Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Online poker companies indicted for fraud

By Ben Rooney, staff reporter


NEW YORK (CNNMoney) -- The founders of the three largest Internet poker companies have been indicted for bank fraud and money laundering, federal law enforcement officials said Friday.

The United States Attorney in New York unsealed the indictment against eleven people, including the founders of PokerStars, Full Tilt Poker, and Absolute Poker. In addition to charges of bank fraud and money laundering, the companies are accused of illegal gambling offenses.

The sweeping 52-page indictment alleges that the companies, based offshore, used "fraudulent methods" to get around U.S. anti-gambling laws "and to receive billions of dollars from U.S. residents who gambled through the Poker Companies."

The authorities also issued restraining orders against more than 75 bank accounts, and seized five Internet domain names used by the companies to host their illegal poker games.

The companies allegedly arranged for the money from U.S. gamblers to be disguised as payments to hundreds of non-existent online merchants for the purchase of items such as jewelry and golf balls, according to the indictment.

The defendants include Isai Scheinberg and Paul Tate of Poker Stars; Raymond Bitar and Nelson Burtnick of Full Tilt Poker; and Scott Tom and Brent Beckley of Absolute Poker.

"As charged, 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," U.S. Attorney Preet Bharara said in a statement.

Prosecutors also filed civil charges against the poker companies and several individual "payment processors," seeking at least $3 billion in penalties.

Prosecutors also alleged that John Campos, a part owner of SunFirst Bank in Utah, agreed to process Internet gambling transactions in exchange for a $10 million investment in his bank by one of the other defendants.

Prosecutors said they are working with Interpol and foreign agencies to secure the arrest of the remaining defendants, who are not presently in the United States.

"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, FBI assistant director-in-charge. "They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee."

The indictment shines a light on Internet gambling in the United States.

"The operation of their business is illegal, and in about half the states the player himself is violating state law," said Denver attorney Chuck Humphrey, who runs a Website dedicated to online gambling laws.

Alfonse D'Amato, chairman of the Poker Players Alliance, said he was "shocked" by the indictments, adding that his group "will continue to fight for Americans' right to participate in the game they enjoy."

"Online poker is not a crime and should not be treated as such," D'Amato, a former U.S. Senator, said in a statement.

Humphrey said Internet poker companies have argued in court that online poker is legal because it is a game of skill, as opposed to a game of chance.

But he pointed to recent cases involving online sports gambling, which resulted in jail time for some defendants, as an example of what might happen to those indicted Friday.

By charging the defendants with bank fraud, a criminal offense, Humphrey said prosecutors stand a better chance of extraditing them from countries where gambling is legal.

It was not immediately clear what will happen to any money that U.S. citizens had in accounts associated with the poker companies.

In 2007, federal prosecutors charged NETeller, an online payment company, with taking part in an online gambling conspiracy. That case resulted in a so-called deferred compensation agreement, in which the company agreed to return $94 million to U.S. customers.  To top of page

Index Last Change % Change
Dow 16,153.52 -374.51 -2.27%
Nasdaq 4,682.68 -93.83 -1.96%
S&P 500 1,927.43 -44.75 -2.27%
Treasuries 2.17 -0.03 -1.18%
Data as of 12:34pm ET
Company Price Change % Change
Bank of America Corp... 15.77 -0.57 -3.49%
Apple Inc 110.90 -1.86 -1.65%
General Electric Co 24.16 -0.66 -2.68%
Ford Motor Co 13.87 0.00 0.00%
Freeport-McMoRan Inc... 9.93 -0.71 -6.67%
Data as of 12:19pm ET
Sponsors

Sections

Welcome to September. Stocks started the historically worst month of the year with another big pullback after two new reports show more weakness in China's manufacturing sector. More

Iran could be pumping more than four million barrels of oil a day by the end of 2016, the country's oil minister tells CNN in an exclusive interview. More

Apple accounts for more than 225,000 jailbroken iPhone owners were hacked with a new kind of malware called KeyRaider. More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Joe is 50 years old and makes $70,000 a year. He should already have $364,000 saved for retirement. Are you on track? More