Instant Gold’s Rocky Spencer: Convicted of Money Laundering, Wire Fraud and more

by Mark on September 8th, 2007

What does it take to become a digital currency exchange agent in the US?

Currently, the financial rules and regulations are unclear. Digital currency and digital gold, like the Internet, are only about ten years old and there are no specific laws on the books yet regarding whether this stuff is currency, gold bullion, digital money or something else.

I’m reminded of that Monty Python Flying Circus line, “and now for something completely different!” Welcome to the world of digital currency exchange agents.

The operation of an exchange provider is a financial go between in the middle of money transactions and the public. Since there are no strict regulations for becoming an exchange provider, the industry players are considered ’self regulated’ and most of today’s exchange business is built on trust and reputation. Or as some may say…the inmates are running the asylum!

The digital currency ‘exchange provider’ or ‘independent exchange agent’ also functions as a temporary market for the retail public and the digital currency issuers. An agent is responsible for receiving national currency (dollars) from individual users and exchanging those funds for digital currency units deposited into a customer’s online account.

As examples: PayPal acts as their own agent, you send your money directly to http://PayPal.com/ . http://e-gold.com/ and http://www.pecunix.com/ , do not accept funds directly from customers, they require the use of independent outside exchange providers. These exchange providers are NOT working for or affiliated with the currency issuers, they are completely independent operations.

This business can be both profitable and risky. In 2006, an estimated several billion dollars worth of ‘digital currency to national currency transactions’ took place and for each dollar that changed hands there was an exchange agent in the middle capturing a fee.

The independent agent has a daily routine of sending and receiving money. Those transfers might include bank wires, money orders, Western Union transfers or even cash. Similar to a check cashing store or a bill paying location, exchange providers are used to handling a variety of payment methods. I might even venture to say this job is a cross between an accountant and a banker. Some might call it a Money Service Business http://www.msb.gov/ and I think a few agents even voluntarily follow those strict guidelines. However, I don’t believe that it is widely recognized that an exchange provider needs to be an MSB.

The ‘exchange provider’ job carries with it a position of public trust. Without strict licensing or regulation one must be very careful when handling customers’ funds. That is why I was surprised to find that one popular exchange agent, Rocky Spencer from Instant Gold Exchange http://www.instantgold.net/ is also a convicted felon http://scholar.lib.vt.edu/VA-news/VA-Pilot/issues/1994/vp940720/07200378.htm . I was even more shocked to find that his conviction was for felony charges including conspiracy, wire fraud, money laundering and illegally structuring financial transactions to avoid bank reporting laws.

In July of 1994, Rocky was sentenced to seven years in prison for scamming almost $2,000,000 million dollars from the federal government through his tax-preparation firm Dominion Financial Services. Surprisingly, Rocky’s mother, Margaret Spencer and his sister, Teresa Spencer both of whom were involved in the scam were also placed on five years probation and 180 days of home detention.

How is it possible that someone who served prison time for these crimes is operating a money business and handling consumer funds? Shouldn’t this type of criminal history be reported or disclosed somewhere? I would want to know if my bank manager had been in prison for financial related crimes….do customers of Instant Gold Exchange know who they are sending their money to…..??

The http://www.instantgold.net/ web site shows a plaque linking to the Better Business Bureau Online http://www.bbbonline.org/profile.asp and they are currently listing his business as a ‘money service’ and they give it their BBB seal of approval:

….this company is a member of the Better Business Bureau, and meets all BBB membership standards.
Description of Product & Services Offered: Internet currency exchange, money services.
BBBOnLine Reliability Participation Confirmed For Instant Gold Exchange, Inc. Instant Gold Exchange, Inc. meets all BBBOnLine Reliability participation and Better Business Bureau membership standards and is authorized to display the BBBOnLine Reliability seal.

It is labeled as a ‘money services’ business, but there is no mention of the previous MONEY LAUNDERING or WIRE FRAUD convictions, hmmmm. Since they are endorsing this online business as meeting their standards, I’m guessing something as minor as money laundering and wire fraud is not considered THAT important to the BBBOnline.[sarcasm] Well that’s the Internet!

Does anyone else find this strange, that a retail money business dealing with consumer funds each day is operated by this convicted felon? Perhaps his customers should know this before risking their hard earned money? Does the Commonwealth of Virginia http://www.state.va.us/ , the State where his business is operating know?

I also see on the Instant Gold web site, convicted felon Rocky Spencer’s business is an accredited senior member of the of the Global Digital Currency Association, the GDCA. No mention there of any previous money laundering convictions. It would seem that the online world does not set their standards very high.

What is even more disturbing is that in May of 2005, the Securities and Exchange Commission filed litigation naming Rocky Spencer, his mother Margaret Spencer and others as principals in a fraudulent Ponzi investor scam. http://www.sec.gov/litigation/litreleases/lr19219.htm (Civil Action No. 05-4057-SAC, (United States District Court; District of Kansas; Topeka Division)

…defendants, using the name CEC, are engaged in an ongoing fraudulent Internet-based high yield investment scheme that raised at least $15 million in the last six months, most of which was sent offshore.
Spencer, a convicted felon, controls at least one bank account, held in Marroc’s name, in which more than $5 million of investor funds was deposited. In reality, the CEC’s “international trading program” does not exist, investors are not told about the backgrounds of Spencer and Kringen, and Spencer has misappropriated more than $1.5 million for personal expenses and Ponzi payments. *sec.gov

What does it take to become a US exchange provider for digital currency? Apparently, not much!