    Meanwhile, those who are familiar with the story of black gold will recall that Dr Ole Bay was the controller on behalf of the CIA and US Treasury in the YAB/42 bullion transaction that involved then President Marcos of the Philippines. This transaction was structured to use cut-outs including Navegocian Global SA and DuPont, along with other CIA conduits, to make it ostensibly a private, non-government transaction.

    The transaction code YAB/42 is also instructive. Not only does "YAB" spelled backwards yield the name "BAY" but, altogether, 42 "major trusts were tapped to help fund" the deal. Coincidentally, 42 is also the number of countries in which Santa Romana gold was deposited in the immediate post-WWII years to form the Black Eagle fund, discussed earlier. 55

    One of the more salient facts about the Puffin Investments fiasco is that Alan Shepherd???s American wife, Sherry, is the daughter of Dr Ole Bay. Dr Bay is known to have been the "Master Wizard" who arranged and ran the Project Hammer trading programme. According to one former intelligence source familiar with the inner workings of Project Hammer, Dr Bay had told him that the ultimate responsibility for Hammer lay with the CIA and the US Treasury, and that Robert Rubin --who later became US Treasury Secretary-- acted as Dr Bay???s "gofer" on the project. Robert Rubin is now a director and Chairman of the Executive Committee of Citigroup.

    If one had to choose a word to describe these apparently diverse connections, that word would surely have to be "incestuous".

    Currently, Li Ka-shing (whom we mentioned earlier) is bidding to purchase control of the global communication network giant, Global Crossing (which was also mentioned earlier), via a joint venture of Ka-shing???s Hutchison Whampoa and Singapore Technologies Telemedia. Representing Ka-Shing???s bid to take control of Global Crossing was the powerful neo-conservative attorney, Richard Perle, who sought a nod of approval from the Pentagon for the deal.
    Perle, who is one of the present Bush Administration "think-masters", is close to Bush Senior, Cheney, Rumsfeld and Wolfowitz and to others on the Defense Policy Board, which he chaired. A recent story by legendary investigative reporter Sy Hersh revealed that Perle had furtively met with a leading Saudi investor in Marseille, France, on 3 January 2003, in what was seen as an attempt to gain private financial advantage from the planned war on Iraq.
    A furious Perle responded to the report by calling Hersh a "terrorist". The meeting was arranged on Perle???s behalf by none other than Adnan Khashoggi (whom we mentioned earlier). Khashoggi also attended the meeting.

    Khashoggi, a trusted adviser to the Saudi royal family, is one of the "high net worth individuals" whose past investments have been handled by Mayo Shattuck, formerly head of Alex. Brown (also mentioned earlier). It is of passing interest that Saudi Prince Alwaleed bin Talal bin Abdulaziz took a 10% stake in Citigroup (also mentioned earlier) back in 1991, following a cash "infusion" of US$400 million, which was eclipsed from view by The Carlyle Group which acted as the facilitator for the investment.
    In 1997, Mayo Shattuck was made Trustee of the Bronfman (also mentioned earlier) family fortune. He resigned as CEO of Deutsche Banc Alex. Brown on 12 September 2001, the day following the tragic events in New York City and Washington, DC --the day that has come to be known as "9-11". 56

    On 13 September 2001, news reports began circulating of suspicious stock market transactions that suggested prior knowledge of the events that were to take place on 9-11. Short sales of airline and insurance stocks that sharply fell in price in the wake of the 9-11 tragedy were later traced back to Alex. Brown.
    • Project - Jacobi / Hammer / Hughes Oil Company Inc.

      We should talk some time.
      D.V.Hughes Jr.