Gaming Law International

Absolute Poker founder pleads guilty

Brent Beckley, one of the founders of Absolute Poker, pleaded guilty in Manhattan to conspiracy to commit bank fraud, wire fraud and conspiracy to violate the Unlawful Internet Gambling Enforcement Act and is expected to be sentenced in April 2012. “I knew that it was illegal to accept credit cards from players to gamble on the Internet,” Beckley said to the judge before his plea. “I knew that it was illegal to deceive the banks in this way.” 

In April 2011, the U.S. indicted  eleven people associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang. 

The indictment alleged that:

• Among others, Beckley deceived, or directed others to deceive, U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Beckley paid certain payment processors to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer’s Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Another defendant, Bradley Franzen, pleaded guilty in May 2011.

Full Tilt Poker accused of operating ponzi scheme

U.S. Attorney Preet Bharara today announced that his office has amended its civil complaint against Full Tilt Poker to include claims that Full Tilt Poker operated a global Ponzi scheme. The U.S. Attorney says that Full Tilt was not a legitimate poker operation but rather operated as a Ponzi scheme, routinely draining players' accounts for other purposes, including payments to company founders and members of the board, and in the process defrauded players of US$300 million.

The company's lawyer went on the record shortly thereafter and apparently admitted that in 2010, Full Tilt Poker had insufficient funds on hand to meet the demands of player withdrawals. He also said, apparenly on behalf of Full Tilt Poker, that he did not comprehend the statements made by Bharara with respect to the Ponzi scheme. A Ponzi scheme is a fraud whereby the source of distributions to the early investors consist primarily of a return of their own capital or money obtained from new investors and with the payments ultimately stopping when there are no further investors. The result is that everyone loses money except the perpetrators of the fraud.

On April 15 of this year, the U.S. indicted defendants associated with Full Tilt Poker, PokerStars and Absolute Poker on allegations that they fraudulently circumvented anti-money laundering laws and the Unlawful Internet Gambling Enforcement Act (UIGEA) by disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services, lied to banks about the nature of their businesses and set up fictitious corporations, in order to open bank accounts to accept bets from U.S. players. Scheinberg, one of the founders of PokerStars, is alleged to have acquired a 30% interest in a small bank in Utah called SunFirst Bank in exchange for the Bank agreeing to process payments for PokerStars.

In April, the U.S. also filed a civil complaint against the individual defendants and the poker companies to recover US$3 billion in civil penalties for money laundering. Asset restraining orders were issued against more than 76 bank accounts in 14 countries, including Canada, to freeze the accounts on the basis that the funds are proceeds of crime.

Details of indictment against principals of PokerStars, Full Tilt Poker and Absolute Poker

The indictment in the U.S. against eleven persons associated with PokerStars, Full Tilt Poker and Absolute Poker, including Canadians Isai Scheinberg, Nelson Burtnick and Ryan Lang, has been made public. The indictment alleges as follows:

• The principals of PokerStars (Isai Scheinberg and Paul Tate), Absolute Poker (Scott Tom and Brent Beckley) and Full Tilt Poker (Raymond Bitar and Nelson Burtnick) deceived or directed others to deceive U.S. banks into processing billions of dollars in payments by disguising the funds as payments to fictitious merchants;
• Scheinberg, Bitar, Beckley, Burtnick and Tate paid certain payment processors, including Canadian Ryan Lang, to lie to U.S. banks about the nature of their business and the transactions processed through the U.S. financial system and to disguise the payments as non-gambling related proceeds;
• In order to continue to accept Visa and MasterCard payments from U.S. customers for online gambling, the defendants set up phony entities to be able to have credit card merchant numbers assigned to those entities that were not associated with online gambling to circumvent regulations implemented by Visa and MasterCard to deny all authorization requests from online gambling merchants. Because the risk control and anti-money laundering systems at the banks could frequently detect the activity associated with the phony merchants as illegal gambling activity, different phony entities were continually being created to obtain merchant codes to process payments;
• The defendants developed stored value cards (also called prepaid access) such as prepaid debit and phone cards that could be loaded with funds from a U.S. customer's Visa or MasterCard unassociated with a merchant code so that the cards could be used to transfer funds to the online poker sites and they also arranged for false e-check processing to facilitate gambling from U.S. customers; and
• The defendants invested in small local banks in the U.S. that were facing financial difficulty so that they could control their decisions with respect to the processing of gambling proceeds. In exchange, the banks or their officers, were given certain kick-backs from the funds processed.

