The co-founder and two other executives of a money transfer company called e-gold Ltd. have pleaded guilty to charges of money laundering and illegal money transmitting.

The Justice Department announced the pleas Monday. Douglas Jackson, e-gold's co-founder and principal director, could be sentenced to 25 years in prison and fined $750,000 for conspiracy to engage in money laundering and running an unlicensed money transmitting business, the department said. The other two executives face five-year sentences and $25,000 fines.

e-gold, of Nevis in the West Indies, and a related company, Gold & Silver Reserve Inc. of West Melbourne, Fla., face a fine of up to $3.7 million, the department said. As part of the plea, the companies agreed to forfeit $1.75 million for a judgment against them.

Sentencing is scheduled for November.

Mr. Jackson, who agreed in the plea deal to set new operating rules for e-gold, told American Banker by e-mail this week that he hopes e-gold can become a respected alternative payment system.

"There is global recognition of the quality of U.S. regulatory standards," Mr. Jackson wrote. "The knowledge that e-gold is compliant with U.S. financial regulation should aid enormously in fostering trust and building confidence … and lead to a net effect of increased transaction volume."

e-gold, born in an era of dot-com innovation — in a blog post Monday on the e-gold Web site, Mr. Jackson contrasted it to failed alternative payment systems such as Beenz, Flooz, and Digicash — soon became associated with various forms of cybercrime.

"Our immediate task is to accomplish as much as possible to overhaul the system in the next few months. It is my hope that following the sentencing, each of the directors will continue to have a meaningful role in ensuring the on-going compliance of the company," Mr. Jackson said by e-mail.

The defendants also agreed to register e-gold as a money-services business with the Financial Crimes Enforcement Network and seek a license in all U.S. jurisdictions that require it.

Gold & Silver Reserve, which is incorporated in Delaware, created e-gold in 1996. Mr. Jackson is also Gold & Silver's chief executive.

e-gold says its currency is backed by gold bullion and can be traded among e-gold accounts either by the metal's weight or by its value to various currencies. The funds can then be exchanged for other currencies using Gold & Silver's Omnipay service or other exchanges.

The Justice Department's April 2007 indictment said e-gold allowed customers to open accounts with obviously "bogus and false" names and information and allowed its system to be used for Ponzi schemes, credit card fraud, identity theft, and the purchase of child pornography, among other things.

e-gold promised in the plea deal to reform its practices.

No new e-gold or Omnipay accounts will be accepted as the company develops a system to ensure that each account can be tied to a specific user.

This ability was lacking, which allowed criminals to easily ignore any consequences when their accounts were linked to illegal activity, the government said.

"When a specific account was determined to be engaged in criminal activity," the indictment said, "defendants would regularly place a 'value-limit' on that account, a procedure whereby an entry would be made in the e-gold database limiting the incoming 'e-gold' funds that could be received by that account … but not limiting the ability of the account-holder to spend the funds already in the account."

That meant criminals could simply move their funds into a separate e-gold account they owned that had not yet been flagged — or use an exchange service to cash out entirely — and ignore the punishment, the indictment said.

In his blog post Monday, Mr. Jackson said e-gold has already given its user agreement more teeth, allowing it to freeze all e-gold accounts owned by a user suspected of criminal activity. Its new login system, which will tie multiple accounts under a single user, is already in development but may still take six to nine months to roll out.

"The immediate emphasis must be on compliant customer identification," Mr. Jackson said by e-mail on Tuesday, and these changes will apply to users worldwide.

Gold & Silver has agreed to hire a consultant to ensure compliance and an auditor to make sure all transactions are backed by gold, and it will be supervised by the Internal Revenue Service's Bank Secrecy Act Division, the Justice Department said. (It said it could not provide an official to comment while sentencing is pending.)

Avivah Litan, a vice president and research director at Gartner Inc., of Stamford, Conn., described the changes planned for e-gold "welcome" and "long overdue."

The changes may not bode well for e-gold itself, Ms. Litan said. "It's certainly the underground currency of choice," and now that the company is making it harder for that audience to use its service, "they'll probably hide from e-gold for a while."

The crime will not go away, but simply go elsewhere, she said.

"There's a lot of little players" to take on the criminal clientele that e-gold has vowed to weed out, she said. The changes at e-gold may be "good for the underground economy," she said.