This page lists the brief facts concerning the legal case that Systemics Inc was Respondant to. The case was summarily closed on 28th August, when the Arbitrator ruled that all DigiGold.net Ltd's claims were denied.
The Arbitrator delivered the Final Award on 28th August 2002.
None of the claims brought by DigiGold was upheld.
The Arbitrator's award to Systemics was paid out in full by DigiGold, in late January 2003. This closes the case.
On or about 21nd May 2001, Systemics Inc (Nevis) notified DigiGold.net Inc, a Nevis company, and announced to users, of the intention to shut down the DigiGold servers and cease support for the DigiGold digital currency project.
On or about 29nd May 2001, DigiGold.net Inc filed claims and asked for injunctive relief against Systemics Inc, in the courts of Anguilla. This included a sworn affidavit by Barry Downey, and attached, a purported agreeement, and a list of correspondance.
DigiGold's basic claim was to request an injunction against Systemics to force continuation of support for the DigiGold project.
On 13th June 2001, Systemics filed a response, including a 53 point affidavit.
The response pointed out, amongst other things, that
- the last payment received from the e-gold group was 22 May 2000, [see BD2 (4 below) line 1000],
- Systemics had made a good faith effort to support the project for about a year thereafter with no more payment,
- there were material non-disclosures, including that the document filed by Mr Downey [ref: Exhibit BD1] was not an agreement between the parties, and that the agreement filed in Systemics' response [ref: Exhibit IA1] was likely to dominate as it was signed by Plaintiffs, and
- in order to continue to support the DigiGold project in the interim, Systemics proposed a schedule of Operator costs necessary to pay for the operation of the Ricardo Issuance Server handling DigiGold.net's issuances.
On 19th June 2001 the Judge discharged the injunction.
During the hearing of Friday 15th June, the Judge took into account the four points listed above. She instructed the parties to negotiate over the weekend, and left a strong hint with the Plaintiffs that if there was no movement, she would likely be forced to discharge the injunction.
On 22nd June, in the Edinburgh Financial Cryptography Conference, Ian Grigg was preparing for his presentation when was approached by a Sheriff Paul Cameron and served a Demand for Arbitration
In the same event, the Sheriff also served an additional suit against Charles Evans.
On 26th June, Systemics filed an application requesting an injunction against the Arbitration Order, and also filed a Counterclaim, in the belief that the matter was best dealt with in Anguilla courts.
On 3rd July, the Judge rejected this application. The matter was then referred to Arbitration.
On 16th November 2001, the first Arbitration preliminary hearing was conducted. The Arbitrator requested written memoranda on how extensive the arbitration should be, which parties should be named, and what choice of law.
On 20th February, 2002, having considered the memoranda filed by DigiGold and Systemics, the Arbitrator ruled that:
On 22nd February, 2002, in a conference call, a schedule was agreed upon for an amended demand for Arbitration, Responses, Exchanges, Exhibits & Witness Lists. The "evidentary hearings", the main event, were scheduled for 3rd-7th June 2002 in Baltimore Maryland.
Over four and half days during 3rd - 7th June 2002, in the offices of DigiGold.net Ltd's attorneys, the Evidentiary Hearings were heard before the Arbitrator, Stephen M. Boyd.
Witness for the Claimant DigiGold.net Ltd was Dr Douglas Jackson, part owner and Chairman of DigiGold.net Ltd. (Barry Downey, the other owner, and Legal Counsel, was withdrawn as DigiGold.net Ltd's witness when it was made clear that he could not be present during testimony of Dr Jackson, and vice versa.)
Witnesses for the Respondent were Ian Grigg, owner of Systemics Inc, and Jeroen van Gelderen, programmer.
At the close of the hearings, the Arbitrator set the following schedule (all 2002) for Post-Hearing Briefs:
All briefs are now delivered.
The Arbitrator delivered the Final Award on 28th August 2002.
None of the claims brought by DigiGold was upheld.
That is, DigiGold's claims were denied by the Arbitrator.