Under U.S. anti-money laundering legislation, a person who launders proceeds of crime or participates in a money laundering transaction greater than US$10,000, is liable on conviction to a sentence of up to 20 years and a fine of twice the value of the funds laundered. The U.S. government estimates that billions of dollars were processed in the U.S. by PokerStars, Full Tilt Poker and Absolute Poker as described above between November 2006 and March 2011. The defendants are charged with, among other crimes, laundering proceeds of crime and participating in financial transactions knowing that the transactions involved criminal proceeds. A total of US$4.5 billion is being sought by civil forfeiture.  

Christine Mingie Duhaime is a gaming lawyer based in Vancouver, Canada and is a Certified Anti-Money Laundering Specialist. She advises gaming corporations and other corporate reporting entities on compliance with gambling and anti-money laundering legislation.

3 Canadians affiliated with PokerStars, Full Tilt Poker and Absolute Poker indicted in U.S. on illegal gambling and anti-money laundering charges

The U.S. Attorney and the FBI today unsealed an indictment today charging 3 Canadians with money laundering, bank fraud and illegal gambling in connection with the operation of Internet gambling websites that provide online gambling services to U.S. residents. Eight other individuals, mostly residents of the U.S., were also indicted. The defendants include the founders of three of the largest Internet gambling sites - PokerStars, Full Tilt Poker and Absolute Poker.

The 3 Canadians indicted are:

• Isai Scheinberg, currently living in the Isle of Man;
• Nelson Burtnick, currently living in Ireland; and
• Ryan Lang, currently living in Canada.

The U.S. has sought the assistance of foreign law enforcement agencies for the arrests of Lang, Burtnick and Scheinberg.

The indictment alleges that the defendants fraudulently circumvented anti-money laundering laws and the Unlawful Internet Gambling Enforcement Act (UIGEA) by disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services, lied to banks about the nature of their businesses and set up fictitious corporations, in order to open bank accounts to accept bets from U.S. players. Scheinberg, one of the founders of PokerStars, is alleged to have acquired a 30% interest in a small bank in Utah called SunFirst Bank in exchange for the Bank agreeing to process payments for PokerStars.

The U.S. also filed a civil complaint against the individual defendants and the poker companies to recover US$3 billion in civil penalties for money laundering. Asset restraining orders were issued against more than 76 bank accounts in 14 countries, including Canada, to freeze the accounts on the basis that the funds are proceeds of crime.

Five Internet domain names used by the poker companies to host the online gambling sites were also seized.

The indictment by the U.S. Attorney General on anti-money laundering law violations is a clever legal manoeuvre that will allow them to prosecute the defendants, secure the extradition of foreign defendants and retain frozen assets with much greater success than if the indictment was based solely on violations of the UIGEA. Most foreign Internet gambling site operators have little to no understanding of international anti-money laundering laws.

The defendants face up to 20 years in prison on the money laundering charges alone.

Christine Mingie Duhaime is a gaming lawyer based in Vancouver, Canada and is a Certified Anti-Money Laundering Specialist.

Woman pleads guilty to cheating casinos in Canada and U.S.

