Date: Sat, 31 Mar 2001 10:20:34 -0700 From: spooner@doitnow.com Subject: [lpaz-repost] [libertyactivists2] Secret Service Raids Gold-Age To: lpaz-repost@yahoogroups.com
<flushright><<http://wired.com/news/politics/0,1283,42745,00.html>http://wired.com/news/politics/0,1283,42745,00.html
Secret Service Raids Gold-Age
by Declan McCullagh
11:10 a.m. Mar. 30, 2001 PST
WASHINGTON -- The Secret Service has raided a New York state
business that exchanged dollars for grams of the digital currency
called e-gold.
A bevy of agents from the Secret Service, Postal Service and local
police recently detained the owners of Gold-Age, based in
Syracuse, and seized computers, files and documents from the
fledgling firm.
U.S. Attorney Daniel French said Friday that the investigation
involved charges of credit card fraud. "We haven't brought charges
yet," French said. "We're in the investigative phase."
Gold-Age owner Parker Bradley says that during his eight-hour
interrogation on March 12, the Secret Service seemed less
interested in credit card fraud and more interested in the mechanics
of e-gold. Until last year, Bradley accepted credit cards and paid out
e-gold, but said he quit because too many people used stolen credit
cards when conducting business with him.
"The interrogation became less about me and more about politics
and e-gold," Bradley said. "They were trying to get me to blame e-
gold for fraud. Just to be blunt, these guys have no clue about how
e-commerce works, how e-gold works or what I was doing."
E-gold is a 5-year-old firm based on the Caribbean island of Nevis
that provides an electronic currency backed by physical metal
stored in vaults in London and Dubai. The company says it has
181,000 user accounts and stores about 1.4 metric tons of gold on
behalf of its customers.
Bradley's Gold-Age company, which he ran with his wife out of their
home until the raid, was one of about a dozen e-gold currency
exchange services: He took dollars and credited grams of gold,
silver, platinum and palladium to a customer's account, less a
modest fee.
"I have no political statements to make," Bradley said. "I'm just
running a business. People can use e-gold for whatever they
desire."
Jim Ray, vice president at Omnipay --
the largest e-gold exchanger -- says he was aghast at a Secret
Service raid directed at one of his competitors and customers.
"I think the case is an outrage," Ray said. "I think this is a symptom
of too many donuts on the cops' part.... To me, this is a very serious
business. They've just taken out one of my best market makers for
no reason."
Still unclear is why the raid took place. French indicated that it could
be more than a routine credit card investigation, saying "at this
point, it's being investigated as a credit card fraud."
One possibility is a broader investigation directed at some users of
e-gold, which is less anonymous than cash but more anonymous
than credit cards. Former Treasury Secretary Lawrence Summers
has warned of malcontents using the Net and encryption to dodge
taxes, and it's possible that the feds don't exactly approve of a
system that's more privacy-protective than the heavily regulated
banking system.
Current federal regulations require banks and credit unions -- about
19,000 in all -- to inform federal law enforcement of all transactions
$5,000 and above that have no "apparent lawful purpose or are not
the sort in which the particular customer would normally be expected
to engage."
Because e-gold is not a bank that lends money -- it's more akin to a
warehouse that stores gold on behalf of its customers -- it's not
covered by those rules.
Mike Godwin said the raid evokes memories of the notorious Steve
Jackson Games raid by the Secret Service a decade ago, which led
to the formation of the Electronic Frontier Foundation.
"Why did they take the hardware?" Godwin asks. "If what they
wanted was business records, why did they take the equipment in
such a way that shuts down the business?"
"These people are presumptively innocent," said Godwin, an
attorney who writes frequently about law and technology. "Even if
they are subjects of a federal investigation, the Secret Service
should know better than to swoop in and engage in disruptive
searches of people they're not ready to arrest."
Justice Department guidelines give a great deal of latitude to law
enforcement officers who wish to seize computers. "Agents may
obtain search warrants to seize computer hardware if the hardware
is contraband, evidence or an instrumentality or fruit of crime," the
guidelines say.
Bradley, who was raided, says that he's retained a lawyer and is
asking that his computer equipment be returned. He said that in
addition to the Secret Service seizing his business records, the raid
seemed personal: They snatched his passport, birth certificate and
personal checkbook.
"When it was obvious I had done nothing worng, they tried to get me
and my wife -- interrogating us seperately -- to implicate e-gold,"
Bradley said. "They said, 'Might (e-gold) be doing this, could they
be doing this?'"
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