At 2001-08-22 16:09 +1000, David Hillary wrote:
>I feel more secure in my interest in e-gold than goldmoney because I know
>that the trustees are legally responsible to fulfill the trust deed more
>than I care that I might own nominal title to some part of a bar somewhere
>(but no where specific).
Dear Mr. Hillary
I am compelled to respond to your comment about GoldMoney and the comparison to e-gold.
Your observation about trusts is correct, and the trustees are responsible to fulfill
the trust deed. Therefore, the following provision of the e-gold Bullion Reserve
Special Purpose Trust is important as it limits the responsibility of Hildeberto de
Frias and Michael Mello (the Trustees).
quote
6.2 The Trustees shall not be held liable for any breach of duty or loss or damage to
any third party caused by virtue of or a result of any distribution made pursuant to
the dual signed instructions from e-gold and the Escrow Agent.
unquote
The term "any third party" includes e-gold users, so this loophole relieves the
trustees of their obligation if anything goes wrong with e-gold. In other words, the
e-gold users have no recourse to the trustees.
Further, the Escrow Agent Agreement contains a similar loophole. It states that
quote
2. e-gold Ltd. is solely responsible for ensuring that the [...gold in the vault...]
is sufficient to meet the requirement under the currency contracts for 100% physical
reserves backing all e-metal in circulation, and neither the Custodians [the vaults]
nor the Escrow Agent have any liability with respect to this requirement.
unquote
Thus, the 'fine print' of the trust agreement and the escrow agreement establish that
neither the trustees nor the escrow agent have any responsibility to the e-gold users,
and that responsibility is solely with e-gold. I assume that you were not aware of
these loopholes before making your comparison to GoldMoney. Further, I would like to
correct your comment above.
We very clearly disclose where the gold in GoldMoney is stored. The bars are stored
in London in the vault owned and operated by VIA MAT International Ltd. Further, not
only were these storage arrangements reported by our auditors, Deloitte & Touche, in
their recent review (see:
http://www.goldmoney.com/public/about_goldmoney/governance.html), but Deloitte also
confirmed that there is a one-to-one relationship between GoldGrams in users' Holdings
and grams of gold in the vault.
As the inventors of digital gold currency, we studied both before and after we filed
our first patent application in Feb 1993 various alternatives to make the process of
online gold payments work efficiently, while still providing the user with maximum
protection and security of his assets. We considered the use of a trust, but decided
against this structure for several reasons. Some of these are:
First, it adds a layer of expense, which we have eliminated in GoldMoney and explains
in part why our fee structure is less than e-gold (our payment fees are only 1/10th of
e-gold and our storage fees are 1/2 of e-gold). Second, the trust separates the user
from his gold, which has been a major problem of gold currency systems historically.
Money substitutes (promises to pay gold) have always proven to be inferior to money
(gold coins) itself.
Our objective therefore has been to build an online payment system that uses money,
and not a money substitute. We have done this with GoldMoney because all the users
own their gold that circulates as currency within GoldMoney. GoldMoney is the
electronic equivalent of a gold coin. We have also provided users with a sound
structure to provide assurances of integrity: (1) the system was designed and built by
Dimension Data, a world-class firm that has built online systems for banks, (2) the
gold is stored in a first class vault by one of the world's leading storage firms, VIA
MAT International, (3) increases and decreases of GoldGrams in the system are
completed by an established commercial trust firm, Euro-Dutch Trust Company, and (4)
our auditors, Deloitte & Touche have provided assurances of integrity that everything
is working as it is supposed to work.
I hope that you find the above disclosure to be useful .
James Turk
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Did you know that e-gold Ltd. stores more gold on behalf of customers
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e-gold Examiner at http://www.e-gold.com/examiner.html for details.
