A federal grand jury has indicted online payment provider e-gold and three men on charges of money laundering and conspiracy.

According to a four-count indictment unsealed Friday, Dr. Douglas Jackson, Reid Jackson and Barry Downey, and their company e-gold, transferred funds even though they knew the monies were proceeds of child pornography, credit card fraud and bank fraud.

E-gold carried out these transfers over a six-year period from 1999 to 2005, the government said.

"Criminals of every stripe gravitated to e-gold as a place to move their money with impunity," Jeffrey Taylor, U.S. Attorney for the District of Columbia, said in a statement. "The defendants in this case knowingly allowed them to do so and profited from their crimes."

After the indictment was passed down, federal prosecutors seized funds in 58 e-gold accounts and froze the company's assets. E-gold can continue to operate under government supervision, however, and use existing funds to cash out unaffected accounts.

E-gold, which was founded in 1996, has been a favourite of online scammers because it is completely anonymous, said Ron O'Brien, a senior security analyst at Sophos. E-gold required only an email address to register, and as a digital gold exchange it is not required to perform background checks on users. "E-gold has attracted cybercriminals because of the anonymity," said O'Brien.

The service has also been favoured because payments are not reversible; once a payment is made, it can't be retracted by the sender. In fact, several "ransomware" attacks - malicious code that sneaked onto PCs, encrypted user files and then displayed a message demanding money to unlock the files - have used e-gold as the payment method between victim and criminal, O'Brien noted. E-gold payments have also been linked to the notorious ShadowCrew identity theft gang.

The two-and-a-half year investigation was led by the U.S. Secret Service, but investigators from the IRS, FBI, and state and local law enforcement were also involved.

If convicted on all four charges, Jackson, Jackson and Downey each face 35 years in prison.

"It's great that there is punishment doled out for these types of activities," said O'Brien. "But we'll have to see if [this indictment] serves as a deterrent."

As of late Monday, the e-gold website was still operating.