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.

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.

Legalized Internet gambling starts in France

France opened up its online sports betting and horse racing industry a few weeks ago in time to coincide with the World Cup. Thus far, 17 licences have been issued to 11 operators including Bwin Interactive Entertainment AG from Austria and BetClic Enterprises Ltd. from Malta. Internet poker is in the process of being approved as well in France and may be available by the end of June. In France, the government taxes the total amount of money gambled at 8.8% and there are predictions that with such a high tax rate, the new online gambling sites may not be economically viable. By contrast, in Canada the government does not tax money gambled or gambling wins from legalized gambling, except in the case of professional gamblers. The only forms of legalized gambling in Canada are those that are licensed, registered and regulated by governments in Canada.     

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. 

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.

Survey says Canadians unaware Internet gambling from foreign sites is illegal

According to a survey conducted by Ipsos Reid, only 23% of Canadians and 37% of Americans, respectively, know that Internet gambling from foreign sites is illegal. Ipsos Reid said the survey shows that authorities are doing a poor job of informing citizens that Internet gambling provided by foreign operators is illegal. The difference among Canadian and American responses can be explained by the fact that the U.S., unlike Canada, has actively prosecuted foreign Internet gambling operators for several years. By way of clarification, it should be noted that in Canada, it is the provision of Internet gambling by non-government entities that renders the activity illegal in Canada.

French to permit (and regulate) Internet gambling

The French government has ended a long-standing ban prohibiting Internet gambling in France and has approved regulations that will grant licenses to foreign companies seeking to offer Internet gambling services to French citizens. Under the new regulations, companies will have to establish separate sites for French customers and provide permanent records on players to the government. There does not appear to be any discussion occurring about which companies can provide online gambling services to French citizens under the new regulations or whether proposed service providers will be subject to investigations to ensure the integrity of the gaming industry as is customary for land based casino operators in Canada and the US.

German national in Florida pleads guilty to operating an unlicensed money transmitting business

Michael Schuett, the German national living in Florida who was arrested by the US Secret Service on February 18, 2010 for money laundering and operating an unlicensed money transmittal business that serviced online gamblers, has pleaded guilty to the lesser charge of operating an unlicensed money transmitting business. Schuett incorporated numerous companies which received and transmitted about $70 million for online gambling. None of his companies were registered with the Office of Financial Regulation or FinCEN. The US government seized over $2.7 million in assets from Schuett's numerous bank accounts in Florida as well as a Porsche and Audi. The US Attorney is seeking a sentence of up to five years in federal prison. Our earlier post describing the original criminal complaint is here. 

Popular online gambling domains in jeopardy

Kentucky is one step closer to blocking online gambling activities in that state. The Kentucky Supreme Court ruled today that two groups purporting to represent several offshore Internet gambling sites whose domains were the subject of a state seizure in September 2008, did not have standing in the litigation. The domains that Kentucky is seeking to seize include absolutepoker.com, bodoglife.com, goldencasino.com, sportsbook.com, playersonly.com, sportsinteraction.com, mysportsbook.com, linesmaker.com and vicsbingo.com.

Several men indicted in Kansas City for online gambling scheme

Four Kansas City area men are accused of operating a multi-million dollar Internet gambling scheme in a federal indictment recently unsealed. Gerlarmo Cammisano, 56, James J. Moretina, 60, Michael J. Lombardo, 54, and James L. Dicapo, 57, appeared in a US court accused of operating an Internet sports bookmaking business that attracted almost $3.6 million in bets between March 2006 and April 2009. Two companies also were charged - Phoenix International Teleport Satellite Services of Chandler, Ariz., and Elite Sports, a company in San Jose, Costa Rica.

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.

 

Two former Neteller executives arrested in U.S.

The two Canadian founders and former directors of Neteller PLC, the Internet payment processing company, were arrested in the United States today. John David Lefebre and Stephen Eric Lawrence, both originally from Calgary, Alberta, were charged with allegedly laundering billions of dollars in gambling proceeds. Lefebre was arrested yesterday in Malibu, California and Lawrence was arrested in the U.S. Virgin Islands. The criminal complaints against them were unsealed in U.S. District Court in Manhattan yesterday. The press release from the United States Attorney General's Office is available here.

Download ag_statement.pdf

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.

U.S. Senate approves anti-Internet gambling legislation

As expected, the U.S. Senate approved the proposed Unlawful Internet Gambling Enforcement Act of 2006 (the "Act") today as part of the adoption of the Safe Port Act, H.R. 4954. The Act amends Chapter 53 of Title 31 of the United States Code (the "Code") You can download a copy here Download unlawful_internet_gambling_enforcement_act.pdf. Some of the key amendments are as follows:

Definitions

Several new terms are defined in the Code and are intended to capture all the components of the activity of Internet gambling from the placing of bets, the handling of funds and the use of the Internet.

(a) "Bet or Wager" (i) means to stake something of value on the outcome of a contest of others, a sporting event or game of chance on the understanding that either the better or someone else will receive something of value in the event of a certain outcome; (ii) includes purchasing a chance or

U.S. arrests second foreign Internet gambling executive

Sportingbet Plc's chairman, Peter Dicks, was arrested by U.S. authorities Thursday after arriving from an international flight at JFK International Airport. The Louisiana State Police had an outstanding warrant for his arrest since May of this year on charges related to his involvement with Internet gambling activities in the state of Louisiana, an activity that is prohibited in that state and in many other U.S. jurisdictions. No information has been made available as to whether federal charges have been laid against Dicks or are pending but such charges are a real possibility and if laid, would likely include Sportingbet Plc and other executives. On Friday, Dicks appeared in court for a bail hearing and was released on US$50,000 bail, pending extradition to Louisiana. 

Foreign Internet gambling executive detained in U.S.

David Carruthers, the CEO of the foreign Internet gambling company, BetonSports Plc, was detained last night by U.S. authorities while changing flights in the U.S. en route from the UK to Costa Rica. He is being held in Fort Worth, Texas, along with four others. The U.S. Department of Justice released a statement that a grand jury in Missouri returned a 22-count indictment charging 11 individuals and four corporations, including BetonSports Plc and three companies based in Florida, on various charges of racketeering, conspiracy, tax evasion and fraud. The indictment was returned by the grand jury on June 1, 2006 but was kept under seal because many of the defendants were out of the United States.

The United States has also filed a civil complaint to obtain an order requiring BetonSports Plc to stop taking sports bets from the U.S. and to return money held in wagering accounts to account holders in the U.S. To view the press release from the Department of Justice explaining the indictment, Download here.pdf.

Internet gambling in Washington soon a class c felony

Starting on June 7, 2006, Washington State residents who gamble over the Internet may, on conviction, be liable for a fine of up to US$10,000 or imprisonment for a term of five year, or both. The new bill upgrades Internet gambling from a misdemeanor to a Class C felony. Surprisingly, the Washington State Gambling Commission confirmed to reporters at the Seattle Post-Intelligencer that commission agents had gone to the homes of several gamblers in the state a year ago to warn them that Internet gambling was illegal but no one was arrested.