With the recent news of E-Gold founders pleading guilty to money laundering comes another shocking revelation that has the digital gold world turned upside down. Pamela Fayed, the estranged wife of James Fayed who is the principal owner of Goldfinger Coin & Bullion Sales and e-Bullion, was found stabbed to death in a Century City parking garage last week.

James Fayed was taken into custody by the FBI and his lawyer Mark Werksman, said his client was likely charged with operating a money transmitter business without a license, and he guessed the arrest involved “money laundering charges or some other federal racketeering crimes.”

The Fayed’s have been involved in acrimonious divorce proceedings since late October and Pamela Fayed complained in divorce records that her husband never properly licensed or bonded their E-Bullion electronic gold exchange service. Court records also show James Fayed accusing Pamela Fayed of embezzlement, claiming she had illegally moved hundreds of thousands of dollars from business accounts into her personal account in order to pay for licenses.

The Fayeds were the only shareholders in the business, and Pamela Fayed said the couple had bank accounts worth more than $12 million.

So much for those of you who didn’t heed the warnings we have repeatedly given about using these fraudulent digital currency systems which are primarily used to fund accounts in online ponzi and pyramid schemes. These are dark days for anybody who had funds remaining in E-Bullion or E-Gold. Maybe some might heed the warning signs that Liberty Reserve will be the next one of these black market payment processors to bite the dust.

 Chalk up one more victory for the US Secret Service, IRS, FBI and US Department of Justice in their war to prevent online crime and keep us all safe from financial predators. E-Gold, the digital currency the Department of Justice labeled as a safe haven for internet scammers, online pyramid schemes, pedophiles and black market makers worldwide has been officially rendered defunct by the US government. Key to E-Gold’s demise was it’s anonymous nature and just like those Swiss Banks who booted US account holders at the IRS’s request last week, it’s become more than obvious that the US Government is engrossed with invasion of citizen’s personal and financial privacy on a level that would have our founding fathers turning over in their graves.

The Department ofJustice released the follwing press release entitled “Digital Currency Business E-Gold Pleads Guilty to Money Laundering and Illegal Money Transmitting Charges” :

