More than $10.8 Million in E-Gold, Ltd Accounts Traceable to Criminal Offenses to Be Forfeited
Laundered Proceeds of Child Pornography, Credit Card Fraud, Identity Theft and Other Crimes
Baltimore, Maryland - U.S. District Judge Ellen L. Hollander issued an order granting the government’s motion to forfeit over $10.8 million, the value of 12,869 accounts recorded and maintained by e-gold, Ltd (EGL ), a company that was engaged in the business of exchanging traditional forms of currency for precious metals held in electronic form (“e-metals” or “e-gold”) and settling payer initiated transfers of e-metals from one customer account to another. The Judge also ordered that $12,287 be returned to the 22 claimants, whose claims the government did not contest.
The forfeiture was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge David Beach of the United States Secret Service – Washington Field Office.
U.S. Attorney Rosenstein said, “Civil forfeiture allows the government to recover the proceeds of criminal activity, while assuring that the due process rights of any lawful owners are fully protected.”
In 2008, EGL pled guilty in the District of Columbia to money laundering and operating an unlicensed money transmitting business. Non-traditional money transmitting businesses are frequently used by criminals to transfer money because they are not as closely regulated as banks and other traditional financial institutions. For that reason, they must be licensed by the State in which they operate and must register with the Department of the Treasury. EGL sold precious metals in electronic form to provide customers with a means of transferring value from one customer account to another while maintaining anonymity, knowing that at least some of the funds were involved in criminal activities, including the exploitation of children.
As part of its plea agreement, the company agreed to identify any customer e-metal accounts that contained funds traceable to criminal activity. The company and the Secret Service identified the 12,869 forfeited e-metal accounts as containing funds derived from a variety of criminal offenses including child pornography, credit card fraud, identity theft, investment fraud, and the sale of stolen or non-existent goods on the internet.
The government filed a civil forfeiture action against the value of the accounts in 2011 and sent notice of the right to contest the forfeiture to the 12,869 registered account holders. Only 22 account holders chose to contest the forfeiture. Some of the account holders who received the notice responded that they were the victims of identity theft and had no connection to EGL. The identities of the true owners of those accounts remains unknown.
Digital currencies are generally marketed as offering global acceptance without the need for conversion between national currencies, and are valued at fluctuating rates tied to the price of a particular precious metal, especially gold. Digital currency is used for on-line commerce or for funds transfers between individuals for private purposes. In general, an EGL customer opened an e-gold account, and then could use the Internet to transfer the value in his or her account to any other EGL customer anonymously and instantaneously anywhere in the world. The recipient could then redeem the e-gold for any national currency. Because of the ease with which customers could purchase and transfer e-gold anonymously, outside of the confines of the traditional banking system, trading in e-gold became popular among persons looking for a way of laundering criminal proceeds and/or transferring criminal proceeds to third parties. In particular, e-gold was widely accepted as a payment mechanism for transactions involving credit card and identification fraud, high yield investment programs and other investment scams, and child exploitation. E-gold was not widely accepted by large or mainstream vendors.
With the forfeiture of the funds traceable to criminal activity, the government will now begin the process of restoring the remaining funds in the e-gold accounts, estimated in the tens of millions of dollars, to bona fide account holders who are able to verify their ownership of the accounts
United States Attorney Rod J. Rosenstein praised the U.S. Secret Service Washington and Orlando Field Offices and the SCIRS-SS Task Force for their work in the investigation. Mr. Rosenstein thanked Assistant United States Attorney Stefan Cassella and former Special Assistant U.S. Attorney Constantine Lizas, a Trial Attorney with the Asset Forfeiture & Money Laundering Section of the U.S. Justice Department’s Criminal Division, who handled the civil forfeiture for the government.