I followed the e-gold saga for some time (some people I know are/were in the digital metal currency market).
I would call it a fiasco for a number of reasons:
1) A number of accounts (as you pointed out) were seized. Depositors lost millions of dollars with no chance for recovery due to the anonymous nature of the systems involved (one of the accounts seized was itself a DGC based on e-gold).
2) Before the government raids, you could in/out exchange e-gold for other currencies with ease. Today, is there *anyone* who will out exchange e-gold?
3) E-gold claims it contacted the U.S. government on several occasions asking if it was subject to KYC rules, and each time they were told they were not subject to the laws (see Doug's blog on the e-gold site -- though you might have to find it on archive.org if it has been removed). Then out of nowhere the government arrested the founders and halted all operations. The founders were given the choice of either acceding to all of the government's demands on how they could run their business, or go to jail.
In hindsight, it is easy to see a number of mistakes were made by the e-gold founders, chief among them trusting the U.S. government to play by its own rules, something that has been made even clearer recently with all the hypocrisy surrounding the thinly veiled attacks on Wikileaks.
If a government currency is always more insecure than a non-government currency, then how do you explain the e-gold fiasco?
E-gold
**FIASCO** ?
Check this out:
http://en.wikipedia.org/wiki/E-GoldIn April 2007, the US government ordered e-gold administration to lock/block approximately 58 e-gold accounts, owned and used by The Bullion Exchange, AnyGoldNow, IceGold, GitGold, The Denver Gold Exchange, GoldPouch Express, 1MDC (a Digital Gold Currency, based on e-gold), and others, and forced G&SR (owner of OmniPay) to liquidate the seized assets.[15] In addition, a few weeks later, e-gold themselves were indicted with 4 indictments [16] . However, e-gold is still in business, though not accepting new accounts.
(...)
E-gold was tried with violation of 18 USC 1960 in UNITED STATES OF AMERICA v. E-GOLD, LTD, District of Columbia court. The court found against E-gold, ruling that "a business can clearly engage in money transmitting without limiting its transactions to cash or currency and would commit a crime if it did so without being licensed."[19] In July 2008 the company and its three directors pled guilty to conspiracy to engage in money laundering and conspiracy to operate an unlicensed money-transmitting business.[1] The company faces fines of $3.7 million, however, the guilty plea is part of a plea bargaining process in which the DA dropped most charges. Regardless, the company has vowed to continue operations following the new Federal KYC guidelines. One upside of the court case for e-gold users is that the judge has rejected any charges of fraud regarding the e-gold user agreement and has confirmed the veracity of the company's gold reserve audit.
If by "fiasco" you mean being raided by government, then fiasco it is, indeed.
Government really hates competition.