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.
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