Feds Ask Banks to Freeze $33 Million in Poker Player Assets

by Lou on June 11, 2009

Feds Ask Banks to Freeze Funds Owed to Poker players
Federal prosecutors asked four American banks to freeze $33 million owed to 27,000 players at four offshore poker sites, including PokerStars and Full Tilt Poker.

According to John Pappas, executive director of the Poker Players Alliance, prosecutors asked Citibank, Wells Fargo and two smaller banks to freeze funds in accounts belonging to two companies, Allied Systems and Account Services, which process payouts on behalf of the poker sites.
The government’s action came to light when checks issued to poker players by the two companies began bouncing. Pappas said that the online casinos had assured him that they planned to pay players what they were owed.

Feds Refuse to Comment on Actions
Yusill Scribner, a spokeswoman for the office of the United States attorney for the Southern District of New York, which is bringing the legal action, declined to comment.

Stephen Cohen, a spokesman at Citibank confirmed that the bank received a request from prosecutors. He said that as a matter of policy Citibank complies with such requests.
Wells Fargo, which received a court order to freeze the money, said it had a policy to comply with “valid instructions to seize funds” but declined further comment. It is not clear whether the other banks received court orders or simply requests.
I. Nelson Rose, a professor of law at Whittier Law School in Costa Mesa, CA and specialist on gambling law, called the government’s move a surprising and significant new effort to police wagering on the Internet.

Gaming Law Expert Nelson Rose Calls it “Aggressive … a Gamble on the Part of the Prosecutors”
“It’s very aggressive, and I think it’s a gamble on the part of the prosecutors,” Rose said. He added that it was not clear what law would cover the seizure of money belonging to poker players, as opposed to the money of the companies involved.
Past government efforts have focused on sports betting on the Internet, not on poker playing, Rose said, noting that he and other legal authorities, and some courts, have considered poker to be different from sports betting because poker involves a transaction between people, not a bettor and the casino.
A. Jeff Ifrah, a lawyer representing Account Services, with offices in San Diego and Canada, said that to his knowledge, the government “has never seized an account that belongs to players who are engaged in what I would contend is a lawful act of playing peer-to-peer poker online.”

Here’s What I Think
This seems to be overreaching, to say the least, on the part of the United States attorney for the Southern District of New York. Especially now, in light of pending legislation that would pull UIGEA’s teeth and provide a basis to license and tax online gambling. But the Southern District has always overreached when it comes to online gaming.

The issue here is what law are they basing their aggression on? It’s clearly not the Wire Act, which has does not to apply to online poker, but to sports betting instead. UIGEA, which was attached to a port security bill, did not create any new law designed that made online gaming illegal. Instead, it was an “enforcement act,” designed to go after financial institutions that received and processed gaming funds.

If we look at it from the perspective of the poker players we are, I’d read the Southern District for a naked bluff. They don’t hold the cards. They don’t have the law in their corner, and all they have going for them is their ability to posture and trumpet their opinion. It may make some quake in their boots, but I think if this case is resolved in court, the Southern District will find themselves exposed for what they are: weak, foolish, overreaching bullies who will back down the first time someone plays back at them.

{ 1 comment }

Low Limit June 27, 2009 at 2:48 pm

I agree with what you said here, I just wonder how they got a court order for Wells Fargo in the first place. As you said the wire act doesn't apply the the UIGEA not only shouldn't apply to player's funds but also my understanding is that it was primarily focused on funding (putting money into your online poker account) and not payouts.

Comments on this entry are closed.

Previous post:

Next post: