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A New Beginning

November 2008 will mark the 12th anniversary of e-gold's debut as an alternative global payment system enabling Users - individuals or businesses - to receive payment in gold at extremely low cost and without risk of the sort of payment reversals that characterize all credit based systems.

e-gold has been a pioneer in numerous areas and I am proud of its innovative accomplishments. Since 1996, the Internet has witnessed multiple online payment initiatives, several of them funded with $20-90 million of start-up capital, with distinguished founders and executive cadre, high profile brand name strategic allies, and favorable reception in the business press. But whereas Digicash, Cybercash, Beenz, Flooz, Peppercoin and a host of others each was promoted as the next big thing, all of them combined cumulatively [in their original incarnations - some have been restructured into other business models] executed less transaction volume than e-gold did in a typical single quarter.

But this note is not about success. It is about e-gold's failure to date to emerge, its failure to transition from a marginal player for early adopters to a respected institution integrated into the global financial mainstream. I am talking about a vision that has not yet been realized… and a determination to fix what needs to be improved.

e-gold's failure to emerge so far is a result of many factors but the root causes were design flaws in the account creation and provisioning logic that led to the unfortunate consequence of vulnerability to criminal abuse. Criminal abuse of the e-gold system, in turn, led to a self-reinforcing negative reputation.

Ultimately, criminal abuse of e-gold reached the point where the US Department of Justice intervened, bringing criminal charges against e-gold Ltd., Gold & Silver Reserve., Inc., (the Operator of e-gold and also of the online exchange service OmniPay), myself, and the other directors for violations of 18 USC 1960 [Operation of an unlicensed Money Transmitting Business] and 18 USC 1956 [Conspiracy to Commit Money Laundering]. The criminal case has been resolved. The resolution of the criminal case however provides for a second chance, an opportunity to address the flaws embedded in the e-gold system and to transform the "e-gold Operation" into the institutions I, the other directors, and our longsuffering employees and contractors have always envisioned, one that serves to advance the material welfare of mankind.

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.

I am going to briefly describe the systemic problems we are undertaking to rectify and a roadmap of where the system is heading. Going from where we are now to where we need to be is going to be a bumpy road, especially at first. Many legitimate e-gold Users have already suffered loss over the past year as the measures undertaken by the government to prevent dissipation of assets have severely impacted exchange markets with resulting illiquidity of a magnitude as to effectively make it impracticable to exchange e-gold for conventional money. There will be more disruption in the next few months but it will be temporary and will set the stage for powerful new features that enhance the usability and global reach of e-gold. If there is a silver lining, it is that the more illiquid e-gold has become, the more valuable it has become due to the (apparently ongoing) decline of the US dollar relative to gold and other non-financial assets.

e-gold User Agreement Changes

Before proceeding, however, let me make something clear that should have been made more emphatically clear long ago. Use of the e-gold system for criminal activity will not be tolerated. Memorializing this resolve, the following provisions are being added to the e-gold Account User Agreement:

2.3.  User agrees to not use e-gold in any manner that violates the laws of whatever jurisdiction to which the User is subject.

4.6.1.1.  If e-gold investigators reasonably suspect that the e-gold account of User is being used to launder the proceeds of crime or for any other criminal purpose, Issuer may freeze the e-gold account and any other e-gold accounts of User.   Additionally, at the sole discretion of Issuer, User will be subject to damages and other penalties, including criminal prosecution where available and the notification of the general public of User’s actions, at the sole discretion of Issuer.

Design flaws in legacy e-gold system

A systemic flaw in the e-gold design, present from the very beginning, made it vexingly difficult for e-gold to expel a User, in a truly effective way, for criminal abuse of the system. e-gold investigative staff might detect suspicious activity, block or freeze the offending account, and later discover the same perpetrator had created additional accounts.

One element was logic that allowed an e-gold account full privileges from the moment of creation and only revoked those privileges in the event of suspicion that the account holder was seeking to mask their identity or actually engage in illicit activity.

Compounding this weakness was an unrestricted ability for Users to create multiple accounts without any obligatory indicator that they were all under the control of one person.

The next generation of the e-gold application will undertake to enforce a "one-human being/one e-gold User" rule. Instead of the existing logic where a User logs directly into an account, a User in the next generation system logs in as a User. Only validated Users are empowered with the ability to create multiple accounts.