WASHINGTON – E-Gold Ltd. (E-Gold), an Internet-based digital currency business, and its three principal directors and owners, pleaded guilty to criminal charges relating to money laundering and the operation of an illegal money transmitting business, Acting Assistant Attorney General Matthew Friedrich for the Criminal Division and U.S. Attorney for the District of Columbia Jeffrey A. Taylor announced today. E-Gold and its corporate affiliate Gold & Silver Reserve Inc. each pleaded guilty to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money transmitting business. The principal director of E-Gold and CEO of Gold & Silver Reserve Inc. (Gold & Silver Reserve), Dr. Douglas Jackson, 51, of Melbourne, Fla., pleaded guilty to conspiracy to engage in money laundering and operating an unlicensed money transmitting business. E-Gold’s other two senior directors, Barry Downey, 48, of Baltimore, and Reid Jackson, 45, of Melbourne, each pleaded guilty to felony violations of District of Columbia law relating to operating a money transmitting business without a license. E-Gold, Gold & Silver Reserve and the three company directors were charged in an indictment returned by a federal grand jury on April 24, 2007. At sentencing, E-Gold and Gold & Silver Reserve face a maximum fine of $3.7 million. Douglas Jackson faces a maximum prison sentence of 20 years and a fine of $500,000 on the conspiracy to engage in money laundering charge, and a sentence of five years and a fine of $250,000 on the operation of an unlicensed money transmitting business charge. Downey and Reid Jackson each face a maximum of five years in prison and a fine of $25,000. Additionally, as part of the plea, E-Gold and Gold & Silver Reserve have agreed to forfeiture in the amount of $1.75 million in the form of a money judgment for which they are joint and severally liable. Sentencing for all defendants has been set for Nov. 20, 2008. In addition to the fines and prison sentences, each of the defendants agreed that E-Gold and Gold & Silver Reserve will move to fully comply with all applicable federal and state laws relating to operating as a licensed money transmitting business and the prevention of money laundering which includes registering as money service businesses. Also as part of the plea agreement, the businesses will create a comprehensive money laundering detection program that will require verified customer identification, suspicious activity reporting and regular supervision by the Internal Revenue Services’ (IRS) Bank Secrecy Act Division, to which the Financial Crimes Enforcement Network delegated authority according to federal regulations. E-Gold and Gold & Silver Reserve will hire a consultant to ensure their compliance with applicable law and hire an auditor to verify the companies’ claims that all transactions are fully backed by gold bullion. Under federal law and District of Columbia law, in addition to other jurisdictions, the E-Gold operation was required to be licensed and registered as a money transmitting business. However, according to information in plea materials, the E-Gold operation functioned as a money transmitting business without registering with the federal government and without a license in the District of Columbia. Because these businesses and individuals illegally failed to register and follow applicable regulations under federal and District of Columbia laws, the resulting lack of oversight and required procedures created an atmosphere where criminals could use “e-gold”, or digital currency, essentially anonymously to further their illegal activities. Specifically, according to information contained in plea materials, the E-Gold operation provided digital currency services over the Internet through two sites: www.e-gold.com and www.Omnipay.com. Several characteristics of the E-Gold operation made it attractive to users engaged in criminal activity, such as not requiring users to provide their true identity, or any specific identity. The E-Gold operation continued to allow accounts to be opened without verification of user identity, despite knowing that “e-gold” was being used for criminal activity, including child exploitation, investment scams, credit card fraud and identity theft. In addition, E-Gold assigned employees with no prior relevant experience to monitor hundreds of thousands of accounts for criminal activity. They also participated in designing a system that expressly encouraged users whose criminal activity had been discovered to transfer their criminal proceeds among other “e-gold” accounts. Unlike other Internet payment systems, the E-Gold operation did not include any statement in its user agreement prohibiting the use of “e-gold” for criminal activity. “By failing to comply with money laundering laws and regulations, the E-Gold operation created an environment ripe for exploitation by criminals seeking anonymity in conducting online transactions,” said Acting Assistant Attorney General Matthew Friedrich. “This case demonstrates that online payment systems must operate according to the applicable rules and regulations created to ensure lawful monetary transactions.” “The operations of E-Gold Ltd. and the other defendants undermined the laws designed to maintain the integrity of our financial system and created opportunities for criminal activity,” said U.S. Attorney Taylor. “Because of the successful prosecution of these defendants, digital currency providers everywhere are now on notice that they must comply with federal banking laws or they will be subject to prosecution.” “The Secret Service is pleased with the successful outcome of the E-gold investigation,” said U.S. Secret Service Assistant Director for Investigations Michael Stenger. “This case demonstrated that even the most sophisticated criminals cannot escape the combined resources of the Secret Service and our law enforcement partners. The Secret Service is committed to our mission of safeguarding the nation’s critical financial infrastructure and we will continue to pursue criminals seeking to use the Internet and new technologies to commit crimes.” The case was investigated by the U.S. Secret Service, IRS Criminal Investigation and the FBI. The case was prosecuted by Assistant U.S. Attorney Jonathan Haray of the U.S. Attorney’s Office for the District of Columbia, Senior Counsel Kimberly Kiefer Peretti of the Criminal Division’s Computer Crime and Intellectual Property Section and Laurel Loomis Rimon, Deputy Chief of the Criminal Division’s Asset Forfeiture and Money Laundering Section, with assistance from the Criminal Division’s Child Exploitation and Obscenity Section. William Cowden of the U.S. Attorney’s Office Asset Forfeiture Unit assisted with forfeiture issues involved in the case. Source : http://www.usdoj.gov/opa/pr/2008/July/08-crm-635.html

The July 21, 2008 press release by the Department of Justice has many former E-gold customers scratching their head, wondering if their IP addresses and personal information will make them subject to further investigation by the feds but suffice to say, only the largest accounts, which made up 80% of the E-Gold system will have to worry if Uncle Sam will be shaking his bony finger in their direction.

Following the release of the DOJ information, Dr. Douglas Jackson made a public statement on the official E-Gold blog assuring that E-Gold would begin a process to become properly licensed to operate as a money services business in the United States.

In harmony with this transformation, we acknowledge that e-gold is indeed a Financial Institution or Agency as defined in US law and should be regulated as a Financial Institution. E-gold Ltd. has submitted an application to FinCEN to be registered as a Money Services Business and will be seeking licensure in all states that require it. Most importantly, working in conjunction with US government agencies, we will be exerting every effort to bring e-gold into compliance with US law and regulation as quickly as possible.

Many readers of this blog will remember that in the past, we have exposed Paypal as being allowed to operated their money services business in each respective state despite the fact that for over a decade Paypal has not been operating with proper licensing in each state they do business in.

Call this a conflict of interest or call it a government conspiracy, the truth is that both E-Gold and Paypal have been at odds for years. eBay, who owns Paypal, conveniently removed E-Gold as a valid payment processor for auctions several years ago, as they have removed every payment processor that threatens Paypal’s cash cow. Granted E-gold’s non-repudiation policy does not compare to Paypals supposed “buyer protection”, however anybody who has ever been scammed on eBay or somewhere else using Paypal, knows very well that Paypal doesn’t do very much to protect buyers and sellers using their service.

While it is not the intention of this blog to edify E-Gold’s legitimacy nor transmute Paypal’s squeaky clean image, it still seems rather ignorant that at a time when many US banks and financial institutions are imploding because of the mortgage crisis and the US dollar is being devalued against every major world currency, a payment system such as E-Gold which is based on the gold standard has more stability than a payment system based on the shrinking US Dollar. Not to mention, if the US keeps locking up citizens at the current rate of incarceration, there’s not going to be anybody left on the outside to pay the taxes which finance the booming prison industry.

Tagged : E-Gold, Department of Justice, Paypal, Douglas Jackson, FBI, IRS

A particularly nasty hoax has been spreading itself around the internet via spam messages to countless E-Gold account holders. The message claims that E-Gold founder Douglas Jackson was shot and killed by a police deputy on Friday evening. Here’s one of the emails that C4G Forum members have received :

E-gold founder, Douglas Jackson, 51, of Sheridan, Mont., was 4 times shot and killed Friday night on the Seventh Street ramp at East Seventh Avenue by off-duty County Deputy Daniel Montana Jr., police said. A spokesman for the Jackson’s family told Fox 31 that the autopsy details show the shots came from 3 to 7 feet away and were fired at a level angle, not from someone lying on the ground. The investigation is ongoing, said DA spokeswoman Pam Russell. More details at hyipops.com

This spam email is completely unfounded and the sources (hyipops.com or tellhyip.com in other spam emails) have zero credibility. There is no truth at all to this spam hoax and the people who have launched it should be prosecuted to the fullest extent of the law. Although many E-Gold account holders are aware that Jackson is not from Montana, evidently there are many who are oblivious to details. If you receive this hoax spam message, just dump it, it’s not true.

Update: The two sites listed in the spam hoax email (hyipops.com and tellhyip.com) are actually passing a Trojan to visitors’ browsers, so *DO NOT* visit the sites under any circumstances. Please see the report here.

I’d previously blogged about the Webmoney payment system in two articles detailing their services and announcing the fact they now have a “Gold Based” version of their Webmoney purse available. You can read those articles from the links at he end of this post. I’ve clearly stated my positive opinion of the Russian based Webmoney. At the moment, Webmoney seems to be the most promising payment processor next to V-Money. Their security is unparalelled and includes a complete software based solution to access your account or you can access your account through the X.509 root certificate based web interface. The ease of use globally makes Webmoney a true contender. The fact it is not located in the United States yet their customer support is absolutely exceptional is just one example of why Webmoney is “superior money”.

Potential Webmoney users and/or merchants will have to be aware that Webmoney requires verification of your account either through their WM Passport system or by sending an SMS Text Message from your cellphone. The WM Passport service had previously been available only in Russian language on the website but I just checked their site before writing this post and I was amazed to see the WM Passport is now available in English language as well.

In my case, I chose to activate by SMS on my handset but I was having a problem dialing the Russian phone number that I was supposed to send the SMS to. The phone number was shown as follow…

+7 (916) 805-46-12

Well, I’m not used to dialing international numbers but I tried about three text messages (to 79168054612) and none of them seemed to be getting through. I decided to try to just dial that number and see if it was in service and if I was connecting. That’s when I figured out that if you are dialing on a US based handset you have to dial the plus sign in the number. Well, I have one Samsung handset with T-Mobile for my personal use and a Motorola handset with Verizon for my business use. I was perplexed with both handsets as to how you get the plus sign in the number. I’m no stranger to text messages, but this one had me stumped. Well, I logged into my Verizon account and found out I’d have to add another monthy charge and change my service plan to be able to send an international text message. Ok, Verizon was out, so I just dialed support on my T-Mobile phone (I love T-Mobile dial 611 for support), anyway, I got a very friendly support person that let me know that T-Mobile allows any account to send international SMS messges for .20 per message. He also told me to dial the plus sign, on almost any handset, all you have to do is hold down the number “0″ until the plus sign appears. Armed with that information, I had my webmoney account verified in 5 minutes. Awesome service by both T-Mobile and Webmoney!!!

To open a Webmoney account and have a look for yourself, their site is available at the link below…
http://www.wmtransfer.com/

Opening an account is free of charge rest assured, Webmoney is worth a look just to see all of the features they offer. Plus, they show their daily stats on their front page, and today’s were rather interesting…

Total registrations in WebMoney Transfer: 4 094 626.
15-09-2007: 73337 transactions, turnover 3 535 391 USD,
3796 new registrations.

