Online Gambling Bust: Three Biggest Online Poker Websites Shut Down for Bank Fraud, Money Laundering, & Illegal Gambling (video)
Posted By Vicki McClure Davidson on April 15, 2011
Screenshot from 2007 of Poker Stars online gambling site, one of the three major poker sites busted and closed down by the FBI
BUSTED!
Executives were arrested Friday morning in Utah and Nevada and the top three online poker websites have been shutdown by the FBI. Reportedly, they were engaged in massive bank fraud, money laundering, illegal gambling — to the tune of billions of dollars.
Casino billionaire Steve Wynn has cut his business ties with PokerStars.
From Poker News, Online Poker’s Big Three Indicted:
On Friday, an indictment against the founders of online poker’s “big three” was unsealed by federal authorities. According to MarketWatch.com, the founders of PokerStars, Full Tilt Poker, and Absolute Poker were indicted on charges of bank fraud, money laundering, and illegal gambling. There were also restraining orders issued against over 75 bank accounts used by the online poker companies and their payment processors, as well as five Internet domain names.
The U.S. Department of Justice released a press release on the indictment, and in it, 11 defendants are named: Isai Scheinberg, Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul Tate, Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie, and John Campos. Scheinberg and Tate are identified in the indictment as representing PokerStars, Bitar and Burtnick of representing Full Tilt Poker and Tom and Beckley of representing Absolute Poker. Lang, Rubin, Franzen and Elie are identified as people who allegedly ran payment processors.
The charges are based on the Illegal Gambling Business Act of 1955 and the Unlawful Internet Gambling Enforcement Act of 2006. These are the same charges previously brought against payment processors used by the sites that have been shut down.
The allegations center around poker companies allegedly using fraudulent methods to circumvent federal law and trick U.S. banks into processing payments after the passage of UIGEA.
From Forbes, 3 online poker houses face fraud charges in NYC:
NEW YORK — The multi-billion-dollar business of the three biggest Internet poker companies became a target of federal authorities before an indictment was unsealed Friday, charging 11 people with bank fraud and illegal gambling.
Prosecutors in Manhattan said they’ve issued restraining orders against more than 75 bank accounts in 14 countries used by the poker companies, interrupting the illegal flow of billions of dollars.
U.S. Attorney Preet Bharara said the 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.”
The companies, all based overseas, were identified as PokerStars, Full Tilt Poker and Absolute Poker. The indictment sought $3 billion in money laundering penalties and forfeiture from the defendants.
The indictment said the companies ran afoul of the law after the U.S. in October 2006 enacted the Unlawful Internet Gambling Enforcement Act, which makes it a crime for gambling businesses to knowingly accept most forms of payment in connection with the participation of another person in unlawful Internet gambling.
[...]
The indictment said the defendants turned to fraudulent methods to trick financial institutions into processing payments on their behalf after the law was passed.
It said they sometimes arranged for money from U.S. gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewelry and golf balls.
Prosecutors said about a third or more of the billions of dollars in payment transactions that the poker companies tricked U.S. banks into processing went directly to the poker companies as revenue. They said the money represented the “rake” charged to players on almost every poker hand played online.
From Business Insider, Meet The Boy Genius Who Just Took Down The Online Poker Industry:
The internet is still coming to grips with the huge online gambling bust that just took down the U.S.’s three biggest online poker sites.
But Australia’s Courier-Mail newspaper already has the scoop on the one man who may have single-handedly built the online industry … then handed it to the U.S. government on a platter.
According to this story, Daniel Tzvetkoff was a young Australian entrepreneur who set up the payment processing schemes used by the biggest poker sites to handle their (mostly illegal) transactions.
He is described by those who know him as a “boy wonder” and “genius” who started his first company at 13 and knew all the intricacies of e-commerce.
He made Full Tilt Poker and Poker Stars millions of dollars — and made as much as $150,000 a day for himself — but then got even more greedy and started taking their. They sued him, accusing Tzvetkoff of taking more than $100 million of their money.
