Online Poker Companies Indicted For Fraud

by Lou on April 16, 2011

Founders of the three largest Internet gambling sites operating in the United States were among those indicted by the United States Attorney’s Office of Southern New York on charges including bank fraud, money laundering, and illegal gambling activities.

A three-billion dollar civil complaint alleging money laundering and forfeiture was filed against the indicted poker companies and several of their payment processors. Restraining orders were also issued for more than 75 bank accounts, and five Internet domain names were also seized.

The Internet poker providers include PokerStars, Full Tilt Poker, and Absolute Poker, and among those named were 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.

The 52-page indictment alleges “fraudulent methods” were used to circumvent US anti-gambling laws “and to receive billions of dollars from U.S. residents who gambled through the poker companies.”

According to the indictment, money from poker players was allegedly disguised as payments to online merchants for the purchase of items such as jewelry and golf balls.

“As charged, these defendants concocted an elaborate criminal fraud scheme that involved tricking some US banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits,” said Manhattan U.S. Attorney Preet Bharara. “Moreover,” he added, “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.”

Interpol and foreign agencies are reportedly working with the prosecutors to secure the arrest of those defendants located outside the United States.

“These defendants, knowing full well that their business with U.S. customers and U.S. banks was illegal, tried to stack the deck,” said Janice Fedarcyk, FBI assistant director-in-charge. “They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee.”

This is obviously not good news in the short run for online poker.  But things may be different in the long run.  Such cases are not always the slam-dunks they appear to be, and if the Feds feel they have the evidence to go to trial and secure convictions, and the defendants decide to draw a line in the sand and fight the charges—rather than pay what amounts to an extortion fee for a “get-out-of-jail-free” card—what might appear to be a strong hand for the Feds might be beaten at a showdown on the river.

It’s way too early to make a lot of sense of this now.  But for the short run, your online poker experiences will not be what you were used to a few days ago.  In the long run, que sera? We just don’t know.

{ 1 comment }

Frank L. Palumbo April 18, 2011 at 1:22 am

Lou:

While many things are uncertain, internet poker in the USA has changed forever. It’s not a death blow, but certainly “The end of the beginning” as Churchill once said about more important world matters. WSOP attendance will take a hit, multi-table internet phenoms will probably have to leave the country if they want to effectively ply their trade. Brick and Mortar casinos will benefit. As my brother put it yesterday. “I’d hate to be the poor slob who just won the Sunday Million at Poker Stars.”

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