In 2006, the United States Congress pass the Unlawful Internet Gambling Enforcement Act that essentially made it illegal for online sites to do online gambling transactions through U.S. banks. For years, online sites have been finding ways to circumvent these laws while pushing for online poker legislation. It appears that their time has run out.

FBI seizes Online poker domains

Earlier Friday, the US Department of Justice unsealed an indictment against 11 defendants and have seized five internet gambling domains. In addition, over 75 different accounts linked to online gambling have been seized. They also filed a civil suit outlining the penalties they would like imposed on the sites and defendants in the indictment.

The Defendants

The following are the list of defendants in the case:

Isai Scheinberg – Founder, owner, and principal decision-maker for PokerStars

Raymond Bitar – Founder, owner, and principal decision-maker for Full Tilt Poker

Scott Tom – Co-founder and principal decision-maker for Absolute Poker and UltimateBet

Brent Beckley – Co-founder and principal decision-maker for Absolute Poker and UB

Nelson Burtnick – Former executive in payment processing departments at PokerStars and Full Tilt Poker

Paul Tate – Former PokerStars employee and head of payment processing department

Ryan Land – served as payment processor middle-man between online poker sites and payment processors.

Bradley Franzen – served as payment processor middle-man

Ira Rubin – processed payments for various sites by using phony internet merchants

Chad Elie – opened bank accounts in the US that was used to receive payments for online poker sites

John Campos – part owner of SunFirst Bank which processed payments for Full Tilt Poker and PokerStars

In addition, the following websites have been seized by the U.S. Government. When you go to the sites, you will either be redirected to another site or a DOJ image will appear on the site:

* PokerStars.com
* FullTiltPoker.com
* AbsolutePoker.com
* Ub.com
* Ultimatebet.com

PokerStars and Full Tilt Poker are still reachable at present by web browser, but ub.com and absolutepoker.com display the DOJ seizure image.

Charges Presented Against Defendants

There are a total of nine counts presented in the brief against the defendants. The nine counts and their penalties are as follows:

Count 1 – Conspiracy to Violate the UIGEA – All eleven defendants are charged with this. They could face 5 years each and a fine of either $250,000 or twice the gain or loss received. They must then serve 3 yeas of supervised release.

Count 2 – Violation of the UIGEA – PokerStars – All defendants except Bitar, Scott, and Beckley face this charge. The penalties are the same as count 1.

Count 3 – Violation of the UIGEA – Full Tilt – Bitar, Burtnick, Lang, Franzen, Rubin, Elie, and Campos face this charge.

Count 4 – Violation of the UIGEA – Absolute Poker – Tom, Beckley, Lang, Franzen, Rubin, and Elie face this charge.

Count 5 – Operation of Illegal Gambling Business – PokerStars – Same defendants as count 1. The penalties are the same as counts 1 through 4 with the additional penalty of forfeiture of proceeds of offense.

Count 6 – Operation of Illegal Gambling Business – Full Tilt – Same defendants as count 2. Same penalties as count 5.

Count 7 – Operation of Illegal Gambling Business – Absolute Poker – Same defendants as count 4. Same penalties as count 5.

Count 8 – Conspiracy to Commit Bank Fraud and Wire Fraud – All defendants but Tom and Campos face this charge. This charge carries up to 30 years in prison, a fine of $1 Million or twice the gross gain or loss. There is also a 5 year supervised release period from this charge as well as forfeiture of proceeds form the offense.

Count 9 – Money Laundering Conspiracy – All defendants face this charge. This carries up to a 20 year prison term, and either a fine of $500,000 or twice the amount laundered. There is a 3 year supervised release period as well as forfeiture of all proceeds from the offense.

What the Government Wants

First and foremost, the U.S. Government wants to receive $3 Billion from the sites as a results of operations in the United States. This breaks down as $1.5 Billion from PokerStars, $1 Billion from Full Tilt, and $500 Million from AP and UB.

