April 28, 2007

US moves to freeze Gold payment reserves

The gold community is a-buzz with the news ... first an announcement from BullionVault (no URL):

There have been growing stresses on our relationship with Brinks Inc, the US-owned vault operator, and it has become clear that they feel uncomfortable about continuing to vault BullionVault gold.

Why this might be so I am genuinely unable to say. Their exact reasoning has not been disclosed to us.

Fortunately, there is an excellent alternative available to us in ViaMat International, the largest Swiss-owned vault operator, and one which has a full quota of internationally located professional bullion vaults.

Swiss ownership suggests an independence from some of the pressures which Brinks may have found themselves operating under recently. Also you - our users - have chosen to vault 26 times as much gold in Switzerland as in the United States, so we believe this change will be both natural and welcome.

This is an echo of the old e-gold story, where different reputable vault companies handed the e-gold reserves around like it was musical chairs. BuillionVault is a new generation gold system, not encouraging payments but instead encouraging holding, buying and selling. It's not yet clear why they would be a threat.

But then, from 1mdc, a payment system:


Friday Apr 27 2007 - 4AM UTC

It appears that a U.S. Government court order has forced e-gold(R) to close down or confiscate all of 1mdc's accounts. All of 1mdc account's have been closed at e-gold by order of the US Government.

Please note that it appears the accounts of a number of the largest exchangers and largest users of e-gold have also been closed or confiscated overnight: millions of Euros of gold have been held in this event. A couple of large exchanger's accounts have been shutdown.

If the confiscation or court order in the USA is reversed, your e-gold grams remaining in 1mdc will "unbail" normally to your e-gold account.

We suggest not panicking: more will be known on Monday when there will be more activity in the courts.

You CAN spend your 1mdc back and fore to other 1mdc accounts. 1mdc is operating normally within 1mdc. However you should be aware there is the possibility your e-gold will never be released from e-gold due to the court order.

Ultimately e-gold(R) is an entirely USA-based company, owned and operated by US citizens, so, as e-gold users we must respect the decisions of US courts and the US authorities regarding the disposition of e-gold. Even though 1mdc has no connection whstsoever to the USA, and most 1mdc users are non-USA, e-gold(R) is USA based.

You are welcome to email "team@1mdc.com", thank you.

Yowsa! That's heavy. And now, BullionVault's actions make perfect sense. Brinks probably heard rumour of happenings, and BullionVault are probably sweating off those pounds right now crossing the border with rucksacks of kg of yellow ballast.

It's worth while looking at how 1mdc worked, so as to understand what all the above means. 1mdc is simply a pure-play e-gold derivative system, in that 1mdc maintained one (or some) e-gold accounts for the reserve value, and then offered an accounting system in grams for spending back and forth.

1mdc then stands out as not actually managing and reserving in gold. Instead it manages e-gold ... which manages and reserves in gold. Now, contractually, this would be quite messy, excepting that the website has fairly generally made no bones of this: 1mdc is just e-gold, handled better.

So, above, 1mdc is totally uneffected! Except all the users who held e-gold there (in 1mdc) are now totally stuffed! Well, we'll see in time what the real story is, but when this sort of thing happens, there are generally some losers.

What then was the point of 1mdc? e-gold were too stuffy in many ways. One was that they charged a lot, another was the owners of e-gold were pretty aggressive characters, and they scared a lot of their customers away. Other problems existed which resulted in a steady supply of customers over to 1mdc, who famously never charged fees.

We could speculate that 1mdc was destined for sale at some stage. And I stress, I don't actually know what the point was. In contrast to the e-gold story, 1mdc ran a fairly tight ship, printed all of their news in the open, and didn't share the strategy beyond that.

It may appear then that the US has moved to close down competition. Other than pique at not being able to see the account holders, this appeared yesterday to be a little mysterious and self-damaging. Today's news however clarifies, which I'll try and write a bit more about in another entry:

...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.
Posted by iang at April 28, 2007 11:15 AM | TrackBack

> Ultimately e-gold(R) is an entirely USA-based company, owned and
> operated by US citizens, so, as e-gold users we must respect the
> decisions of US courts and the US authorities regarding the disposition
> of e-gold. Even though 1mdc has no connection whstsoever to the USA,
> and most 1mdc users are non-USA, e-gold(R) is USA based.

G&SR is USA-based but isn't e-gold based in Nevis?

Posted by: Ray at April 30, 2007 05:03 AM

IANAL, and this is not legal advice, but there are several general ways of looking at the question of offshore status.

The location of the founders/beneficiaries/decision-makers, the servers, programming, intellectual property, support, customer contracts, etc, are all indicative. In this case, half appears to be in the US, and the other half appear to have been "sold" from the US to an offshore entity, created apparently for the purpose.

These are questions that may be dealt with ultimately in Washington DC., court. Typically courts in the US and around the world take a skeptical view of unclarity. The general reasonable test in a civil or taxation case is if the transfer makes economic sense, beyond simply escaping jurisdiction. Experienced offshore operators know this well and go the extra mile to make it very clear what the real economic purpose is.

In criminal matters, "economic sense" does not help as much, as the economics of crime are not considered to be so important to the court. There might be a question on whether to establish jurisdiction, but that is assisted by having the defendents at the court's pleasure.

In short, it may be that the court accepts that e-gold is in Nevis, and that it is irrelevant to the case.

Posted by: IANAL at April 30, 2007 05:44 AM


USA Govt is just doing bullshit they have nothing to do with e-gold and they have totally un-educated officers who are dealing in egold case more then 2 months are gone still no progress has been done.

e-gold management is also duffer why they are living in S.O.B country

Posted by: Jessica Walton at July 5, 2007 11:29 AM

It seems the problem stemmed from the negative stigma of E-gold. Now that the digital gold currency arena has been cleaned up it will likely lead to more acceptance from vault operators to work with reputable companies like GoldMoney and Bullionvault.

Posted by: Trace Mayer at November 1, 2011 02:15 AM

Hi Ian, it seems there's some forward motion on maybe getting some fraction of our e-gold value.... I've received a paper letter from "E-Gold Claims Process Administrator" inviting me to logon to E-Gold.com and confirm my identity.... Well fine; after ten years I just got thru purging some old paper files where I had written down my account and password, LOL! Having neither, I suppose I won't be in the pool of claims...

Posted by: Todd Boyle at May 22, 2013 12:22 PM
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