Game Over? Top Online Poker Execs Arrested for Fraud, Money Laundering
The FBI and the state of New York charged the founders of the top three online poker sites in the United States with charges including bank fraud, money laundering, and illegal gambling.
The FBI and the state of New York charged the founders of the top three online poker sites in the United States with charges including bank fraud, money laundering, and illegal gambling.
In all, 11 defendants were charged, including the founders of PokerStars, Full Tilt Poker, and Absolute Poker. The FBI and the Attorney General of New York also seized five Internet domain names associated with the sites, as well as more than 75 bank accounts used by the poker companies.
The indictment and civil complaint seek at least $3 billion in civil money laundering penalties and forfeiture from the poker companies and the defendants. Authorities didn't say what domains had been seized, but all three online poker sites remained accessible Friday afternoon.
The indictments could be death knell for the online poker industry in the United States. At present, federal law bans gambling businesses from accepting payments in connection with unlawful Internet gambling made via credit cards, electronic fund transfers, and checks, a prohibition Rep. Barney Frank (D-Mass.) tried , but was unsuccessful. Congress enacted the Unlawful Internet Gambling Enforcement Act in 2006, which the defendants were charged with violating,.
To get around the law, the poker sites "tricked" the banks, Manhattan U.S. Attorney Preet Bhahara said. "As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits," Bhahara said in a statement. "Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. Foreign firms that choose to operate in the United States are not free to flout the laws they don't like simply because they can't bear to be parted from their profits."
Defendants included Isai Scheinberg and Paul Tate of PokerStars, Raymond Bitar and Nelson Burtnick of Full Tilt Poker, and Scott Tom and Brent Beckley of Absolute Poker. Ryan Lang, Ira Rubin, Bradley Franzen, and Chad Elie were also charged as "payment processors" who obtained accounts at U.S. banks for the poker companies, according to a statement jointly released by the FBI and the Manhattan Attorney General's office.
According to the indictment, the payment processors originally lied to the banks about the nature of the financial transactions. Soon enough, however, the companies moved on.
Instead, law enforcement agencies believe, the payment processors and poker companies swapped processing payments for investments in the banks themselves.
"For example, in September 2009, Elie and others approached defendant John Campos, the vice chairman of the board and part-owner of SunFirst Bank, a small, private bank based in Saint George, Utah, about processing Internet poker transactions," the Manhattan U.S. Attorney's Office said in a statement. "While expressing 'trepidations,' Campos allegedly agreed to process gambling transactions in return for a $10 million investment in SunFirst by ELIE and an associate, which would give them a more than 30 percent ownership stake in the bank. Campos also requested and received a $20,000 'bonus' for his assistance. In an e-mail, one of Elie's associates boasted that they had 'purchased' SunFirst and that they 'were looking to purchase' 'a grand total of 3 or 4 banks' to process payments."
The indictments will probably doom , which reportedly passed out of committee this week. However, the revised bill only would create an intrastate online poker gaming business, not the interstate or even international business that backers had hoped for.