Interview With Free Market Money Guru, Jim Davidson of Vertoro 2 of 4

I know you are familiar with the current legal situation for e-gold Ltd and OmniPay. What can you tell us about what happened between e-gold and the government and why?

Well, I am familiar with the situation. I do not claim to be entirely current. I try to keep up, but all legal cases tend to involve their principal in lots of details and minutia. So, I’m probably not the best source of data on the case. I would suggest you talk direct to Doug Jackson or to the lawyers handling the case.

What happened?

I think the broad outline of the history is important. E-gold was founded in 1996. During its growth from 1996 to 2006, it was often contacted by law enforcement. To my knowledge, e-gold always responded very well, turned over records on subpoena, and followed court orders whenever they were presented. You can read about it in the 2002 article in Wired by Julian Dibbell who describes federal agents being served coffee and donuts in the e-gold conference room while perusing records. At least as early as 2003-2004, Doug Jackson of e-gold was vigorously pursuing the company’s obligations to oppose child pornography. I think e-gold was a founding member of one of the major anti-child-porn groups. Anyway, they began to hunt down the e-gold accounts which were in any way involved in child porn sites or in buying from those sites, and using their own internal financial forensics to identify and shut down those accounts.

Meanwhile, the credit card companies were not, in my opinion, doing anything on this issue. But, they wanted to blame someone for the problem, and they focused on e-gold as a good scapegoat to exploit. At the same time, one of e-gold’s competitors in the industry was also trying to focus law enforcement attention on some of the Ponzi scheme pseudo-investment sites. Quite a few of these high yield income programs (HYIP) or Ponzi schemes were accepting e-gold. Finally, things came to a head in December 2005. BusinessWeek ran a very nasty article fixating on only those few accounts where e-gold was apparently used by alleged credit card frauds and other criminals, asserting, as I read the article, that e-gold was itself part of a vast criminal enterprise. In my view, that was a smear piece which was extremely libelous.

Also in December 2005, the government came to e-gold’s offices and imaged the servers. So, the government had all the data. They also seized a bunch of paper records from e-gold and from OmniPay, the related exchange provider. Up to that point, various government agents had extolled the virtues of e-gold and OmniPay in their cooperation with law enforcement. And, up to that point in time, everyone in government at all levels had consistently said that e-gold was not money, and that OmniPay was not a money service business.

Then in December 2005, to get the warrants to image the servers, the government made a number of very spurious claims. Treasury Department agents went to a judge and asserted that e-gold was in a criminal conspiracy to launder money, that OmniPay was an unlicensed money service business, and so forth. Coincidentally, in early January 2006, the folks at OmniPay received a letter from the Treasury Department denying their second or third application for a money service license, because, it said, e-gold was not money and they were not a money service business.

So, the government’s position at that point was completely idiotic and inconsistent. It was entirely appropriate for the judge to throw the whole thing out in January 2006 and demand that the government admit that there was no wrongdoing. Of course, the government then got upset, because it is full of people who cannot admit to ever doing anything wrong.

Thereafter, 2006 was spent by e-gold and OmniPay trying to put their paper records back in order. I was over there in October 2006, and I can tell you that the government thugs took neat and tidy records away and returned a blizzard mess of paper. It is really disgusting how little regard for honor or decency those people have. They just don’t think private property is right, so when a private party gets his things back, assuming that the government agents don’t just stonewall on the return of what they seized, he gets it back in disarray.

But, the other shoe was yet to drop. In April 2007, the government acted again. The same agencies as far as I can tell, are now accusing Doug Jackson on criminal charges of conspiracy and money laundering, and they have shut down a bunch of e-gold accounts, including quite a few perfectly legitimate business operations. Moreover, they not only seized the gold in those accounts, the government demanded that all that gold be liquidated. E-gold is appealing the seizure order, but I gather the judge has been told all sorts of poisonous half truths and has been a bit unfriendly. At some point, the criminal charges are going to be settled in court. I think the charges are entirely fabricated, groundless, and despicable. I think the people involved in building up this case have done so out of petty and vindictive motives. And, in my experience, government agents lie, fabricate evidence, withhold exculpatory evidence, cheat, steal, beat suspects, rape and murder with impunity. So, I don’t expect much from their side of the case. It may be that justice would still prevail, but it won’t be easy. And, of course, once the criminal charges are settled, the government agencies are going to run the whole set of people through the mill again with civil charges. So, it may be quite a few years, judging by how others have been treated in the past.

What does the future hold for e-gold?

