

How the Man finally brought e-gold down - pelle
http://stakeventures.com/articles/2008/07/22/the-man-finally-brought-e-gold-down

======
Prrometheus
eGold was a remarkable financial institution in that it focused so much on
providing a service to their customers. They were a servant, not of the
government, not of the regulatory powers that be, but of their customers. This
is rare. Try to make a payment to an online poker site from your bank account
if you want to see how your bank's commitment to their customers stacks up
against eGold.

Sadly, eGold was shut down. It was too dangerous to the authority's power for
it to be allowed to exist. Epiphyte corp. can only exist in a fictional
universe outside of the watchful gaze of Uncle Sam.

~~~
tsetse-fly
What's with all of the conspiracy theories?

I don't think people grasp how easy and widely e-gold was used to launder
money. It was THE premier way to move money if you were involved with any sort
of electronic fraud.

All you had to do was cash-out someone's bank account then wire the money to
an e-gold affiliate, who deposits it into your online account. All
transactions are irreversible. e-gold kept minimal records and after the money
enters an offshore account, the government has little chance of recovery.

There were millions of dollars being moved through e-gold with fraud. They
purposely made the process easy with as little verification as needed. Their
market was criminals. I'm sure most of their profit came out of transaction
fees related to fraud.

Where's the innovation? Their site looks like shit. They just managed to find
a loophole to look legitimate and survive this long. I'm not surprised that
the owners plead guilty to conspiracy to engage in money laundering.

------
patrickg-zill
What is surprising to me, is how no law enforcement exists at any level for
individuals who get scammed on the Net. I am talking about eBay scams, all
those spam emails etc.

Yet create a company where the IRS might not get every penny due either to
e-gold's actual gold appreciation or money transfers, and see how rapidly the
Feds react.

------
ivankirigin
we at Tipjoy are painfully aware of this story

~~~
michael_dorfman
Why "painfully"?

~~~
jcl
I'd guess that any service that transfers funds between people would be
susceptible to charges of money laundering. Tipjoy doesn't currently make it
easy to transfer funds, but they would like to:

<http://tipjoy.com/faq/#q8>

~~~
ivankirigin
The regulation here in question and our policies are a cause and effect.
That's why it's painful. We'll solve this soon though. It's a top priority.

------
notauser
Which is a better commodity to back a currency?

\- Gold, where quantity is dependant on the supply of a single good dug out of
the ground.

\- Debt, where quantity is dependant on the supply of all goods (including
labour).

~~~
pelle
I used to think Gold, but fundamentally I've come to believe that debt is
probably the better choice as it promotes growth.

Paraphrasing Neal Stephenson debt based currencies are backed by the ingenuity
of the people, which is always growing and improving. Asset backed currency
such as gold are backed by a finite amount of gold.

Where gold still has it's value is in it's transparency. No one controls gold,
but with say the USD or EUR corruptable entities known as governments can
either print more money or take more loans devaluing the currencies. The
history is littered with cases of this happening. I'm personally pretty
bullish on the dollar, but who knows.

Another problem is that they have government enforced monopolies, which kills
competition on the local level.

Just look at the current attacks by the US DOJ on e-gold and on the
[http://www.libertydollar.org/ld/legal/raidalert_11_27_2007.h...](http://www.libertydollar.org/ld/legal/raidalert_11_27_2007.htm)
.

~~~
Prrometheus
>Asset backed currency such as gold are backed by a finite amount of gold.

Currency units are somewhat arbitrary. If you don't believe that the market
needs a central technician for it to run properly (I don't, but I'm in the
minority), then I'm pretty sure a modern economy could be run on currency
backed by almost any commodity.

What most people fear and distrust about fiat currency is putting one legal
monopoly in charge of such an important part of the economy. It's too much
power. A gold-backed currency takes that power out of the hands of any one
man.

I advocate that we should use whatever currency the market chooses. I want the
market to have the legal rights to make that choice. Historically this was the
case until legal currency monopolies were created to fund wars.

~~~
lupin_sansei
I agree. Society would be much better (fairer, wealthier, more peaceful) if
there was a separation of economy and state.

------
blastomere
Bit gold will provide a safer alternative:

<http://unenumerated.blogspot.com/2005/12/bit-gold.html>

~~~
wmf
Can't botnets generate a near-infinite supply of bit gold?

~~~
blastomere
No, the bits are solutions to hard computational puzzles, and they are
securely timestamped and published, so that you always know exactly what the
money supply is. More on the markets and economics of bit gold here:

[http://unenumerated.blogspot.com/2008/04/bit-gold-
markets.ht...](http://unenumerated.blogspot.com/2008/04/bit-gold-markets.html)

~~~
wmf
I admit that my understanding of some of these concepts like futures contracts
is negligible, but it still seems bad if, say, 90% of all bit gold is
generated by criminals at no cost to them, while regular people have to expend
their own resources to create (or buy) bit gold.

------
gamble
It's incredible how quickly HN has transformed into reddit.

~~~
fallentimes
Can you elaborate? I thought this was an interesting read.

~~~
davidw
There is a realm of things that are 'interesting' but 'very controversial', in
the sense that most mainstream economists, right or left, view the gold
standard as more or less nutty, and of course, the 'nuts' don't like being
viewed as such. The ensuing discussion is never pretty, and is completely
unrelated to hacker news. Some of us would prefer to just not see it here. You
can talk about that kind of thing here:

<http://www.reddit.com/r/Economics/>

~~~
pelle
Whether you believe in the gold standard or not, this article was not about
that.

There are many things they did that are very applicable to current startups.
In particular governance models and transparency are very much issues that
current startups need to worry about.

The point about Know Your Customer is also an important one. In the 90's when
e-gold started there was a lot of experimenting with this. Most people in the
industry were weary about government involvement, but didn't think it was
going to affect them.

At some point it isn't inconceivable that social networks, email service
providers and others will be required to follow similar Know Your Customer
procedures to banks. Several countries are already starting to institute this.

