Over $56.6 Million Forfeited In E-Gold Accounts Involved In Criminal Offenses
More Than $20 Million Returned to Bona Fide Account Holders
Baltimore, Maryland - U.S. District Judge Ellen L. Hollander ordered yesterday the forfeiture of $45,816,817.84, the remaining value of over $86.3 million in e-gold, Ltd. (EGL ) accounts seized by the government in 2011. In 2012, Judge Hollander ordered the forfeiture of over $10.8 million in the EGL accounts, bringing the total amount forfeited to over $56.6 million. Judge Hollander also ordered the return of $295,642 to bona fide account holders who were able to verify their ownership of the accounts. Judge Hollander had previously ordered the return of over $19,947,313.91 to identified account holders.
The forfeiture was announced by United States Attorney for the District of Maryland Rod J. Rosenstein and Special Agent in Charge Kathy Michalko 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.”
EGL was in the business of exchanging traditional forms of currency for precious metals held in electronic form, known as e-metals or e-gold, and settling payer-initiated transfers of e-metals from one customer account to another. In 2008, EGL pled guilty in the District of Columbia to money laundering and operating an unlicensed money transmitting business. 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. Non-traditional money transmitting businesses such as EGL 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 register with the Department of the Treasury.
In 2011, the government filed a civil forfeiture action in the District of Maryland against the value of the e-gold accounts, totaling more than $86.3 million, and sent notice of the right to contest the forfeiture to the registered account holders. Some of the account holders who received the notice responded that they were the victims of identity theft and had no connection to EGL.
As part of its plea agreement, EGL identified 12,869 customer e-metal accounts that contained 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. In 2012, Judge Hollander ordered the forfeiture of more than $10.8 million, the value of those accounts. Judge Hollander also ordered that that $12,287 be returned to 22 claimants from those identified accounts, whose claims the government did not contest.
The government then sought the forfeiture of the remainder of the $86.3 million as property involved in EGL’s criminal offenses, but it agreed to exempt from forfeiture any money claimed by bona fide account holders. The money forfeited yesterday represents the balance of the funds involved in the criminal offenses that was not claimed by account holders, bringing the total forfeited to the government to over $56.6 million.
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 the 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 regulated traditional banking system, trading in e-gold became popular among persons looking for a way of laundering criminal proceeds. In particular, e-gold was widely accepted as a means of transacting credit card and identification fraud, high yield investment programs and other investment scams, and child exploitation, but was not widely accepted by large or mainstream vendors.
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, who handled the civil forfeiture for the government.