I really don’t know. I think that e-gold is a good idea. I think the men and women involved in e-gold are good, kind, decent, and honorable. I have spent considerable time getting to know them, and I think very highly of their intelligence, skills, and integrity. It may be that justice would prevail, but that assumes a legal system that is capable of emitting just decisions. I’m not sure that fairly characterizes things in the United States at this point. Of course, e-gold may be able to continue. If it does not, that’s a terrible loss to the industry. But, I think the idea of e-gold has so much merit that the idea would carry on - Pecunix, c-gold, and other offshore gold services would carry the flag.

If you could give Dr. Jackson and his fine team, some personal advice from your experiences, what would you tell them?

Well, if I had been hired in 1999 or 2000, I would have told them what I told e-Bullion’s team in 2003. Get your servers out of the USA. Take them to Switzerland or Malta or the Isle of Man or Singapore or anywhere you can get decent connectivity with fairly low latency, and where there is a legal system with integrity. Prosecutors and government agents in the USA routinely seize evidence without a warrant or subpoena, and the USAPATRIOT act and other shenanigans not only authorize, but encourage such behavior. As for personal advice, what Doug and his team are experiencing is very hard. It is extremely painful to have false charges brought against you. It is very, very sad to see something you’ve built being destroyed by evil people who have maliciously brought false and misleading charges. When Space Travel Services was destroyed in 1991, and when the government then admitted that what they had claimed about our business was false, I was very disillusioned. But, the world is a big place. It is really, really big. Traveling to Asia and Africa and getting to see the oceans for hours and hours while flying at 600 miles per hour, you get a sense of how big it is.

I know Doug has been to Africa and Asia, so I think he understands. The government of the USA acts like it is omnipotent, omniscient, and omnipresent. It is not. In particular, the government of the USA is not a god, it has no god-like powers, it is merely a graven image with pretended powers. The people who worship it are idolators, the people who service it are evil, or misguided, but they are only human. They make errors. They put on their clothes one limb at a time. To fear them is as mistaken as to worship them.

Governments don’t last. They are mayflies. A given set of edicts and idiocies might last four years or eight, but it won’t last forever. Governments come and go. The world goes on. So, don’t be disheartened. When you are ruined by governmental abuse of authority, when you are hurt by their shenanigans, remember that they always lose. Governments have been trying to enslave people for at least the last five thousand years. Judging by the records from Egypt, they have been cheating people out of more tax money than they are properly owed for all that time. Judging by the results, some of the most pious, decent, and honorable men and women - Jesus, Gandhi, Joan of Arc, Henry David Thoreau, Emma Goldman, Susan B. Anthony, the Dalai Lama to name but a very few - have been imprisoned, betrayed, traumatized, beaten, and in some cases murdered by government, but their cause has always won.

Jesus and Joan of Arc are remembered not for being heretics and criminals, as their accusers claimed, but for being pious, decent, intelligent, and visionary. Gandhi and the Dalai Lama are known for having stood against immense brutality and survived. Good people like Thoreau, Goldman, and Anthony, to name only three, are always treated shabbily by those who demand obedience, who claim to rule.

I think the same is true for Doug Jackson and his team. They have decency, integrity, and truth on their side. So, of course, they are going to get some kicking around. Whether they are convicted or sentenced to prison or turned over for extreme rendition as enemy combatants, or whether they are exonerated, life goes on. Bringing free market ideas to money is a tough business. It confronts the very things that governments serve - the banking cartel and the military industrial complex. Putting money on a solid basis - free from exchange risk and offering finality of settlement - is a good thing.

So, don’t let the scum grind you down. Be of good cheer. That would be my advice. The minds that conceived of e-gold in 1996 and implemented it, made it the most successful digital currency ever, and built a gold reserve to rival many nations, are great minds. No prison for the body ever did more than fleetingly limit a mind. Indeed, some of the best literature of freedom has been written inside prisons. My advice comes down to this: live on, dream on, and find a way to achieve your goals.

Do you think that this move by the DOJ against e-gold is the beginning of an outright ban on digital gold currency being used across the United States?

Yes, I think it is a step in that direction. It is always government policy to erect barriers to capital flight when the currency is tanking. It is always government policy to use capital controls and wage controls and price controls to “fight inflation.” And, these policies always fail.

Something perhaps similar to what has just happened to online gambling and US banks?

Yes, the events are related. The policy has three main sources. First, the policy is intended to shore up the currency by limiting capital flight. Second, the policy is intended to protect domestic gambling and banking interests which benefit from the enforcement of the policy. Third, the policy is intended to take more in seizures and in taxes. You can see where that works for gambling. The online gambling business competes with the land based casinos and race tracks. Well, those edifices have a tight relationship with the tax authorities. Go win a jackpot in Las Vegas and you find yourself confronted with a form telling you how much is being withheld by the IRS. The governments of the USA now make payments to 52% of the population. The war is very costly, and war is always inflationary. The war has hampered trade, and protectionist trade policy in gambling has brought sanctions from the World Trade Organization - and trade wars are also inflationary. Finally, online gold competes with the banking cartel. Nobody in government ignores the interests of the banking cartel with impunity.

