Published April 15, 2011
In a dramatic move sure to send shockwaves through the surging Internet poker world, U.S. officials shut down and seized the domain names for the three largest U.S. online poker companies on Friday.
The indictment unsealed Friday alleges industry leaders PokerStars, Full Tilt Poker and Absolute Poker continued to operate their businesses inside the U.S. in the face of new laws banning Internet poker and largely by deceiving financial institutions.
The takedown marks the first widespread charges targeting Internet poker by federal officials and is likely to impact billions of dollars of gaming revenue. The indictment seeks at least $3 billion in civil money laundering penalties and forfeiture from the poker companies and defendants.
Preet Bharara, the U.S. Attorney for the Southern District of New York, unsealed an indictment Friday afternoon charging 11 defendants, including the founders of PokerStars, Full Tilt Poker and Absolute Poker, with bank fraud, money laundering and illegal gambling offenses.
At the same time, the U.S. seized five Internet domain names used to host the poker games and filed a civil money laundering and a civil complaint against the companies, their assets and the assets of several of their payment processors. Restraining orders were also issued against more than 75 bank accounts used by the poker companies and their payment processes.
“These defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits,” Bharara said in a statement. “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."
In tandem with the soaring popularity of Internet gaming and televised Texas Hold’em poker, Internet poker has skyrocketed in recent years despite the ambiguity surrounding its legality in the U.S.
However, visitors on Friday to absolutepoker.com, the homepage of Absolute Poker, are greeted with logos of the Department of Justice and Federal Bureau of Investigation and a statement saying the domain name has been seized by the FBI.
The statement on the site warns that taking part in an illegal gambling business is a federal crime. “It is also a federal crime to knowingly accept, in connection with the participation of another person in unlawful Internet gambling, credit, electronic fund transfers, or checks," the warning said.
According to the indictment, the offshore poker companies continued to operate in the U.S. despite the enactment of a 2006 law that made it a federal crime to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.”
The U.S. alleges the poker companies used fraudulent methods to circumvent federal law and trick U.S. banks and credit card issuers unwilling to process their payments.
For example, the indictment says the companies arranged for the money received from U.S. gamblers to be “disguised” as payments to hundreds of nonexistent online merchants purportedly selling other items like jewelry and golf balls.
The indictment lists five founders of the poker companies: 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.
“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, assistant director-in-charge at the FBI. “The defendants bet the house that they could continue their scheme, and they lost."
The U.S. also charged “highly compensated payment processors,” including Ryan Lang, Ira Rubin, Bradley Franzen and Chad Elie.
According to the indictment, these individuals obtained accounts at U.S. banks for the poker companies by lying about the nature of the transactions and covering up those lies by creating phone corporations and Web sites.