The co-founder of a group known as the Tran Organization, Van Thru Tran, pleaded guilty in San Diego today to conspiring to cheat 29 casinos in the U.S. and Canada out of US$7 million, including Casino Rama in Ontario and the Monte Carlo in Las Vegas. Members of the organizations are alleged to have bribed casino card dealers and supervisors to perform false shuffles during card games, thereby creating “slugs” or groups of unshuffled cards. After tracking the order of cards dealt in a card game, a member of the organization would signal to the card dealer to perform a “false shuffle,” and members of the group would then bet on the known order of cards when the slug appeared on the table. By doing so, members of the conspiracy repeatedly won thousands of dollars during card games, including winning several hundred thousand dollars on one occasion. The members of the organization used sophisticated mechanisms for tracking the order of cards during games, including hidden transmitter devices and specially created software that would predict the order in which cards would reappear during blackjack games. Tran faces a maximum penalty of 20 years in prison, a $250,000 fine, forfeiture of certain assets, and payment of restitution to the victims.

Woman wanted on human trafficking charges arrested in casino

An Soon Kim, a suspected human trafficker, was arrested at the Mohegan Sun Casino in Connecticut following an anonymous tip to America's Most Wanted, which had recently featured Kim. Kim was wanted on charges that she operated a wide-ranging human trafficking ring in the northeast U.S. that brought in young girls from Korea and forced them to work as sex slaves in massage parlours.

Canada increases severity of gambling offences

Canada has introduced amendments to the Criminal Code regulations to re-categorize certain gambling offences as "serious offences" that carry a longer term of imprisonment. The gambling offences that are now "serious" include:

• keeping a common gaming house (a place kept or used for gambling);
• permitting a place to be used for gambling;
• allowing a place to be used for betting or selling a pool;
• importing, making, buying, keeping or allowing to be kept any device for gambling, betting or pool making;
• controlling any money or property related to a gambling offence;
• recording or registering bets;
• engaging in book making or pool selling;
• entering into an agreement for gambling privileges or for information for assisting gambling;
• printing or providing information (such as on the Internet) for any type of gambling in or outside Canada;
• importing into Canada information that promotes gambling whether the gambling is inside or outside Canada;
• advertising, publishing, offering, inducing or inviting the results of a contest or any contingency; and
• transmitting or receiving messages that convey information related to gambling.

The amendments are touted as necessary for countering organized crime, however, those related to gambling have no specific application to organized crime and are of much more general application.

The starting point under Canadian law is that gambling is a common and public nuisance, contrary to public policy, inherently criminal in nature and prohibited under the Criminal Code. The Criminal Code provides for certain exemptions, making lawful certain gaming activities where prescribed conditions are met. Gambling activities that do not fall clearly within the permitted exemptions contravene the Criminal Code prohibition and are illegal.  The Criminal Code permits four categories of groups or individuals to legally operate gambling in Canada: provincial governments; charitable and religious organizations; agricultural fairs; and the federal government in respect of pari-mutuel betting on horse races.

The amendments, above, are significant because they increase the severity of the general aiding and abetting of illegal gambling offences and capture a broad range of prohibited conduct, including gambling activity conducted over the Internet by foreign-based operators that target, market or provide gambling-related services to persons in Canada without authorization.

Murder suspect van der Sloot met victim in casino in Peru

According to this story on Fox News, murder suspect Joran van der Sloot met the woman he is alleged to have confessed to killing at a casino in Lima, Peru. Casino surveillance cameras recorded van der Sloot meeting 22-year-old Stephanie Flores at a card table at the Atlantic City Casino. The pair stayed at the casino for some time then left for van der Sloot's hotel where, according to van der Sloot's apparent confession, he killed her. Van der Sloot fled to Chile and was arrested and extradited to Peru. Stephanie Flores' father owns the casino in Lima where the pair met. He also owns the Miraflores Park Hotel near Lima. You can watch the surveillance footage of the meeting of van der Sloot and Stephanie Flores here. Van der Sloot is suspected of murdering American teen Natalee Holloway in Aruba several years ago.

Former NBA Antoine Walker to face trial over casino debts

Former three-time NBA All-Star Antoine Walker was ordered to face trial on felony charges this week in Las Vegas for writing bad cheques to repay gambling debts. Walker allegedly owes nearly US$1 million to Planet Hollywood, Caesars Palace and Red Rock Resort in Las Vegas. The casinos gave him credit during a six month period last year. Walker filed for Chapter 7 bankruptcy in Miami, Florida. According to his bankruptcy court filings, he has liabilities of US$12,737,534 and assets of US$4,279,275. If convicted, Walker faces up to 12 years in prison. 

