e-gold History

e-gold was founded in 1996 by Dr. Douglas Jackson and Barry K. Downey. Transactions using e-gold have grown dramatically since 2005. The total amount of gold bars (over three tonnes) in the e-gold system is approaching the size of the national reserves of smaller countries. e-gold now generates a substantial income from spend and storage fees — there is a charge of a few cents to make each e-gold "spend" and e-gold itself now earns well over a million USD per year from fees.

The number of e-gold accounts (as claimed by e-gold) grew from 1 million in November 2003 to 3 million on 22 April 2006. Unlike fractional-reserve banking, e-gold holds 100% of clients' funds in reserves with a store of value. Proponents of the e-gold system contend that e-gold deposits are protected against inflation, devaluation and other possible economic risks inherent in fiat currencies. These risks include the monetary policy of countries or territories, which are perceived by proponents to be harmful to the value of paper currency.

The repository of the actual bullion bars with serial numbers and other data can be seen using the live "Examiner" function on the e-gold web site. Bullion is held in allocated storage with Brink's Global Services (part of The Brink's Company), Transguard Security Services (part of The Emirates Group) or MAT Securitas Express AG (part of the VIA MAT Group). ^[5] Clients hold an unallocated share of this allocated bullion.
The user may take physical delivery of the precious metal upon payment of an additional fee, and provided the user has an available balance of at least the weight of the smallest individual item displayed in the Examiner. This is currently a 32 troy ounce (996 g) gold bar, which is worth approximately $29,500. However in practice, most users permit the company to store the metal for them.

Crime and fraud

e-gold has been perceived by the United States government as the medium of choice for many online con-artists, with pyramid schemes and High Yield Investment Programs ("HYIPs") commonplace. This has been blamed on e-gold's policy of irreversible transactions. However, e-gold has been blocking accounts where fraud is proven or suspected since 2001.

e-gold and OmniPay have also been accused of being a medium for money laundering, although this is questionable given that there were only 24 customer accounts holding over 10kg of gold (approximate value $200,000) by April 2006. As digital gold currency providers are not banks, they are not legally required to perform various sorts of "know your customer" background checks. However, many legitimate e-gold exchange providers, for example GoldNow, may require a higher level of identification, generally more intrusive than a bank, for security purposes.

In January 2006, BusinessWeek reported on the use of the e-gold system by ShadowCrew, an 4000-strong international crime syndicate involved in massive identity theft and fraud Omar Dhanani of Fountain Valley, California, connected to the ShadowCrew, is an e-gold customer and is reported to have moved amounts ranging from $40,000 to $100,000 a week from proceeds of crime through e-gold.

In response, Jackson published a letter which stated that "e-gold operates legally and does not condone persons attempting to use e-gold for criminal activity. e-gold has a long history of cooperation with law enforcement agencies in the US and worldwide, providing data and investigative assistance in response to lawful requests." He further noted that "Our staff has participated in hundreds of investigations supporting the FBI, FTC, IRS, DEA, SEC, USPS, and others."

In August 2006, WORLDLawDirect lawyers announced e-gold officials and their legal counsel to be the subject of a U.S. Federal Court subpoena. They believe e-gold is subject to U.S. Federal Court jurisdiction and may be held liable for some or all of the investors' losses (and potential triple damages) in the Solid Investment large scale High Yield Investment Program (HYIP) scam.^{[citation needed]} On 27 April 2007, a federal grand jury in Washington, D.C. indicted e-gold Ltd and its owners on charges of money laundering, conspiracy, and operating an unlicensed money transmitting business.e-gold, however, claims that the charges are groundless, and has responded to the allegations.

Gold & Silver Reserve (G&SR), Inc has suspended all of Iranian accounts on 24 November 2006 without notification.

Security

As with any online payment system, e-gold is vulnerable to various threats, notably phishing (for example, forged emails asking for login details) and malware (such as keystroke logging spyware).

e-gold offers no protection whatsoever if an attacker succeeds in obtaining:

• the user's e-gold account number
• the user's e-gold password
• access to the user's registered email account (web-based email accounts without a secure login are especially vulnerable) as the e-gold account will then be completely open for malicious use.