Recently I wrote a story about how Pecunix is now using a warning screen to ward off ponzi scams and investments Do you think this approach will be successful?

Yes, although it isn’t the warning screen that makes it succeed. Pecunix works very hard to police its users so that it is used within the terms of service. That sort of self-regulation is essential during these times of authoritarianism.

Do you think it’s overboard?

Not at all. It is suited to the business environment. Businesses that don’t pay attention to the policies and practices of government get ruined.

Should we all just mind our own business?

Yes, of course. And, the shareholders of Pecunix and of Pecunix Venture Holdings are very happy that the management of Pecunix is minding their business.

Or do you feel this does not go far enough to fight scams?

How far do you go? I think it is important to fight against crime. If I see someone stealing from another, I think I have an obligation to do what I can to stop that crime. In my view, that extends to using up to deadly force as I see fit. I believe that obligation is one that I have to myself, primarily, to create a world where less crime takes place. Pecunix management does an excellent job of making sure that the currency is not used for fraud or theft or crime.

What can we all do to strengthen the digital currency industry and create more positive growth?

I think the main thing to do is bring the ideas of free market money to the business owners who would benefit from them. That’s why we created Vertoro.

You and I both understand that we can’t walk down to the local grocery store, whether it’s Food Lion, Kroger or Piggly Wiggly and spend or barter for a basket full of groceries using real gold or silver currency or bullion.

Well, Mark, I beg to differ. I have bought groceries at stores such as Kroger in Houston, Texas, with silver from the Liberty Dollar organization. I have spent silver in a lot of places, just that way. It’s not US legal tender. No, it is not, but that’s okay. Neither are Federal Reserve Notes. You see, legal tender means that it is unlawful to refuse. And there is no punishment for refusing to accept paper notes from the Federal Reserve. None. I have a stack of newspaper articles about stores which refused paper and would only take credit card money. Disney runs theme parks where you have to use Disney Dollars, not Federal Reserve Notes. Lots of places offer store money or gift cards. So, legal tender isn’t the problem here. It was in Revolutionary France, of course. You could face the guillotine, as hundreds of merchants did, for refusing the assignat or the mandat paper money. You could be executed for simply posting a set of prices in assignats and a different set of prices in gold and silver specie. Those were actual legal tender laws.

Legal tender for the courts means that if someone tenders paper money for a payment denominated in dollars, that qualifies as payment. But, if the contract is denominated in grams of gold, that is not clear, and I believe gold denominated contracts are now binding.

So, what can the regular guy do to help create a more stable financial economy?

First, “sauf qui peut.” Save yourselves. If you have a savings account, and no other wealth, then take that savings account and buy some gold and some silver, and do it right now. Second, diversify. Again, for the sake of your own financial survival. Put some of your money into GoldMoney - a good currency with both gold and silver. That metal is stored in London, and their servers are on the Channel Isle of Jersey. Put some of your money into Pecunix, which has metal in Switzerland and servers in New Zealand, I think. Put some of your money into digital gold stocks or bonds. Put some of your money in c-gold which is based in Malaysia. Look at e-Bullion which has servers in Switzerland and gold on several continents, as well as silver. Keep some gold coins and silver coins at home. Look at good quality gold mining stocks.

I think Casey Research has the best leads on these. Third, get involved. The American Liberty Dollar has over a hundred thousand users nation wide. You would do well to be a part of that network. Get involved with free market money on the web. Join the discussion lists and the Crowdvine. Make it a part of your MySpace Page and FaceBook presence. Fourth, give gifts of gold and silver coins. Your friends and family would do well to have some, and they are very popular gifts.

What do you tell people locally, when they ask, “what can I do?”

I tell people that they can do anything. Remember, in 1990 some friends of mine and I bought a contract to put an American on the then-Soviet space station Mir. A buddy of mine, Walt Anderson, later purchased that space station. Now, sure NASA got the government of Russia to destroy it before he could do very much with his property. But, you see where the sky is no limit. Some of my friends in the Planetary Society built hardware that went to Mars. Can you imagine?

What should you do? You should choose for yourself. I think you should choose a free market money. I do not think you would be well served by fiat money. But, a lot of people think I’m mistaken. In the end, all I can offer is my best thinking. The choices you take determine your future. So get the best ideas you can, think about your choices, and act. Once you see how those actions went, you can act again with more confidence.

Once again, I’d like to thank Jim for taking time to provide me detailed answers and helping me understand how to build a stronger financial future.

Part three we will hear from Jim on how to build a stronger digital gold economy and as Vertoro offers, how moving your dollars into gold will help you over the ‘economic’ long haul.