E-Gold, what F-Secure calls a "very prominent" digital currency for criminals, has been indicted for money laundering, conspiracy and operating an unlicensed money transmitting business.

According to an indictment, handed down by a Washington federal grand jury and unsealed on April 27, E-Gold is a preferred method of payment by investment scammers, credit card and identity fraudsters, and online sellers of child pornography. E-Gold allegedly conducted funds transfers on behalf of such customers knowing that the funds were the proceeds of unlawful activity, thus violating federal money-laundering statutes.

E-Gold's digital currency, "E-Gold," is supposedly backed by physical gold. The company only requires a valid e-mail address to open an account, with no additional verification of contact information. E-Gold accounts can be funded with a number of exchangers to convert national currency into E-Gold. With an open account, users can conduct anonymous transactions worldwide.

"We have no information whether EGold staff has been aware of misuse of their services, or whether they have been able to do anything to prevent misuse," F-Secure said in its blog. "But we have seen a lot of criminals using EGold."

One example F-Secure offered was the Haxdoor rootkit. The rootkit's author accepts E-Gold payments for customizing a version, the security firm said. E-Gold's digital currency is also a favored payment method for purchasing DOS attacks, credit card numbers and bank account information.

The indictment charges E Gold Ltd., Gold & Silver Reserve, and their owners Dr. Douglas L. Jackson, of Satellite Beach, Fla., Reid A. Jackson, of Melbourne, Fla., and Barry K. Downey, of Woodbine, Md., each with one count of conspiracy to launder monetary instruments, one count of conspiracy to operate an unlicensed money transmitting business, one count of operating an unlicensed money transmitting business under federal law and one count of money transmission without a license under D.C. law.

"Douglas Jackson and his associates operated a sophisticated and widespread international money remitting business, unsupervised and unregulated by any entity in the world, which allowed for anonymous transfers of value at a click of a mouse," said U.S. Attorney Jeffrey A. Taylor for the District of Columbia, in a statement from the U.S. Department of Justice. "Not surprisingly, criminals of every stripe gravitated to E-Gold as a place to move their money with impunity. As alleged in the indictment, the defendants in this case knowingly allowed them to do so and profited from their crimes."

The indictment comes after two and a half years of investigation by the U.S. Secret Service Orlando Field Office, working with the IRS, the FBI, and other state and local law enforcement agencies. Secret Service Assistant Director for Investigations Michael Stenger said in the statement that E-Gold "has been exploited for more than 10 years by criminals who operate primarily via the Internet."

It's a sign of the times, said Assistant Director James E. Finch, of the FBI's Cyber Division. New online currency systems increase criminals'—and possibly terrorists'—ability to transfer funds while escaping scrutiny and sneaking around banking regulations and reporting, he said.

The conspiracy charge relating to money transmitting carries a maximum sentence of five years in prison. Operating an unlicensed money transmitting business also carries a maximum sentence of five years in prison. The D.C. Code violation for money transmission without a license carries a maximum sentence of five years. The conspiracy charge relating to money laundering carries a maximum sentence of 20 years in prison.