Notes:
Latest News
The Award ordered DigiGold to pay all Arbitration costs to Systemics. This was paid in late January 2003.
These documents are online.
Injunction: includes three scanned documents:
(PDF is 630k.)
Sworn 17 point affidavit sans exhibits of Barry Downey, as 1.c above, but converted to text form. (142 lines, 7k.)
Affidavit Exhibit BD1 is the document that Barry Downey filed in court as the relevant agreement between the parties.
Note that this document is unknown to Systemics, and bears no signature. Its format is strange, and was possibly an internal working document. In the responding Affidavit, the signed agreement of 02 August 1999 was filed by Systemics.
Affidavit Exhibit BD2 partial, a collection of private emails. This textual representation includes my own copies of those emails brought together in facsimile of the court filed document.
I believe it to be accurate with the following known exceptions:
Sworn 53 point affidavit sans exhibits of Ian Grigg. This was converted from the DOC file, I believe it to be correct, but am aware of at least one minor error.
The Real DigiGold Agreement of 02 August 1999 which was signed by the parties.
Defence filed against the claim, with intention of digging the case into the Anguilla court, to avoid arbitration. Judge declined this "motion" and referred the case to arbitration. The case itself is still in the Anguilla courts, and has not been withdrawn by plaintiffs, presumably because it will cost them / to maintain options.
Demand for Arbitration served in the Signet Library in Edinburgh. This was converted from the faxed and served copy and is believed to be correct.
Barry Downey, counsel for and director of DigiGold, has posted substantial extracts (here) of the demand for arbitration on the e-gold list, so for the avoidance of doubt the full document is published here.
Goldmoney filed this Complaint against DigiGold, e-gold and many individuals, into the District Court of Southern New York. Judge Berman is assigned.
Discovery Archive of public and published documents. Most of these were used in the Arbitration, but a bunch were acquired too late. Within Arbitration, discovered documents were later refined into Exhibits, and then further into Evidence.
e-gold, et al filed this Response on 13th May 2002, which they then published, with these attachments:
Documents filed into the Superior Court for the State of California,
The status of the filed documents is that they are filed into competent courts and have been read by the assigned judge. Original documents can be acquired from the respective court.
This may make them protected in some sense against slander, within reasonable limits. I don't know the precise legal definition, but it's whatever allows the newspapers to publish. GYOL - get your own lawyer, or somesuch.
In April of 2001, John Wayne Zidar, the investor in G&SR who provided 2.45 million dollars for approximately 8% of issued capital, was arrested after being indicted by a Federal Grand Jury.
Best summary of information for this case, United States v. John Wayne Zidar, et al (Cr01-108R) is found at:
http://www.usdoj.gov/usao/waw/vw/CaseUpdate.html
Trial began 24th June 2002. Prosecution estimates 4 weeks to present their case, and then would hand over to the defence.
According to the above summary link:
After less than two days of deliberation, a verdict was returned by the jury on August 14, 2002. Defendant John Wayne Zidar was found guilty on all counts. Defendant Steven C. Moreland was found guilty on 14 of 20 counts. Both defendants were convicted of counts of mail fraud, wire fraud, money laundering, conspiracy to commit mail and wire fraud, and conspiracy to commit money laundering.
No mention found so far of sentencing, nor of the fate of the G&SR shares.
On 22nd June, 2001, at the EFCE conference held in the Signet Library, Edinburgh, Sheriff Paul Cameron also served Charles Evans a Summons and Complaint alleging misappropriated trade secrets, tortious interference, unfair business practices, and breach of loyalty.
It is probable that the Evans case is related to the Systemics Inc., case.
The Evans suit includes 10 John Does, and there is a clear implication that Systemics and staff will be named in due course.
Any others who might be related to the events surrounding G&SR, e-gold Ltd and DigiGold.net Ltd over the last few years would be well advised to seek counsel and to request copies of the Summons and Complaint.
