Everyone knows who PayPal is. Do you know who competes against PayPal (and I use this term very loosely, since they dominate the market)? I did a search just a few minutes to see who’s in business still, and which ones have gone by the wayside. It’s a volatile market - very few companies that start up in that space are reputable, or if they are they aren’t well funded enough to stay in business until they gain traction. In fact, most of them are so obscure or little known that the closes thing to a list post of PayPal alternatives here at Mashable is a post Pete put out back in 2006, where he re-published a list of banned eBay alternative payment methods (imagine that - a list we haven’t done yet!). One company that has stood the test of time in this space is E-Gold - at least up until now. PC World is reporting that the founders of the company are facing serious jail time due to “design flaws†in the e-Gold system. E-Gold was an odd system, even by the measure of Internet pay systems. It required you to purchase actual gold and have it stored in an e-Gold certified vault. From there, you could spend and accept e-Gold currency as you wished with other participating vendors. Unfortunately for e-Gold, due to the PayPal/eBay stranglehold on the Internet marketplace, it was next to impossible to propogate usage through legitimate business development means. When multi-level marketeers and their cousins the ponzis schemers started using e-Gold for their business ventures, e-Gold apparently turned a blind eye for as long as they could. The problem with letting too much of your business rely on folks who prey on others to make their money is that it’ll eventually snowball into a mountain of complaints, and as they say: “when you lay down with dogs, you wake up with fleas.†E-Gold may not have been complicit in the quasi-legal schemes of the MLMers and Ponzi schemers, and they may not have wanted to outrightly endorse the schemes, either. Unfortunately, their very prolific usage of their systems turned US federal scrutiny towards the company when e-Gold tried to deal with the common problem of refunds, seizures for abuse and account suspensions that accompanies that crowd. For allowing them to ply their trade using the e-Gold system, e-Gold founder Douglas Jackson and two senior directors, Barry Downey and Reid Jackson all plead guilty today to the charges related to money laundering (one part of a Ponzi scheme that makes it illegal). The senior directors could face prison sentences of up to 5 years, and Douglas Jackson is looking at 20 years. Of course, shady MLMs and illegal Ponzi schemes aren’t the only things that got them in trouble - they were the gateway drug, so to speak. In order to cater to the userbase, which was primarily this crowd, they had to have loose identity verification standards to open an account with the system. This ended up meaning the system was rife with other illegal activities related to, according to the Department of Justice, child exploitation, investment scams, credit card fraud and identity theft. What was the situation that made this possible? We’re back to eBay’s stranglehold on the market. When PayPal and eBay ruled online commerce, which was when e-Gold made their stand against them, it was a bleak picture for anyone who tried to compete with them. Now, with all the other commerce going on with alternatives to the largest garage sale on the Internet, a strong business development team could very easily mount an offense without catering to the lowest common denominator. There are a number of interesting aspects to the story, and a lot of other systemic flaws that e-Gold even admits to as a company. To start getting into those various problems would require several more blog posts, and would involve a lot of very theoretical talk about virtual economic systems and how they interact with one another on a macro scale (for more on that from the horse’s mouth, go to e-Gold’s latest blog post). For those in that business, though, let this be a cautionary tale. I’ve been around a number of companies who work in this space, and it looks lucrative to cater to the MLMers and look away when you think those programs start to verge on Ponzi schemes. What happened to e-Gold, though, is what success looks like when you go down that path too far.
e-gold has been hounded by government investigations in the past and has always come out ok. I wonder if their luck will change this time.
i hope they survive all these because there alot of ppl who cant use paypal and Depends mostly on their E-gold account. e-gold been the best alternative to paypal, i dont know why they always try to get our lives harder by destroying our alternatives.
People are abusing the system heavily though. In America most laws don't cover "Gold", so people are scamming, and getting away with it. I for one will never do business with anyone that uses E-Gold because of that.
Oops.. Why didnt you split that in to many paragraphs?! Itz really irritating to the eyes to read the whole para.
yeah,but i am sure that e-gold will survive like everytime it happens they always knows how to get over it.
It bothers me when companies get in trouble for stuff other people were doing. Is there any evidence that e-gold were willfully complicit in any of the wrong doing? Did they plead guilty as part of a deal?
I don't know if it will get back, as they are scamming too much peoples in the last time I hope to see some upgrade soon, and will inform you all here about that !
I don't think E-Gold founders should be 100% shut down, and then locked away in jail forever, but they know that bad business is happening on their site, and they have done little about. I do think they should be held responsible at least a little bit.
Yeap .. that is why all exchange services are reducing e-gold price .. just because it's not safe anymore ! I'm exchange service owner and contacted a few other exchange services, and they said the same .. it's all about security !