The advantage from the cybercrime-thwarting standpoint will be an ever-stronger ability to blacklist a person who has abused the e-gold system.

e-gold is intensively working on this next generation User-based log-in system but it is likely to be another 6-9  months to deployment. Meanwhile, emergency surgery is required NOW.

Shock Therapy phase [may it be brief!]

1)  Effective immediately, new e-gold account creation is suspended until a compliant interim solution for Customer Identification can be ensured.

2)  We are requesting that autoexchangers - even though the technical beauty of the autoexchanger concept is sublime – cease supporting exchanges to or from e-gold for the time being. The problem with the autoexchanger concept is that although the autoexchangers themselves may be perfectly compliant with requirements [promulgated by Webmoney and e-gold] to automatically put tracking data in their memo fields, and despite the fact that Webmoney is also committed to aiding in the suppression of cybercrime, the fact is that a substantial proportion of the cybercriminals that abuse e-gold have evolved into a modus operandi that involves autoexchanging possible proceeds of crime into Webmoney, sometimes within minutes of receiving the value, thus making interdiction a matter of catch-up or closing the barn door after the horse is gone.

Looking Forward

We are confident that a regulated e-gold rebuilt to a more systematic specification will be less hospitable to criminals, and more attractive to mainstream business use without being less accessible to those disregarded by legacy payment systems.

Please accept our apologies for the occasional turbulence you may experience on this journey. And, as always...

Thank you for using e-gold.

I know Douglas Jackson long enough, before the times when he has received his M.D. Sorry, I’ve forgotten to introduce myself, my name is George Harrison. I’ve initially changed my name for confidentiality. Before appearance of E-gold in 1996 I knew Double D, as I’ve got used to call him, personally. We sometimes met to dinner, to discuss some future prospects of the Internet and e-currency though that time we called it as e-money, and only then E-bullion has registered this term as a trade mark.

So, time passed and our paths had crossed again and I worked several years with Jackson. We were successful and had earned enough until the numerous rivals began appearing. In the very beginning we weren’t concerned with all that problems until everything had come in on us at once. Those endless inspections on the part of the government (long before our accounts were arrested), all those appearing payment systems, the mere Webmoney cost great troubles! That time we’ve decided to organize a secret rival squad. First we confined ourselves to black PR then started sending artificial phishing postings. Finally Douglas offered to get with DDoS attacks. We have invited my nephew from Silicon Valley (Palo Alto, CA), who worked as a system administrator in some IT company. So, we’d organized mini DDoS division headed by me. We were well-connected and never had any problems with Botnet. Sometimes it was really a global scale... I don’t feel ashamed and I think that any of you would feel the same if you knew how had that damned Jackson dealt with me. The thing was that Douglas always offered me an interest from the new funds in system (Doug usually granted me 6% from the balances). That time our turnover was over $30 mln, so I had a good business. But this sweet life had led my old chap double D to the wrong way. One day I barged in his parlor and choked up: DD was carefully emptying some white dust out of the iron bullet fob to his table and leveling it with a plastic card. I’d frightened him away and as soon as he saw me he’d quickly swept aside everything on his desk. Later, in a few months he’d owned up that he was taking a amphetamine and other drugs to improve a working capacity. I have to admit that later I joined him for company. However along with a funny pace of living we’d got some financial problems in the system. Boss started to delay the payoffs and to practice black ddos hiding behind his usual “for the sake of e-gold”. I wasn’t motivated to work without bonuses. That time I was building a house in Florida and I wasn’t pleased with my financial situation. For that reason I decided to know the status of the system and used my password to enter the admin area. You may not believe me but I found that all our accounts were empty. I was shocked! Only then I understood the way Doug worked: being not able to support such a machine he started living for the account balances and very soon have killed them all. He not only let the whole biz all hang out but also made a trial shot in his own health by hook. When we were chilling out he often told me about his adventures being high. Once he told me that each thanksgiving he was meeting his pal Henry T. Nicholas, CEO of a well-known Broadcom, producer of microchips for mobile phones. May be you’ve heard that he was arrested for drug storage and adding ecstasy into the beverages of the company clients. Neither me, nor Barry K. Downey could stop this.