As the year wended on, there was little or no news from the Evans case, primarily because the Plaintiffs, G&SR, did not particularise their claims. The sum total of their evidence was Evans' personel file, consisting of the I9 (imimigration form), W2 (tax form), copy of driver's licence, copy of Social Security Card and a Fedex receipt.
The Deposition and Discovery Demand may give some clues as to the sparse legal theories that Plaintiffs G&SR were working on.
On 23rd May 2002, G&SR filed their 2nd Amended Complaint ( HTML and PDF ) into the Court. The filing adds two additional names, including Ian Grigg. For the record, the complaint(s) are denied in their entirety.
(The above HTML has redacted the additional name, and compressed some duplicated sections. Refer to the PDF for full accuracy.)
It was served on Charles Evans' attorneys in California, on 3rd June 2002, being the same day that Evidentiary Hearings started in the DigiGold v. Systemics Arbitration. However, Wigley Chambers, attorneys for Systemics Inc, had extracted a mutual agreement not to serve from DigiGold.net Ltd, and G&SR apparently decided not to serve on Grigg (nor the other named party, who was present for parts of the arbitration).
Two days after the Final Award was delivered in Digigold v. Systemics, on 30th August 2002, G&SR withdrew their complaint against Evans et al from the California court, "dismissed without prejudice." In the United States, apparently, a filer has the right to withdraw "until the 1st question has been asked in hearings."
A reasonable person might postulate that Evans was sued in order to interfere with the Systemics Inc., case. Evans could have provided key testimony as to the internal understandings of the DigiGold.net Agreement, but was not available for this purpose, because of the filing.
On 6th July 2001, Wired published an article entitled Nothing That Glitters Is DigiGold by Declan McCullagh.
05 November 2001 Goldmoney (a system competing with e-gold Ltd) announced:
G.M. Network Ltd. Defends Patent Rights in Complaint Filed in U.S.
Federal Court
Infringement of Patents by e-gold Ltd. and DigiGold Ltd. is Cited
5 November 2001 - G.M. Network Ltd., the company that has developed
GoldMoney, today announced that it is defending in the US District
Court in New York City its digital gold currency patents against
infringement by e-gold Ltd. and DigiGold Ltd.
e-gold and DigiGold are reportedly owned, operated and controlled by
Doug Jackson and Barry Downey and related family trusts, all of whom
were named in the Complaint. The Trustees of the e-gold Special
Purpose Trust, the Escrow Agents used by that trust, and Gold &
Silver Reserve Inc. (d/b/a OmniPay) were also named in the Complaint.
. . .
Goldmoney owns three patents issued in the US of A. They issued a Full Press Release on filing a Complaint (1.6Mb) into the of New York District Court (Southern).
This complaint lists the case as 01 CV 9621:
GM Network Limited and Net Transactions Limited
v.
e-gold Ltd, Gold & Silver Reserve Inc., DigiGold Ltd.,
Douglas Jackson, Barry K. Downey, The Jackson Family
Trust, The Downey Family Trust, Baxter, Baker, Sidle, Conn,
& Jones, P.A., Hilderberto S. De Frias, Michael J. Mello, and
Does 1-10, inclusive.
Plaintiff's Attorney is listed as:
Jonathan A. Marshall, Esq (JM 7664)
Timothy E. DeMasi (TD 7852)
Thomas P. Scully (TS 8561)
PENNIE & EDMONDS LLP
1155 Avenue of the Americas
New York NY 10036
(212) 790-9090
In mid June 2002, e-gold published a filing that responded to the patent suit:
Subject: [dgc.chat] e-gold vs. GoldMoney news
Date: Wed, 19 Jun 2002 23:24:29 -0700 (PDT)
From: Ragnar
To: dgcchat@lists.goldmoney.com
Friends,
http://planetgold.com/patentwars/13May2002drinkerbiddleltr.pdf
I've just gone over the url at the top. It looks like e-gold is
planning to ask a federal judge for Rule 11 sanctions against
GoldMoney for filing frivolous and/or unscrupulous claims. Any
opinions on the above?
Regards,
Ragnar
Amongst other things, DigiGold.net Ltd described the DigiGold system in this filing ( local copy ). Attached were:
as filed into the New York District Court before Judge Berman.
The e-gold group of companies attempted broad discovery in an apparent attempt to dig up evidence for the Systemics Arbitration and the Evans case. This was argued in a single filing on 20th August 2002 ( local copy ) by both sides to Judge Eaton.
The relevant part to Systemics (and Evans) as claimed by e-gold is:
4) Plaintiffs' contacts with Charles Evans and Ian Grigg
Plaintiffs' directors contacted two people who had access to E-gold's source code: Messrs. Evans and Grigg. Mr. Turk hired a disgruntled former director of E-gold, Charles Evans. Mr. Evans and E-gold did not part amicably: E-gold sued Charles Evans for defamation, tortious interference with prospective econonic advantage, unfair business practices, breach of the duty of loyalty, and civil conspiracy. Mr. Turk's son, co-inventor of one of the patents in suit, suggested purchasing software from Ian Grigg, a former software developer for DigiGold.net. (Tab 10) DigiGold.net sued Mr. Grigg for delivery of the source code to the software that Mr. Grigg developed for DigiGold. For both these reasons, E-gold has a right to investigate the source code to see if Mr. Grigg, or perhaps Mr. Evans, gave trade secrets to the Plaintiffs (a form of common law unfair competition, which is pleaded in the Counterclaim).
For the record, the Arbitrator denied any such claim by DigiGold to the software owned by Systemics.
As is seen elsewhere, the Evans case was vexatious and was filed tactically in support of the actions against Systemics. Of particular relevance to the above is that G&SR failed to show any evidence of the existance of any trade secrets, let alone their misuse, during the 15 months of that case.
Goldmoney's response to the above part occurs in page 8.
Finally, Defendants argue that they have "a right to investigate the source code to see if Mr. Grigg, or perhaps Mr. Evans, gave trade secrets to the Plaintiffs." But, as noted, Defendants have never pleaded a misappropriation claim. As discussed above, Defendants cannot obtain discovery concerning claims that they have never pleaded. In addition, while Defendants cite a communication that allegedly "suggests purchasing software from Ian Grigg," Plaintiffs have already explicitly informed Defendants that they have never received any source code from either Mr. Grigg or Mr. Evans. 10 (See Tab 15 ar Rsp. To Req. 60-61.) Still further, Defendants are aware that Mr. Evans executed a written agreement explicitly stating that he would not reveal any of e-gold's proprietary information to Plaintiffs during his role as a consultant for Plaintiffs' subsidiary. (See Tab 16.) This is simply another poor attempt by Defendants to misdirect the Court in hopes of impermissibly expanding the scope of discovery.
Systemics was not consulted on this matter at the time. But we would agree with the central assertation: Systemics provided no source code to Goldmoney, unless it be that source code that is available freely on our open source websites, for all to peruse and benefit from!
Two days later, Judge Eaton denied e-gold's request ( image version and html version ). It is a one page document. As the judge prominently discussed e-gold's "very strained arguments" concerning Systemics, here is the central paragraph:
Defendants complain that plaintiffs have given discovery that is incomplete in three categories. Defendants make very strained arguments that some of the discovery is relevant to their counterclaims. For example, at page 5 of the joint letter they say: ". . . E-gold has a right to investigate the source code [of Plaintiffs] to see if Mr. Grigg, or perhaps Mr. Evans, gave trade secrets to the Plaintiffs . . . ." But there is no such claim in the counterclaims. In reality, defendants are asking me to order discover which is merely relevant to the "subject matter" of this lawsuit. For this type of discovery, F. R. Civ. P. Rule 26(b)(1) requires "good cause." I find that defendants have failed to show good cause. I am satisfied that plaintiffs have provided adequate responses with respect to each of the three categories in dispute.