Then last April, Tzvetkoff was arrested in Las Vegas and charged with the same crimes those sites’ founders were charged with today: money laundering, bank fraud, wire fraud. As an Australian citizen with a lot of cash, he was considered a flight risk and denied bail.
Then after a “secret” meeting with prosecutors last August, he was suddenly out on bail. And now his former colleagues are the ones facing serious prison time.
From Sydney Morning Herald, FBI charges 11 internet poker kingpins:
Australian internet whiz Daniel Tzvetkoff, who has become a prized FBI informant in a bid to avoid a 75 year jail sentence in the US, may have brought down the multi-billion dollar American online poker industry.
The FBI announced on Friday it had charged 11 people, including the founders of three of the largest internet poker companies in the US, with bank fraud, money laundering and illegal gambling offences.
The three poker sites – PokerStars, Full Tilt Poker and Absolute Poker – have been shut down.
It is believed Gold Coast entrepreneur Tzvetkoff’s decision to turn super-grass and reveal to authorities the secret schemes used by poker companies to illegally launder billions of dollars via phony bank accounts and shell companies helped the FBI and New York prosecutors build their case.
“These defendants, knowing full well that their business with US customers and US banks was illegal, tried to stack the deck,” FBI assistant director Janice Fedarcyk, in announcing Friday’s charges, said.
“They lied to banks about the true nature of their business.”
More from Bloomberg, Internet Poker Entrepreneurs Charged With Fraud, U.S. Says:
PokerStars, based on the Isle of Mann, Ireland’s Full Tilt Poker and Absolute Poker of Costa Rica are the leading online poker sites doing business with U.S. customers, according to the indictment. The charging documents name two principals from each company and others who allegedly worked with them to illegally process payments.
“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 today in a statement. “To circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud.”
Prosecutors allege that after the U.S. enacted a law in 2006 barring banks from processing payments to offshore gambling websites, PokerStars, Full Tilt and Absolute Poker worked around the ban to continue operating in the U.S.
No worries for fretting online gamblers… another online poker site has just launched today. Any one besides me have a problem with the name “Hustler”?
Reported by Los Angeles Times, Hustler Casino launches free online gaming site after FBI Internet poker crackdown:
The empty space left behind by the FBI’s crackdown on three major online poker sites is already being filled — by Hustler.
Hustler Casino launched its own online gaming site on the same day federal authorities indicted and began to shut down prominent poker hubs Absolute Poker, PokerStars and Full Tilt Poker.
“It’s just one of those phenomenal coincidences that happen very rarely in a marketer’s career where something so monumental occurs in the online gaming community as what happened today,” said Al Underwood, marketing director for Hustler Casino in Gardena. “It opens up a space for us, and people who enjoy this online activity at least have a place to go that is familiar, legal and safe.”
The difference, according to owner Flynt Management Group, is that Hustler Casino’s site is free to use and doesn’t require players to stake and win real money. Instead, games are based around a point system that goes toward eventual prizes.
The site, according to the company, has been in development for months.
From December, an interesting post at RedState: Dirty Harry Reid Rewarding His Casino Backers With Online Gambling Monopolies. Looks like Democrat Senate Majority Leader Harry Reid has been busy working to reward his campaign contributors by re-legalizing, then granting them with monopolies in online gambling by restricting initial licenses to casinos and racetrack operators that have been in businesses at least five years.
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If these sites are shut down, how is that possible that I am playing right now. These articles have many misleading statements.
Just reporting what you see from the news sources – but I’d be real cautious, Jay. I tested the PokerStars site earlier today and it was down, but didn’t bother with the other two.
Yes I completely understand. These articles just portray these websites like they were stealing people’s money. When in fact all they were doing was paying people out which is against the Unlawful Internet Gambling Enforcement Act. They call it money laundering and fraud to make people scared and think that they were stealing people’s money.
Gotta love the American government telling us what we can and can not spend out money on.