However, I wasn’t able to catch how he has managed to send all that dough from the accounts. Only after the registration in Nevis (Antilles) on July 14, 2006 I’d latched on everything. Jackson had not only registered an offshore company there but also started transferring the money (supposedly backed by gold) from all the accounts to the bank located there. He was my friend but that shitty money, fame and amphetamine had done their part. He was finding dozens of reasons not to pay my bonuses and I believed him and continued working for the sake of our dear e-gold. I devoted this system few years and couldn’t believe that surrounding. After the registration in Antilles the money most probably was quickly sent to the other part of the world. May be you remember that exactly that time E-gold and his primary exchanger OmniPay has stopped paying with the bank wires.

I was almost sure that Douglas had personally initiated the suit on the part of the government. His conclusions were clear: he’d withdrawn all the money and hence the system was not able to pay with wires and the only way out for him was a suit. Just look closer – he wrote off in one go the whole loan when the accounts of Bullion Exchange, AnyGoldNow, IceGold, GitGold, Denver Gold Exchange, GoldPouch Express, 1MDC and others were blocked. The wisest step, huh? That time I was getting a load of everything and couldn’t understand how clever my DD had been indeed. He was a genius because he thought out E-gold and he was a double genius when he contrived the way of getting all the system money. Already in May all the charges were dismissed, the accounts unblocked but wire transfers were still unavailable. Has anybody asked the question why after the court of appeals for the District of Columbia circuit has dismissed all the charges on April 11 e-gold didn’t resume its work? Douglas Jackson is not just a fraudster but a scammer of the higher rank who not only scams the people and blocks the accounts in e-gold but also makes it so that both people and the exchangers believe e-gold system.

As soon as E-gold was discharged I decided to contact Douglas to remind him the debts, especially as I was sure that he had some green. I was greatly surprised as Doug hadn’t changed his cell number and answered the very first call. He was very cheerful and I can even say that we talked as the old friends. I felt greatly offended but I tried to pocket my pride in order not to blunder out and not to let Doug to hang on. I was greatly surprised that DD had not only hung on but also agreed to meet willingly. We’d appointed to meet in Santa Monica, to take a walk over the beach, to have some beer and to talk about the business and other issues as we hadn’t met long enough. When I saw Douglas it was painful to see him as it was clear that he still in action. I’m not able to depict people as the writers do but no exceptional ability was need to see that he was pale and an evident disease was shown through the artificial smile. I think he was addicted. Now I was finally sure that at all the court sittings concerning e-gold, he was high or was addicted which could be seen on his face. I’m not quite sure but those recordings are available on YouTube.

As soon as we reached each other Doug started asking me about my business and my current affairs and was constantly giggling. I was greatly surprised but DD was thanking me much that I said nobody about his affairs and all the machinations he was dealing with in E-gold. In an odd moment he offered me some white dust that didn’t taste like a nose candy for sure. Knowing that we can talk only on a cloud I didn’t refuse. Later when we were sitting near the water Doug being overamphed started telling about his recent way of living, earning and the way of transaction making. He wasn’t able to speak quietly, he cried. He was cryin’ that had he managed to send several tens of millions to his offshore bank, that he hated people for misunderstanding. A bitchy hog… He cried that he considered all of us, the employees of E-gold as a tool for earning money. He became a pill… And then he had haughtily said that even a law was not a problem for him and that he was going to bankrupt e-gold already in August. He was jabbing his finger into me and saying that he would simply declare his bankruptcy… He said that all the large accounts had already been arrested long ago and everything they could take from him were $20k and the servers that he didn’t need anymore… Later he came to his senses and offered me another doss thinking that I’d forget everything he’d said. I didn’t want to wait until he finished and simply had turned on my heels full of insult.

Why did I publish that press release? I just want everybody to know that truth at last. He’ll treat you the same way he’d treated me. I know that after that discharge lots of people started cherishing hopes but I don’t want people to believe in e-gold and then in August to find that it is insolvent. So, I’ve placed that release and put the name of Douglas Jackson under it as the whole story was heard from him.

The reaction was quite predictable. Jackson was silent for the whole day and was whipping the cat for his talkativeness and then started writing a disclaimer.

And even if you don’t trust this letter I’m happy that I’d written it. Let people know. Especially since most of them have already understood that the system which backs its currency with nothing and which doesn’t let to withdraw money should not exist. I don’t know whether I did good or not by telling about all the plans of Douglas but I sincerely want less people being scammed by this man and his system.

11 of July 2008
Source: pressreleasepoint.com