 

Parents charged with child endangerment for allegedly leaving 1-year-old in car while they gambled

The parents of a 1-year-old and a 10-year-old were charged with child endangerment in Connecticut after police say they left their children alone in a car while they gambled at the Foxwoods Resort Casino for about an hour. Police said the couple's children were turned over to the Massachusetts Department of Children and Families. Almost every land-based casino reports a handful of similar incidents every year in which parents, grandparents or other caregivers, leave children in vehicles unattended while they gamble. Most gambling jurisdictions in Canada and the U.S. require surveillance cameras be installed in casino parking garages and entrances to monitor this type of activity. 

European Court upholds Internet gambling ban in member states

The Court of Justice of the European Union has ruled that an EU member can ban a foreign Internet gambling company based in another member state from operating within its border to protect its citizens against fraud and other crime associated with Internet gambling. The ruling follows a court adviser's March opinion which stated that recognition of gambling licenses across member states is not viable under the EU's current system. 

In the decision, the Court held that "because of the lack of direct contact between consumer and operator, games of chance accessible via the Internet involve different and more substantial risks of fraud by operators against consumers compared with the traditional markets for such games".

The decision confirms that the Netherlands has jurisdiction to prohibit Internet gambling sites based in the UK from offering Internet gambling services to its citizens. The Court stated that: "A member state is entitled to take the view that the mere fact than an operator ...lawfully offers services via the Internet in another member state is not a sufficient assurance that national consumers will be protected."

The ruling is not unexpected. Foreign Internet gambling companies that offer Internet gambling in countries where they are not legally authorized to operate are essentially unregulated and unsupervised in those jurisdictions. 

Canadian payment processor pleads guilty in U.S.

Douglas Rennick, the Alberta man who was accused of laundering US$350 million in illegal Internet gambling proceeds in the United States last year, pleaded guilty in a federal court in Manhattan to a lesser charge of one count of transmitting wagering information in the U.S. From 2007 to 2009, Rennick opened a number of bank accounts in the U.S. under various corporate entities to receive funds from foreign Internet gambling companies and disburse the funds to U.S. residents. Rennick received about US$350 million from bank accounts in Cyprus used by the offshore Internet gambling companies that he did business with. 

Portland man accused of gambling mother's life savings away

Richard Stone, a 52-year-old Portland, Oregon man, was charged this week with stealing his elderly mother's life savings to gamble. Stone's mother suffers from dementia and is in an adult foster home. Stone is alleged to have sold her house and used the proceeds to gamble, take trips and pay his bills. He is charged with criminal mistreatment and theft. You can read the story here. 

Australian indicted for laundering US$500 million in Internet gambling proceeds

The US Attorney's Office announced today that an Australian foreign national, Daniel Tzvetkoff, was arrested in Las Vegas today on charges that he assisted illegal Internet gambling companies process about US$500 million in transactions for American gamblers. Tzvetkoff operated a payment processing company called Intabill Inc. Tzvetkoff was charged with gambling conspiracy, bank fraud conspiracy, money laundering conspiracy and one count of money laundering. The indictment was unsealed in Manhattan federal court today. It alleges that Tzvetkoff convinced banks to provide services through the Automated Clearing House System to offshore online gambling companies and that he disguised the recipients so banks would not know they were online gambling companies. 

In an e-mail, one of Tzvetkoff's alleged co-conspirators told him he had hired programmers to develop "unique" websites for the shell companies so that if someone was "checking the companies out there is absolutely no way to tie the companies together." Tzvetkoff replied that it was "perfect." If convicted, Tzvetkoff faces a term of imprisonment of up to 75 years.

