After the once-friendly relationship between DigiGold and Systemics soured this spring, DigiGold sued the software company in an attempt to keep its servers online. Systemics' computers, which maintain DigiGold's customer accounts, are located on the West Indies island of Anguilla.

See also:
*	Discuss this story on Plastic.com
*	Digging Those Digicash Blues
*	Secret Service Raids Gold-Age
*	There's no biz like E-Biz
*	Executive Summary: movers and shakers

Systemics' Ian Grigg claims he wants to pull the plug on the server since DigiGold has paid only $370,000 of the $500,000 it owed him under a 1999 contract.

But DigiGold says it was willing to pay the remaining cash, according to court documents that describe how a close personal relationship between Grigg and DigiGold investor Douglas Jackson led to the creation of Systemics, the invention of a remarkable digital currency, a spate of personnel disputes and an eventual estrangement.

Making an odd situation even more unusual are allegations involving one of Jackson's business development employees, WWWWWW KKKK, who's described in internal e-mail messages as "a person who would use her physical attractiveness as a tool for manipulation of men." According to e-mail written to Grigg, another employee "was well and thoroughly seduced by Wajiha and her attractive younger sister."

In response to DigiGold's lawsuit, a judge in Anguilla prohibited Grigg "from terminating support for the DigiGold project or from taking the server offline," according to documents provided by Systemics. On June 19 Judge Hariprashad Charles lifted her injunction, and the dispute currently is in arbitration.

The dispute highlights one risk of the way DigiGold handled electronic cash: Since the system relied on one server, it had one single point of failure that could snarl customer accounts if it went offline.

The DigiGold-Systemics partnership began in July 1998 when Grigg -- an Australian programmer who's a regular at financial cryptography conferences -- met Jackson at an event in Boston.

The two men, along with a lawyer and a programmer named Ryan Lackey who's now at HavenCo, agreed to meet in Jackson's home in Florida soon after. They spent a week outlining plans to create a company that would mint digital cash.

To pull off this venture, Jackson hired lawyers to create a web of interlocking companies that largely seem to be incorporated in Nevis, an island in the Caribbean about the size of Washington that declared independence from Great Britain in 1983.

Those talks eventually led to the formation of Systemics, a company that Grigg would run and in which Jackson would invest -- in exchange for approximately 20 to 25 percent ownership. The idea was for Systemics to support itself with development contracts from Jackson's other companies that trade and maintain different digital currencies.

In 1999, Jackson launched DigiGold, a company formed around a digital currency that's issued in grams of gold and other precious metals. Like traditional banks, it maintains a fractional reserve -- of at least 25 percent -- so it can lend money and mint electronic cash in much the same way as the U.S. Treasury prints greenbacks or American Express prints travelers checks.

By contrast, Jackson's E-gold firm provides a different kind of electronic currency backed by physical metal stored in vaults in London and Dubai. The company, which acts not as a bank that lends money but a warehouse that stores gold on behalf of its users, says it has roughly 237,000 user accounts and stores about 1.5 metric tons of gold on behalf of its customers.

When contacted, Jackson -- a retired physician who founded DigiGold, E-gold and the Gold and Silver Reserve -- would only say this: "There is now no way to process DigiGold. We never thought we would get into a situation where we couldn't use technology we paid to have developed."

He refused to comment further.

Jackson's lawyer and fellow investor, Barry Downey of Smith and Downey, refused to discuss the case. Downey said DigiGold had no employees and relied on contractors. He said he did not know how many contractors the company had, the amount of its revenues, how much DigiGold was in circulation, or even whether the company was profitable or not.

But internal documents and e-mail that Grigg put online at systemics.com -- and removed in the last few days -- provide a unique and unsettling glimpse into the relationship between the two firms.

Grigg appears to have kicked off the spat by writing Jackson and Downey a message on May 21 that said: "Payments were made as required up to and including May of 2000. Since that time, demand has been made but no further payments were received.... Therefore we will no longer provide our services effective as of Friday May 25, 2001."