It would appear that Judge Eaton was equally perplexed, but less patient than the California court, in the matter of the lost and elusive e-gold trade secrets.
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According to a statement made by Goldmoney on 13th September 2002:
G.M. Network had requested that the case be stayed to allow further proceedings with the US Patent Office. E-Gold and its related parties had opposed this motion. But with its favorable decision, the court enables G.M. Network to resume its case and to continue developing its filings with the US Patent Office.
Precisely what happened is a matter of some dispute. According to Reuters, quoting from an unknown/undated statement, e-gold said:
[e-gold] said Tuesday it succeeded in getting a patent infringement action brought by GoldMoney dismissed by a U.S. District Court in New York.
"The dismissal was a direct result of GoldMoney's filing of a request to the U.S. Patent and Trademark Office to have its patents reexamined to determine if they have legal validity," e-gold said in its statement. "That request was motivated by e-gold's attack against the patents in defense of the infringement allegation."
James Turk had the last word in response to JP May's questioning:
>(1) WHO brought the motion, was it e-gold or goldmoney
GoldMoney
>(2) WAS it a motion to stay or a motion to dismiss
We requested a motion to stay.
>(3) WHAT actually happened -- did the judge DISMISS, or STAY the case
The judge chose to dismiss the case without prejudice, which is more than what we asked for.
James
Peace in our time? We shall see.
Analysis suggests that Goldmoney won this battle substantially. The Patent(s) is/are now referred back to the US patent office (USPO) for re-examination; when, as expected, they return re-examined, they will a) start again (gain many years on the clock) and b) incorporate the defences filed by e-gold.
Who knows? There's never been a better time to read up on patent law...
The owners of the Standard Reserve group of companies (Standard Reserve Holdings Ltd, Standard Transactions Ltd (BVI) Standard Reserve Issue Ltd) included G&SR and/or Douglas Jackson and Barry Downey for a shareholding of, or around, 37.5%.
On or around mid-June 2002, it the Standard Reserve group of companies reported that they had collapsed. ( local copy of site on that date.) The announcement on the site alleged that "it has become evident that certain officer(s) and Director(s) of Standard Transactions Ltd. have commingled customer and company money."
More recent information was posted on or around 08 July 2002:
At this stage my understanding is that Ancien Limited; (a Nevis company owned by Douglas Jackson and Barry Downey) has filed a claim against SRHL, and possibly Deloitte Touché of the British Virgin Islands. These claims will force SRHL into bankruptcy and place a liquidator in charge of processing not only claims but also sell off any assets that any of the companies involved may have.
The same post, 08 July 2002, by Chris Gallant, claimed that Barry Downey and Douglas Jackson were directors of Standard Reserve Holdings Limited (what appears to be the top company in the group). Barry Downey appears to have been the CEO of Standard Reserve Issue Limited.
Planet Gold published this Investigative Report which summarises some of the publically reported background. It remains substantially unclear what the full story is.
On the 10th July 2002, Ancien Limited petitioned the Eastern Caribbean Supreme Court to wind up the company Standard Reserve Holdings Limited. On the 31st July 2002, a heading was held, and a liquidator was appointed. (See < http://www.standardreserve.com/> and also local copy.)
A case went before a US court, but details have not been revealed by the parties. The case was dismissed for lack of jurisdiction in October 2000. Ian Grigg was subpoened for documents in September, 2002. The status of the documents supplied under subpoena is unknown at this stage.
There have been several efforts at recovering funds lost in scams or ponzis or pyramids. They are only briefly listed here.
Apparently totally unrelated to any of the other parties and cases mentioned here, a major civil complaint asking for huge damages was launched against many of the major exchange providers who had done business selling OSGold.
One of these cases may be at:
http://ca.groups.yahoo.com/group/Global-Recovery-Group-how-to-join/
But, you have to pay a fee to join and find out if the recovery effort is legit. There was a rumour that a CostaGold recovery case was filed and was settled on or around Jan 2003, for a 6-7 bar figure.