Government attempts to block e-Bullion from recovering seized assets

A tangled legal dispute surrounding the shuttered digital gold currency firm e-Bullion has turned to the ownership of tens of millions of dollars in seized assets.

Federal prosecutors filed a motion in the U.S. District Court for Central California on Monday attempting to block Goldfinger Coin & Bullion -- a partner company of e-Bullion -- from recovering an estimated $20-$24 million taken from e-Bullion and Goldfinger vaults and offices by the IRS and FBI between August 4-8, 2008.

The raids were initiated by authorities one week after e-Bullion and Goldfinger co-owner Pamela Fayed was slashed to death in a Los Angeles parking garage. Investigators immediately suspected her estranged husband, e-Bullion and Goldfinger founder James Fayed, but did not have enough evidence to arrest Fayed for the murder.  Instead, he was charged with operating a money transmittal business without a license. A month later, the money transfer charges were dropped after authorities decided to charge Fayed with murder. However, Goldfinger remained under indictment in the illegal money transmittal case.

Now, the government and Goldfinger lawyers are battling over ownership of the seized assets. A declaration by James Fayed dated December 12, 2008 states that gold, silver, coins, currency, uncashed money orders, and cash equivalents worth more than $20 million "are the property of [Goldfinger] [and] are not the property of [Goldfinger's] depositors." A motion submitted by Goldfinger lawyers three days later calls on the government to return all of the seized assets or "no less than $1,000,000" to cover legal fees and business costs associated with the trials.

On Monday, Assistant U.S. District Attorneys Mark Aveis and Edward Alon submitted a response to the Goldfinger motion. The document criticized Fayed's "obvious bias" and pointed to earlier statements by Fayed in which he claimed that the property was jointly owned with depositors. The government also described e-Bullion's business model, which claimed to allow users to buy bullion over the Web and have it physically stored in reserve by Fayed's companies. The document further claims e-Bullion was used extensively by the operators and customers of high-yield investment programs, which the government described as "Ponzi schemes." Federal prosecutors and the FBI have said they would like to have a receiver manage the return of the money to e-Bullion account holders.

Fayed's December 12 claim that Goldfinger owns all of the seized assets also contradicts comments made by James Spertus, the lawyer who represented e-Bullion and Goldfinger until late last year. Spertus told the Standard in August that property seized in the raids included account holders' assets and "the goal is to get assets returned so customers can get their money back."

The Industry Standard attempted to contact the attorneys now representing Goldfinger for comment, but has yet to receive a reply.

A hearing is set for March 9 to discuss the Goldfinger motion.

Sources: Court documents, United States Attorney's Office for Central California, James Spertus.

Image: Tao Zhyn