In an LA Times article dating back to August 2008 when the case first started Mark Aveis, an assistant U.S. attorney on this case “characterized Fayed’s business operations during 2005 and 2006 as ponzi schemes in which individuals invested up to $20 million.”  http://articles.latimes.com/2008/aug/05/local/me-centurycity5

From my point of view, it is interesting to see that the government’s prosecution is based on the determination that are several independent transactions in both national currency and digital currency count as one continuous money transmitting transaction. I assume that the basis for this legal sandwich comes from the fact that e-bullion funds were collected in Goldfinger bank accounts. In other words you sent in a wire of 10k USD to Goldfinger for the purchase of e-bullion gold. Two days later that gold balance now appeared in your e-bullion account. On the third day, you separately log into your digital currency account and sent some gold to your favorite HYIP, perhaps all 10K perhaps less. The government is saying the receipt of the wires and movement of gold from one e-bullion account to the other[the hyip] is ‘money transmitting’ and not e-bullion gold account funding, it seems they have sandwiched all the activity as one transaction.  On the other hand with my rose colored shades might have looked at it like this “I funded my e-bullion online digital currency account, then I decided to send some gold here. Then a few days or weeks later decide to spend some here. Multiple unrelated transactions in digital gold.” I would have been wrong in my assumption. Comments welcome.

From court documents posted by Ian Lamont of  TheStandard, we now see just how the FBI viewed the e-bullion operation. Here is the sworn declaration of a special agent on the case.

DECLARATION OF MAURA KELLEY (FBI AGENT)
I am a Special Agent (“SA”) with the Federal Bureau of Investigation (“FBI”), assigned to the Los Angeles FBI Field Division, Ventura Resident Agency, and have been so employed since 1984. During the course of my employment as an FBI SA, I have been involved in dozens of investigations of violations of federal law including bank fraud, wire fraud and money laundering based on evidence of a variety of fraudulent schemes including “Ponzi” schemes, where earlier victims are paid off with newer victims’ contributions, and various so-called “prime bank” or “high yield” investment scams where unrealistically high rates of returns are promised but not provided. I make this declaration in support of the government’s response to the Goldfinger Coin & Bullion (“GCB”) renewed motion for return of property.

For several year prior to the indictment in this case, I was involved in an FBI investigation into several “Ponzi” schemes. The investigation revealed that scheme operators directed their victims to open online “e-Bullion” accounts in order to transfer victims’ “investment” funds to the scheme. In order to effect the transfers, numerous victims opened online e-Bullion accounts. I reviewed e-Bullion’s online agreement which I saw both online and in the form of documents provided by victims, which provided, among other things, that account holders could wire their funds to e-Bullion and direct that the funds be used to either buy precious metals or “e-currency.” True and correct copies excerpts of e-Bullion wiring instructions are attached hereto as part of Exhibits 1-3.

Based upon victim’s statements, documents provided by victims, and an analysis of GCB bank account records, I determined that GCB would hold an account holder’s transfer in either precious metals or cash (in a GCB bank account or vault) until such time as the account holder directed that the asset be transmitted or withdrawn. E-bullion customers could also deposit their cash at the bank utilized by GCB or mail their funds in the form of money orders or other cash equivalents to GCB in Camarillo. For its money transmitting service, e-Bullion received a fee based on a percentage of the funds transmitted to the Ponzi scheme operators.

As to the two primary Ponzi schemes that were investigated (“Kum Ventures” and “Solid Investments”), I determined that the Ponzi victims purchased “e-currency” through the e-Bullion website with the intent that their funds be transmitted immediately to the Ponzi scheme operators. I and other investigators traced Ponzi scheme victims’ funds from their point of origin, namely, the victims’ bank accounts, to GCB, and then to Ponzi operators. The tracing began with the wire transfers from the victims’ bank accounts. Victims’ funds did not go anywhere online or to a bank account in the name of e-Bullion. Rather, the bulk of the funds went to the bank account in the name of CGB at a Bank of America branch in Camarillo, California where the incoming funds from all e-Bullion account holder were commingled. From this Bank of America account, funds were transferred into other GCB accounts. From there victims’ funds, less a percentage fee taken by GCB, were transmitted to the Ponzi scheme operators who themselves were e-Bullion account holders.

If you would like to read the full document, it’s available on Scribd, thanks Ian.

http://www.scribd.com/doc/12338986/FBI-declaration-in-eBullion-court-case-filed-February-2009