In addition, the government wants all defendants rights, title, and interest in the following entities and businesses:

* PokerStars
* Full Tilt Poker
* Absolute Poker
* Ultimate Bet
* Oldford Group Ltd.
* Rational Entertainment Enterprises Lt.d
* Pyr Software Ltd.
* Stelekram Ltd.
* Sphene International Ltd.
* Tiltware LLC
* Kolyma Corporation A.V.V.
* Pocket Kings Ltd.
* Pocket Kings Consulting Ltd.
* Filco Ltd.
* Vantage Ltd.
* Ranston Ltd.
* Mail Media Ltd.
* Full Tilt Poker Ltd.
* SGS Systems Inc.
* Trust Services Ltd.
* Fiducia Exchange Ltd.
* Blue Water Services Ltd.
* Absolute Entertainment, S.A.
* Blanca Games, Inc of Antigua

The government also wants to seize domain names pokerstars.com, fulltiltpoker.com, absolutepoker.com, ultimatebet.com, and ub.com.

In addition, there are 77 U.S. and foreign based bank accounts that were used to process or receive internet gambling money that the U.S. wants the online sites to forfeit.

The Meat of the Accusations

The gist of the allegations base on activities committed by online poker sites after the passage of the UIGEA. The following were some of the acts committed by payment processors to obtain funds illegally:

* Fraudulent credit card processing – the government claims that certain defendants worked with and directed others to apply incorrect transaction codes to disguise the nature of the transactions to hide they were gambling sites. They also used phony companies to initiate the charges. Petfoodstore.biz is one such company.

In addition, “store value cards” like pre-paid debit cards were setup and used for these transaction. To attempt to avoid detection, more fake sites were setup for the cards use.
* Fraudulent E-check processing – the government claims that online sites and processors setup bank accounts and lied about their purpose. In addition, sites were using poker processors to process payments by using fake companies. E-check providers mentioned were Intabill, the “Arizona Processor”, and E-Triton were all mentioned in this section.
* Transparent Processing – Sites used certain banks to help make gambling transactions transparent in another attempt to circumvent the UIGEA. John Campos and SunFirst Bank processed over $200 Million in payments for PokerStars and Full Tilt. SunFirst received over $1.6 Million in fees for this processing as well as investments from sites totaling Millions more.

Fallout from Announcement

It did not take long for PokerStars to respond to the indictment. Within an hour, US players were banned from being able to play at real money tables. Full Tilt followed later in the evening when they stated that real money play on that site would be suspended as well.

Chad Elie was arrested Friday Morning and appeared in a Las Vegas federal court Friday afternoon. He was then released on his own recognizance. U.S Magistrate Judge Peggy Leen also restricted his travel to Nevada, New York, and Washington D.C. Also, Elie must maintain lawful employment until his trial. He will appear in a New York courtroom on Monday where he intends to contest the charges.

Both John Campos and Bradley Franzen have also been arrested. Franzen is scheduled to appear in New York for his arraignment on Monday and no word has been released as to Campos’ arraignment. Other defendants are not in the US at present, but Raymond Bitar as part of the statement released by Full Tilt earlier stated that “I am surprised and disappointed by the government’s decision to bring these charges.” He also said that “I look forward to my exoneration.”

In addition, the partnerships between the Wynn and PokerStars and Station Casinos and Full Tilt Poker appear to be null and void. The Wynn released a statement that they were backing out of their deal due to the indictments. Station Casinos hasn’t release a statement, but odds are that deal is over with as well.

At present it appears that AP and UB players can still play at the sites, but for how long is yet to be determined. Other US friendly sites such as Doyles Room, Lock Poker, and Cake Poker are all operating as normally.

What does this mean for online poker? It depends. For now, it means that the two largest online poker rooms are off limits to US players. This has put a noticeable dent in traffic on sites. As of this afternoon, PokerStars was down 31% from its numbers last Friday. Full Tilt was down 20% and Cereus, the home of AP/UB, was down 19%.

Should the U.S. government become successful in getting all of their demands, this could begin the death knell for online poker in the United States. However, expect the online sites to fight this and to ultimately make some sort of deal with the government. You can also expect this to set back online poker legalization by years, if not longer. We will obviously have more details on this as they develop.

by James Guill

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