California man killed over gambling loss

A California man was convicted of first degree murder today over a gambling loss. Franco Edgar Neftali, 44, shot a man to death shortly after losing hundreds of dollars in an illegal Cambodian dice game in 2007. Neftali faces up to 50 years in jail when sentenced in May.

US lawyer with gambling addiction suspended after stealing to feed addiction

Ohio lawyer Michelle Smithern lost her license to practice law indefinitely today after a hearing by the Akron Bar Association. Smithern started gambling on the internet in 2004 and as she continued to gamble, she also began using alcohol in excess. Over a two-year period, she took about $108,000 from her firm to gamble online. In 2009, she was convicted of felony theft for stealing.

US lawyer accused of stealing US$2.4M from client for gambling

Thomas Koch, a Milwaukee lawyer, has admitted stealing US$2.4 million from a client over a five year period to gamble, the Milwaukee Journal Sentinel reports. He was a regular customer at the Potawatomi Bingo Casino, whose website surprisingly spells "paysbig.com." Koch is no longer practicing law and is seeking treatment at a gambling addiction centre. If convicted, Koch faces a ten year prison sentence. 

German national arrested in Florida for money laundering in connection with Internet gambling site

A German national, Michael Olaf Schuett, residing in Florida, was arrested today in connection with operating an unlicensed money transmitting business that received and disbursed Internet gambling funds to Canadians and Americans. Schuett, also known as Michael and Olaf Schütt, appears not to have known Internet gambling was illegal in the United States. According to a criminal complaint filed on February 17, 2010 in the United States District Court, Fort Myers Division, Schuett:

• set up at least nine corporate entities to conduct wire transfers including MI Global Inc., MCM Capital Management Inc., US AG 24 Inc., Woodhouse Systems Inc., and Internet Payment Services Group Inc.;
• received and transferred out approximately US$70 million from various financial institutions; and
• facilitated the distribution of gambling proceeds to Canadians and Americans, including from an online gambling site called ultimatebet.com.

Schuett is alleged to have operated an unregistered and unlicensed money transmitting business, failing to register with FinCEN, file appropriate money laundering reports and establish a money laundering program. He is also alleged to have laundered the proceeds from his activities. 

Employees at Shamrock Bank, Wachovia Bank and Federal Express became suspicious of Schuett's activities in the Fall of 2009. FedEx employees reported that Schuett couriered about 150 packages a week to various addresses in the US. Employees opened several of the packages and determined Schuett was sending cheques. 

Internet gambling site allegedly connected to mafia

According to UK news reports, the Internet gambling company Paradise Bet Ltd., that operated the foreign Internet gambling site paradisebet.com, is connected to the Italian Parisi mafia clan. In December 2009, Italian police froze the assets of the London-based gambling site as part of a three-year operation called "Domino" and seized €220 million worth of assets including 227 properties, 680 bank accounts, 61 luxury cars, 71 horses and 35 businesses in Italy and the UK. Savino (or Savinoccio) Parisi, the 48-year-old apparent head of the clan, was among 74 people arrested by Italian officials in Bari, Italy where Paradise Bet operated an office. He is accused of laundering the proceeds of crime, attempted murder, drug trafficking, loan sharking and interfering with bids.

 

Betonsports agrees to permanent injunction

Effective today, BetonSports Plc has agreed to a federal court order for a permanent injunction with the U.S. Attorney General's Office. Under the terms of the injunction, the company is barred from:

1. continuing to operate an illegal gambling business through Internet web sites and telephone services;
2. continuing to operate any web site that offers sports betting or transmit betting information in the United States;
3. continuing to operate any telephone service that offers sports betting or transmits betting information in the United States;
4. soliciting and accepting wagers on sports and sporting events from persons in the United States;
5. transmitting wagering information using interstate and international wire communications facilities within the United States;
6. transmitting funds solicited from persons in the United States for the purpose of placing wagers on sports and sporting events to the Company and its agents outside the United States;
7. advertising any gambling activity which is in violation of United States law; and
8. transferring funds to, from, or within the United States in violation of United States law.