Three of the largest online poker companies, their associates and payment processors were indicted in March 2011 on charges of fraud, illegal gambling and money laundering, the United States Attorney for the Southern District of New York revealed April 15.
Internet poker sites PokerStars and owners Isai Scheinberg and Paul Tate, Full Tilt Poker and owners Raymond Bitar and Nelson Burtnick, and Absolute Poker and owners Scott Tom and Brent Beckley, along with five alleged accomplices, were named in the indictment. PokerStars is ranked by some industry reviews as the top poker site worldwide, with a peak volume of 178,000 players.
The government is seeking $3 billion from the companies in civil money laundering penalties and forfeiture. In addition, the feds placed restraining orders on 76 bank accounts allegedly controlled by the poker companies in 14 countries.
The charges were brought under the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). The UIGEA made it a federal crime to knowingly process most Internet gambling payments. U.S. poker sites relocated offshore and began looking for ways around the new regulations soon after the act became law.
The grand jury indictment describes an array of scams designed to defraud or coerce banks into processing gamblers' poker payments for the Internet sites. They include:
The indictment names Ryan Lang, Bradley Franzen, Ira Rubin and Chad Elie as processors who helped the three poker companies hide the poker payments. According to the grand jury Lang and Franzen allegedly acted as liaisons between the poker sites and processors willing to handle poker e-checks.
The indictment accuses Rubin, who owns a California processing company known as E-Triton, of disguising poker site payments as payroll processing, affiliate marketing and online electronics merchants using such names as MyGolfLocation.com and OneShopCenter.com.
Franzen allegedly promoted a scheme to bill gambling debt to a phony business called Green2YourGreen that was supposed to be a direct sales business for people who want to buy environmentally friendly household products for resale. And Elie is charged with using false information to open U.S. bank accounts to receive gambling payments.
The fees the processors received for handling these transactions were "substantially higher" than for legitimate processing, the indictment says.
The indictment mentions the poker companies continued to work with Elie even after the poker sites sued him for allegedly stealing more than $4 million. The companies claim Elie stole the money while processing for their sites.
The grand jury indictment states the poker sites turned to Elie for help again, despite the alleged theft, when the companies were desperate to find "transparent" processors that would process the charges without having to lie to the banks. According to the indictment, it was Elie's job to look for small, local, financially troubled banks that might be willing to work with the poker sites.
One of the banks Elie contacted, Utah's Sunfirst Bank, is named in the indictment. Sunfirst Vice Chairman of the Board and part owner John Campos is also named in the indictment. Campos allegedly agreed to process poker payments in return for a $10 million (30 percent) investment in the bank and a $20,000 bonus for "check and credit card processing consulting."
Processing for the poker sites, though often short-lived, proved lucrative for processors. The indictment indicates an Australian based processor, Intabill, processed $543 million in just over two years. It claims the poker sites stopped working with Intabill when it was determined the company owed the poker sites "tens of millions of dollars for past processing."
The indictment also claims an Arizona processor processed more than $100 million in a year before its accounts were seized, and Sunfirst processed more than $200 million in a year, earning more than $1.6 million in fees.
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