Seems like quite a few people are opening Webmoney account these days. As a footnote, I assume most of the people reading this post are aeware that Webmoney now offers a “gold backed” purse called Webmoney G. Thumbs up !! Below are two of my previous articles on Webmoney.

• Webmoney E-Currency Review
• Webmoney Goes Gold

About Liberty Reserve

Liberty Reserve is a digital currency and online payment system with similarity to Paypal, E-Gold, Pecunix, E-Bullion and other E-Currency services. You can send or receive money to or from anyone in the world and unlike Paypal, Liberty Reserve payments are 100% irrevocable, meaning once a payment is sent there is no repudiation policy.

Contrary information sources such as Wikipedia and About.com, Liberty Reserve is incorporated in Costa Rica, not Panama. Their servers are operating in Holland, which is good for a digital currency to have their servers operating outside of the United States. It is unclear where Liberty Reserve’s actual offices of operation are located which is a definite negative for any company wishing to process large business to business transactions. It is also unclear if they hold any licenses to conduct transactions with US citizens or if that is necessary for a Costa Rican based corporation.

Funding a Liberty Reserve Account

As with many digital currencies, Liberty Reserve does not accept direct transactions to and from their system. Accounts are funded or cashed out using an exchanger, and quite a few reputable exchangers accept exchanges of Liberty Reserve. Additionaly, the exchange rates for Liberty Reserve are currently much more feasable than other e-currencies such as Pecunix. This fact makes Liberty Reserve seem to be a viable option for smaller webmasters who are primarily selling advertising or service on their websites.

My Opinions on Liberty Reserve as an Online Business Owner

Liberty Reserve claims to be protected by an offshore trust, and claims at all times to be backed 100% by US dollars for LR-USD accounts, and by gold for LR-gold accounts. However, there is no information provided regarding contact details for the offshore trust, and there is no information regarding the amounts of gold bullion or where the bullion is stored such as is available in plain view on E-Gold’s website. The fact that Liberty Reserve claims to be “backed by gold” but does not provide an examiner and/or summary results such as other digital gold currencies (DCG’s) will cause a significant lack of credibility amongst those wishing to store digital gold with them. The fact Liberty Reserve hides it’s physical office address, does not publish their business contact details and has domain registration privacy on their whois information is another reason to make me wary of utilizing them as a payment option for anything other than small transactions when there is no other option.

The fact that Liberty Reserve, like E-gold and other processors, has a non-repudiation policy and transactions are 100% irrevocable, I don’t see many brick and mortar merchants selling hard goods using the system because quite honestly, I don’t think many people are going to pay for a $4000 Plasma TV or a $600 iPhone with Liberty Reserve funds.

My Opinions on Liberty Reserve’s Design and Implementation

Liberty Reserve’s user interface is simple and easy to use, and it is reminiscent of AlertPay’s interface. The login process is a two step process and Liberty Reserve does seem to have covered the bases as far as providing a secure interface somewhere in between the simplicity of E-Gold and the complexity of Pecunix. They provide an intuitive SCI/API for merchants wishing to easily add Liberty Reserve as a payment option to their websites, and within a few minutes we had the merchant’s interface up and running on one of our test sites.

Overall, Liberty Reserve looks promising if they would just pony up the contact details and the details regarding the amounts of gold bullion in their posession. Until that happens, I’d have to give them a 5/10 rating because when dealing with monetary exchange systems, payment processors and/or digital currencies; transparency is absolutely necessary to facilitate a trust of the system.

If you are interested in opening a Liberty Reserve account, please visit their website : Liberty Reserve

Any and all non-spam comments are welcome.

Thanks for reading, and please Digg this article if you like it !!!

About Webmoney

Webmoney is an electronic money and online payment system with similarity to Paypal, E-Gold, Pecunix, E-Bullion and other E-Currency services. It provides a fast and somewhat anonymous payment system however the registration process requires email verification and account holders are encouraged to verify themselves further through sending an SMS message from their cellphone making it more strict than E-Gold for opening and using an account. WM verification gives the following advantages: private key file retrieval if you have lost control over your WMID; complaint to the Arbitration service; credit activities; access to online services, Internet exchanges, information resources requiring personal client identification. Verified users can issue trust certificates to other users and take fees for the service. Any user can become a verified Register. Verified Registers can verify other WebMoney users.

Transactions are conducted through the WMTransfer software which comes in three distinct flavours :

• WM Keeper Classic - A standalone application, that is dowloaded and then installed onto your PC.
• WM Keeper Light — A secure browser based application that doesn’t require installation of client software onto a user’s PC.
• Telepat — A technology enabling the operation of an account via any mobile device or cell phone, that supports Java.

