05:46 PM

E-Gold's Chairman Spoke Out Against Cybercrime, Until He Got Caught

I read with great interest about a Washington, D.C., federal grand jury's decision late last week to indict E Gold Ltd, Gold & Silver Reserve Inc., and the owners of these digital currency businesses on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business. I recently served on a grand jury in Brooklyn, so I know the joke about being able to indict a ham sandwich to

I read with great interest about a Washington, D.C., federal grand jury's decision late last week to indict E Gold Ltd, Gold & Silver Reserve Inc., and the owners of these digital currency businesses on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business. I recently served on a grand jury in Brooklyn, so I know the joke about being able to indict a ham sandwich to be true (the most circumstantial of evidence will get your case sent to trial).But I couldn't help thinking back to an exchange I had with e-gold chairman Douglas Jackson over a January 2006 blog in which I'd mentioned his company in the same breath as the hacker economy. Jackson was indignant over my portrayal of his company as a one that creates a loophole that enables cybercrooks to get paid for their misdeeds. At the time, he noted, "E-gold is often depicted in the media as anonymous and inaccessible to law enforcement." Now, he can make his case to the federal government or face up to 35 years in prison.

E-gold acts as an alternative payment system and is said to be backed by stored physical gold. To get an e-gold account, one needs only to provide a valid e-mail address. The beauty of the model is that any foreign currency can be dropped into the account and then exchanged for its value in gold, and account holders can access their accounts through the Internet and conduct anonymous transactions with other parties anywhere in the world.

The Justice Department believes this made e-gold popular with operators of investment scams, credit card and identity fraud, and sellers of online child pornography. But Jackson has said in public forums that e-gold's business is on the up and up. In response to my original blog, which described how purveyors of rootkits and other malware are able to sell their malicious wares without being caught by using services such as e-gold, Jackson wrote, "On this understanding, with about a minute of work, we investigated the matter, identified the e-gold account(s) used by these people and exercised our Right of Association, eliminating their ability to ever receive another e-gold payment. For good measure, we reached out and touched (in the same fashion) every e-gold account ever used to buy these wares from them using e-gold.""

Sounds like a pretty standup operation. But the Justice Department's indictment alleges, among other things, that Douglas L. Jackson, Reid A. Jackson, and Barry K. Downey "conducted funds transfers on behalf of their customers, knowing that the funds involved were the proceeds of unlawful activity; namely child exploitation, credit card fraud, and wire (investment) fraud; and thereby violated federal money laundering statutes."

My favorite line by Jackson in response to my blog is the following: "I note in passing that the blather about 'avoid[ing] the scrutiny of the Secret Service' is a crock of sh_t. If indeed a crime has been committed, all the data needed to identify, apprehend, and prosecute the malefactors is in our database, and will be forever, available pursuant to any lawful request." I edited the profanity in the quote because we like to think of InformationWeek as a family-friendly publication. Further, Jackson added that, "e-gold in no manner condones persons or organizations attempting to use e-gold to support criminal acts. The exact opposite is true. E-gold limits accounts that are suspect of illicit activity and has a long history of cooperation with law enforcement agencies."

As recently as Feb. 8, 2007, Jackson and I corresponded about e-gold's role within the hacker economy, and Jackson went as far as to position his organization as a group of cybercrime fighters, having "broke the back of two communities (CP and carders) that had infested e-gold and were damaging our brand/reputation." The "CP" in his quote refers to Carderplanet, a Web site that served as a marketplace for millions of stolen bank accounts. Wired magazine even chronicled Jackson's claims in a December 2006 story.

The Justice Department apparently was not impressed, pointing out last week that its indictment was the result of a two-and-a-half-year investigation by the Secret Service Orlando Field Office into an alternative payment system that has largely operated outside of normal banking industry regulations. Federal law enforcement sees e-gold as a system for supporting emerging threats and evolving criminal methods through the use of electronic or digital currency to facilitate trafficking in illicit goods and services.

It will be fascinating in the coming months to learn whether e-gold is simply a misunderstood crusader for cybersafety or a key enabler of identity theft. Hard to believe that it could be both (if you believe both Jackson and the Justice Department). One thing's for sure, federal law enforcement is onto to something in taking on any site that allows cybercriminals to get paid for their efforts.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
Register for Dark Reading Newsletters
Dark Reading Live EVENTS
INsecurity - For the Defenders of Enterprise Security
A Dark Reading Conference
While red team conferences focus primarily on new vulnerabilities and security researchers, INsecurity puts security execution, protection, and operations center stage. The primary speakers will be CISOs and leaders in security defense; the blue team will be the focus.
White Papers
Cartoon Contest
Write a Caption, Win a Starbucks Card! Click Here
Latest Comment: No, you were supposed to display UNICODE characters!
Current Issue
Security Vulnerabilities: The Next Wave
Just when you thought it was safe, researchers have unveiled a new round of IT security flaws. Is your enterprise ready?
Flash Poll
[Strategic Security Report] Assessing Cybersecurity Risk
[Strategic Security Report] Assessing Cybersecurity Risk
As cyber attackers become more sophisticated and enterprise defenses become more complex, many enterprises are faced with a complicated question: what is the risk of an IT security breach? This report delivers insight on how today's enterprises evaluate the risks they face. This report also offers a look at security professionals' concerns about a wide variety of threats, including cloud security, mobile security, and the Internet of Things.
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
Published: 2017-05-09
NScript in mpengine in Microsoft Malware Protection Engine with Engine Version before 1.1.13704.0, as used in Windows Defender and other products, allows remote attackers to execute arbitrary code or cause a denial of service (type confusion and application crash) via crafted JavaScript code within ...

Published: 2017-05-08
unixsocket.c in lxterminal through 0.3.0 insecurely uses /tmp for a socket file, allowing a local user to cause a denial of service (preventing terminal launch), or possibly have other impact (bypassing terminal access control).

Published: 2017-05-08
A privilege escalation vulnerability in Brocade Fibre Channel SAN products running Brocade Fabric OS (FOS) releases earlier than v7.4.1d and v8.0.1b could allow an authenticated attacker to elevate the privileges of user accounts accessing the system via command line interface. With affected version...

Published: 2017-05-08
Improper checks for unusual or exceptional conditions in Brocade NetIron 05.8.00 and later releases up to and including 06.1.00, when the Management Module is continuously scanned on port 22, may allow attackers to cause a denial of service (crash and reload) of the management module.

Published: 2017-05-08
Nextcloud Server before 11.0.3 is vulnerable to an inadequate escaping leading to a XSS vulnerability in the search module. To be exploitable a user has to write or paste malicious content into the search dialogue.