Disaster Strikes PokerStars, Full Tilt Poker, Ultimate Bet, Absolute Poker And The Entire Online Poker Community
Sunday, 17. April 2011

If you went online this Friday to visit the websites of PokerStars, Full Tilt Poker, Ultimate Bet or Absolute Poker then you were most likely welcomed with a fairly disturbing message posted by the F.B.I. and the U.S. Department of Justice. The message stated that the domains were seized and went on to list the various fines and long prison terms that people engaging in the management of online gaming companies as well as the participation in online gaming could be exposed to.

The U.S. Attorney in Manhattan Preet Bharara filed the indictment against Ishai Scheinberg, the found of PokerStars; Raymond Bitar, the founder of Full Tilt Poker and an additional nine others this past Friday. Federal prosecutors accused them of operating illegal gambling businesses. A civil lawsuit was also filed against the companies that seeks a monumental $3 billion in money laundering penalties. The civil lawsuit alleges that the companies attempted to disguise funds that they received from their US members as payments to bogus online retailers that were selling golf balls and jewelers.

A total of five domain names were seized including pokerstars.com, fulltiltpoker.com, ub.com and absolutepoker.com. In addition to seizing internet domains, a federal judge issued restraining orders against a total of 76 relevant bank accounts located in 14 different countries used by the companies.

The Unlawful Internet Gaming Enforcement Act (UIGEA) of 2006 (which was tacked onto the Safe Port Act) made illegal the “acceptance of any payment instrument for unlawful gambling” but did not go so far as to declare online gambling illegal…just implied it. As a result of the passing of the UIGEA, many online poker rooms discontinued their service to US players but a number of them continued. In fact, companies such as PokerStars not only continued to provide service to US players but produced television programs and US networks broadcasted commercials. Online poker had become so accepted that Steve Wynn, one of the most prominent names in the casino world, recently announced a strategic relationship with PokerStars explaining that while the US Justice Department has their opinion, a number of states had ruled that poker is a game of skill and not chance. Steve Wynn has since announced that the relationship with PokerStars has been dissolved due to recent events.

It is important to note that these poker rooms are not being indicted for providing online gaming services; rather, for using “fraudulent methods to avoid restrictions and to receive billions of dollars from United States residents who gambled.” The indictment went on to say that the companies “deceived or directed others to deceive” US banks and other financial groups into processing what amounted to billions of dollars in transactions.

In addition to the online poker companies being indicted, a payment processor in Las Vegas, Chad Elie, and the part owner of a small bank in Utah, John Campos, were arrested by Federal Agents. This week, another payment processor, Bradley Franzen, is expected to appear in a Manhattan federal court for arraignment. A number of the individuals indicted have not been arrested due to the fact that they are not in the US and are located in places where online gambling is legal. This could potentially set the stage for some fairly intense extradition battles.

Prosecutors stated that the companies in question utilized payment processors that lied to US banks regarding the nature of the payments that were being processed and compensated them heavily for doing so. As an example of the deception, federal prosecutors stated that Raymond Bitar created a number of bogus online retail companies in order to help facilitate player transactions. They went on to allege that Ishai Sheinberg developed a scheme to use pre-paid debit cards and phone cards that could be stacked with monies from a US player’s credit card so as to avoid using a gambling transaction code. It would appear that a number of the payment processors have pleaded guilty over the course of the investigation and have cooperated in the indictment.

As a result of the indictments and pending litigation, all four companies have discontinued service to their US players but continue to offer service to their international customers. Regarding accounts at the companies belonging to their US players, all four companies announced that the money is safe and will be returned to players in time. When that will be…only God knows.

What This Means For Online Poker In The US
It is really unclear what all of this means for online poker in the US. The companies were not indicted for providing online gambling; rather, for money laundering and bank fraud. Other online poker companies that provided service to US customers before the indictment are continuing to do so afterwards (for more information, see Can I Still Play Poker In The US After The Events Of Online Poker’s Black Friday?.

It seemed that the US was moving towards the legalizing of online gambling and many people in the industry felt that it was an inevitability. While the indictments serve as a setback to the cause, it will still most likely occur in the not too distant future. What is for certain is that if or when online poker does become legal in the US, those indicted companies face a serious uphill battle with regards to ever offering US players service again.

If you are a US poker player and are interested in an alternative to the four indicted companies then we would suggest the following excellent sites:

Bodog Poker
Sportsbook Poker
PlayersOnly Poker
Cake Poker
Carbon Poker