I recently posted some information and my opinions that ‘e-gold had hit the wall’.

It was clear early in the day, Friday, that many large e-gold accounts had been frozen or blocked by a US government action. Additional information early in the day on why or how government authorities ‘froze’ the accounts was unknown.

Late Friday afternoon the Justice Department put out a press release stating what action had taken place. This information enlightened us all on why the e-gold exchange agents’ accounts had been frozen and what may happen to e-gold Ltd. from this day forward. We’re getting copies now of the actual court docs but reading the will probably take a week.

Many facts are still unclear and everyone who reads this should remember that persons indicted are innocent until proven otherwise. So any mischief discussed here is only alleged to have occurred. Also understand that a grand jury is a tool of the prosecution. Grand jury indictments are not the final word they are the first word.

What happened?

Early Friday, it was reported on the 1MDC web site that major e-gold exchange agents’ accounts, including 1MDC, had been frozen by a US Government court order or similar document. Later in the day Friday, several news organizations released stories based on the Department of Justice press release.

The four-count indictment, handed down on April 24, 2007, and unsealed today, charges E‑Gold Ltd; Gold & Silver Reserve, Inc.; and their owners Dr. Douglas L. Jackson, of Satellite Beach, Fla.; Reid A. Jackson, of Melbourne, Fla.; and Barry K. Downey, of Woodbine, Md., each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law. *usdoj.gov

The indictment alleges that the defendants 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. *prnewswire.com

What account were frozen?

The accounts that were targeted by the investigation and alleged to have been involved with the illegal activity were frozen and that appears to have been only accounts owned by some larger exchange agents and the 1MDC account(s)

“Subsequent to the indictment, the Department of Justice also obtained a restraining order on the defendants to prevent the dissipation of assets by the defendants, and 24 seizure warrants on over 58 accounts believed to be property involved in money laundering and operation of an unlicensed money transmitting business.” * prnewswire.com

Is e-gold still in business?

There was no official information release from e-gold, Gold & Silver Reserve or OmniPay yet. Their web site is still up, funds still transfer and it appears YES! No one knows yet what will happen in the coming days. However, we are taking an educated guess that they[gov] will allow ‘outexchanges’, redemptions…whatever you want to call it, account holders should be able to get national currency from an agents (if you choose to sell). It seems that the government will allow e-gold / GS&R et al. are allowed to sell bars in storage for exchange of national currency to account holders, under their supervision and with prior approval. We believe they are NOT allowed to buy any gold and sell any e-gold digital currency, only outexchange. So the bar count will only go down from here.

Can I get the funds out of my e-gold?

It would appear YES, but no one is sure if you can liquidate immediately. If agents are buying, you can sell to them. I would think if you can transfer the digital money to an exchange agent and they are willing to pay you, its smart to seize that opportunity to get your cash. Again, this is our opinion based on the facts so far.

The information reads that only the frozen accounts will be restricted, all other regular accounts are still open and contain value.

The restraining order does not limit the E-Gold operation’s ability to use its existing funds to satisfy requests to exchange E-Gold into national currency for customers of non-seized accounts, or its ability to sell precious metals to accomplish the same, once approval has been received.” *pr-inside

Not to fear….your funds look safe, however the last line above says, “…once approval has been received.” I’m not sure if that means the court has to approve the sale of gold and/or disbursements of funds. That’s unclear. It seems the funds are safe but may need approval from the .gov before they can be liquidated, that includes bars in storage but its not 100% clear.

But as the wording reads above, they[e-gold] will be allowed to convert e-gold back to national currency for the existing account holders. Until someone points out different I assume that is the case.

Is 1MDC out of business?

Yes, 1MDC accounts that were backed by e-gold…..the e-gold was frozen/seized. That part of 1MDC is over. I don’t know how they are progressing with Pecunix or other currencies but perhaps we’ll get an update next week.

All funds that were in 1MDC, are they gone or can I get them back?

Good question, anyone know?

Where do we go now for our online businesses?

• Webmoney
• Liberty Reserve
• Loom
• eCache
• e-bullion
• Pecunix

Why are they so hard on illegal [alleged] money transmitters?

From Ian’s Financial Cryptography Web

Which leaves operating an unlicensed money transmitting business. This is the core charge. As we recall, this law came in in the aftermath of 9/11, when a Hawala was found to have transmitted one of the payments needed to finance the terrorist attack (the vast majority of the funds went through normal bank transfers). This then started a war on Hawalas, and the regulations were put in place * with a clear offer: license yourself as a money transmitter or face the consequences.

e-gold declined the offer. I recall that they argued they were not a money transmitter business because e-gold was not money, and the sales operation of Omnipay just used the banks to transmit the dollars back and forth. (This is from memory, these arguments were made in public in either the press or the mailing lists.)

I don’t know about you, but that was a ludicrous position to take then, and now. It was pretty clear that the point was, come in from out of the wild wild west, or well go and hunt you down. To argue on a technicality like that was just insane, as courts will ignore such nonsense on the basis of a “reasonable man” test.

Is e-gold more or less in the money transmitting business? A reasonable man will say yes.