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.
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 propagate 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.
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).