WM Transfer Ltd, the owner and administrator of WebMoney Transfer Online Payment System, was founded in 1998 and is a legal corporate entity of Belize, Central America. Originally targeted at Russian consumers and businesses, Webmoney is now in use worldwide and the company claims to have more than 3.7 million account holders. According to the stats on the website, Webmoney executed over 75,000 transactions worth over 10 Million dollars on this day alone. The main address for technical support is given in Moscow; the main proprietor and administrator is located in Belize. Transactions in WMR are underwritten by WMR LLC in Moscow and transactions in WME and WMZ are underwritten by Amstar Holdings Limited in Panama.

The System supports several types of e-currency, secured by various resources and tangibles. Each individual e-currency has a dedicated electronic wallet, called a Purse:

+ WMR — equivalent to RUR (R-Purse)
+ WMZ — equivalent to USD (Z-Purse)
+ WME — equivalent to EUR (E-Purse)
+ WMU — equivalent to UAH (U-Purse)
+ WMB — equivalent to Belorussian Roubles (B-Purse)
+ WMY - equivalent to Uzbek Sum (Y-Purse)
+ WM-C and WM-D — WMZ equivalent for transactions on Ñ- and D-purses

WebMoney transactions are inherently safe because they do not require credit card or bank account information to be stored in the system unlike Paypal which is well known for it’s problems with phishing schemes. Webmoney makes online businesses immune to certain scams because transactions are final and cannot be repudiated by the spender which is similar to e-gold or cash transactions but unlike credit card transactions and PayPal which can incur chargebacks.

WebMoney incorporates an instant messaging system as well as a way to send out bills and to extend credit. It is also possible to protect a payment with a password. The payment is withdrawn from the payer’s account and added to the payee’s account, but cannot be redeemed unless the password is known. The payer will typically provide the password once the promised goods have been delivered. Some operations require a higher level of user authentication known as a “WM Passport” which a user can obtain from authorized parties.

It is not possible to buy WM units online with a credit card or a Paypal account. A Webmoney purse can be funded by a bank wire, by receiving funds from other account holders, by issuing invoices, by a prepaid WM-Card or through a E-Currency exchanger.

My Opinions on Webmoney as an Online Business Owner

I’ve had my Webmoney account for a few months now because my loadable debit card provider, GoldEx, accepts Webmoney as a funding option, so I decided to give it a try as an option for accepting payment for services. I run a web-hosting service, a few internet directories and several sites that accept advertising such as this one (Code4Gold). I DO NOT accept Paypal under any circumstances due to the fact they have a nasty habit of freezing people’s accounts for 180 days for no reason at all and they will not offer an explaination why your account was frozen. I had $2300 in my Paypal account from a guitar I sold on E-Bay and the transaction was fine, both myself and the buyer were very happy, however when I logged into my Paypal account one day, my funds had been frozen. I was a Paypal account holder for 7 years with the debit card, over 700 verified transactions and not a single negative feedback on E-Bay. I eventually had to sue Paypal to get my money back and they graciously allowed me to keep my account which I refuse to use even though I know it costs me sales. Beside having a standard “Internet Merchant Account” through CardServices International for processing credit cards, I also prefer to accept as many usable payment options because the more payment options you present a consumer the more likely you are to make a sale. Considering Webmoney claims to have over 3 Million account holders, I figured it would be a good idea to try and tap into some of that market.

My Opinions on Webmoney’s Design and Implementation

As many of you readers know, I am a software developer by trade and have worked on high level projects so I’m quite critical of design and form versus function. If you don’t believe me, you should read my scathing Agloco Toolbar Review… In my opinion, Webmoney has one of the cleanest, simplest, well designed, professional, elegant and secure systems I’ve ever used. I absolutely love the fact that you can choose your authorization mode from X.509 Certificate, E-num authorization or simple Login and Password. The X.509 Certificate is my method of choice because it is possibly one of the most secure and simple methods of logging in to an account.

Making spends from Webmoney is a simple process and setting up the merchant’s interface to accept payments is similar to setting up a Paypal or E-Gold merchant transaction. The only exception is that Webmoney’s merchant interface is a developer’s dream come true in it’s configurability and in regards to the data that is returned to the merchant to verify a successful payment.

The more I work with the Webmoney interface and the merchant’s interface, the more I come to respect the incredible attention to detail the creators of this system have applied to constructing the perfect online payment system.

To open a Webmoney account and have alook for yourself, their site is available at the link below…
http://www.wmtransfer.com/

Opening an account is free of charge.

I would also sincerely appreciate any comments from other Webmoney account holders regarding your experience with them.