Dark Reading is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


05:22 PM

Besieged E-Gold Founder Claims (Not Unconvincingly) To Be Victim Of A Fed Vendetta

Bloggers live for feedback to their controversial postings and in this regard, my entry earlier this week about a 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 did not disappoint. The following day, I recei

Bloggers live for feedback to their controversial postings and in this regard, my entry earlier this week about a 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 did not disappoint. The following day, I received an e-mailed link to E-Gold's highly articulate and well-sourced defense.E-Gold chairman Douglas Jackson believes the Justice Department, and the Secret Service in particular, has a vendetta against his company. It's less clear why the Secret Service might be manipulating information and public opinion in its efforts to bring down E-Gold and its executives, but Jackson is armed with plenty of documents that support his allegations.

In an April 24 statement, issued the same day as the federal grand jury's indictment, Jackson states that the government "knows full well that their allegations are false, yet they highlight these irresponsible and purposely damaging statements in order to demonize e-gold in the eyes of the public." He denies all of the accusations, taking particular umbrage to the Justice Department's portrayal of him and his business ventures as having turned a blind eye to payments for child pornography or for the sale of stolen identity and credit card information. Jackson then reiterates his claims that E-Gold is "the most effective of all online payment systems in detecting and interdicting abuse of its system for child pornography related payments."

Jackson points to a December 2005 court case where he says the Secret Service deceived Federal Magistrate Judge John Facciola by presenting erroneous testimony in order to obtain search and seizure warrants authorizing the government to seize U.S. bank accounts of Gold & Silver Reserve Inc. Jackson's online statement even includes a link to an e-mail that appears to indicate that he had made plans in December 2004 to visit the Secret Service in Washington, D.C., in order to brief them on how E-Gold operates. These plans, he says, were eventually cancelled by senior Secret Service management, although it's not clear based on Jackson's telling of the story why this was done.

In defense of the money laundering charges, Jackson notes that his company's OmniPay online exchange service "has for years followed stringent customer identification procedures and an absolute policy of only accepting money payments by bank wire." Further, since E-Gold doesn't accept money payments from "anyone in any form and has never owned a single dollar, yen, euro or any other brand of legacy money," it can "scarcely be construed" as a money launderer. E-Gold is a closed system, the only way to obtain e-gold is by receiving a transfer from someone who already has some, and the company maintains a permanent record of all transfers.

While Jackson's reasoning here requires first-hand knowledge of how E-Gold works to be proven, much more clear cut is E-Gold's role as founding member of the National Center for Missing & Exploited Children's Financial Coalition Against Child Pornography, alongside America Online, American Express, Bank of America, PayPal, and others. Their stated goal is to eradicate the multi-billion dollar commercial child pornography by 2008. Is this a clever move by E-Gold to cover its tracks, or additional, albeit circumstantial, evidence that E-Gold is out to stop rather than encourage child porn?

An aspect of the E-Gold case that certainly warrants further examination is Jackson's allegation that the government, in investigating his company, is helping itself to the financial records of hundreds of thousands of E-Gold customers, which include American citizens as well as international organizations.

A full understanding of what's happening here (that is, what's behind the Justice Department's interest in E-Gold and whether it's justified) far exceeds the capacity of any single blog entry, particularly as the story is still unfolding. In the meantime, the Justice Department's campaign against E-Gold and that company's defense hit on some of today's most relevant security and privacy issues. These include the possibility that the online payment infrastructure that facilitates the underground cyber exchange of pilfered personal information needs to be reformed and that law enforcement needs to work with, rather than alienate, members of this infrastructure in order to beat back cyber criminals.


Recommended Reading:

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
COVID-19: Latest Security News & Commentary
Dark Reading Staff 8/3/2020
Pen Testers Who Got Arrested Doing Their Jobs Tell All
Kelly Jackson Higgins, Executive Editor at Dark Reading,  8/5/2020
New 'Nanodegree' Program Provides Hands-On Cybersecurity Training
Nicole Ferraro, Contributing Writer,  8/3/2020
Register for Dark Reading Newsletters
White Papers
Cartoon Contest
Write a Caption, Win a Starbucks Card! Click Here
Latest Comment: This comment is waiting for review by our moderators.
Current Issue
Special Report: Computing's New Normal, a Dark Reading Perspective
This special report examines how IT security organizations have adapted to the "new normal" of computing and what the long-term effects will be. Read it and get a unique set of perspectives on issues ranging from new threats & vulnerabilities as a result of remote working to how enterprise security strategy will be affected long term.
Flash Poll
The Changing Face of Threat Intelligence
The Changing Face of Threat Intelligence
This special report takes a look at how enterprises are using threat intelligence, as well as emerging best practices for integrating threat intel into security operations and incident response. Download it today!
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
PUBLISHED: 2020-08-06
In whoopsie, parse_report() from whoopsie.c allows a local attacker to cause a denial of service via a crafted file. The DoS is caused by resource exhaustion due to a memory leak. Fixed in, 0.2.62ubuntu0.5 and 0.2.69ubuntu0.1.
PUBLISHED: 2020-08-06
In etcd before versions 3.3.23 and 3.4.10, the etcd gateway is a simple TCP proxy to allow for basic service discovery and access. However, it is possible to include the gateway address as an endpoint. This results in a denial of service, since the endpoint can become stuck in a loop of requesting i...
PUBLISHED: 2020-08-06
In ectd before versions 3.4.10 and 3.3.23, gateway TLS authentication is only applied to endpoints detected in DNS SRV records. When starting a gateway, TLS authentication will only be attempted on endpoints identified in DNS SRV records for a given domain, which occurs in the discoverEndpoints func...
PUBLISHED: 2020-08-06
An unhandled exception in check_ignored() in apport/report.py can be exploited by a local attacker to cause a denial of service. If the mtime attribute is a string value in apport-ignore.xml, it will trigger an unhandled exception, resulting in a crash. Fixed in 2.20.1-0ubuntu2.24, 2.20.9-0ubuntu7.1...
PUBLISHED: 2020-08-06
TOCTOU Race Condition vulnerability in apport allows a local attacker to escalate privileges and execute arbitrary code. An attacker may exit the crashed process and exploit PID recycling to spawn a root process with the same PID as the crashed process, which can then be used to escalate privileges....