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FBI charge 11 poker company officials 18/04/2011
Richard Whitehouse
FBI charge 11 poker company officials and shutdown three major online poker sites operating in the USA

PREET BHARARA, the United States Attorney for the Southern District of New York, and JANICE FEDARCYK, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the unsealing of an indictment on April 15th charging 11 defendants, including the founders of the three largest Internet poker companies doing business in the United States—PokerStars, Full Tilt Poker, and Absolute Poker with bank fraud, money laundering, and illegal gambling offenses.

The United States also filed a civil money laundering and in rem forfeiture complaint against the Poker Companies, their assets, and the assets of several payment processors for the Poker Companies. In addition, restraining orders were issued against more than 75 bank accounts utilized by the Poker Companies and their payment processors, and five Internet domain names used by the Poker Companies to host their illegal poker games were seized.

Manhattan U.S. Attorney PREET BHARARA said: “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. Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like simply because they can’t bear to be parted from their profits."

FBI Assistant Director in Charge JANICE K. FEDARCYK said: “These defendants, knowing full well that their business with U.S. customers and U.S. banks was illegal, tried to stack the deck. 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 defendants bet the house that they could continue their scheme, and they lost."

Because U.S. banks and credit card issuers were largely unwilling to process their payments, the Poker Companies allegedly used fraudulent methods to circumvent federal law and trick these institutions into processing payments on their behalf. For example, defendants ISAI SCHEINBERG and PAUL TATE of PokerStars, RAYMOND BITAR and NELSON BURTNICK of Full Tilt Poker, and SCOTT TOM and BRENT BECKLEY of Absolute Poker, arranged for the money received 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. Of the billions of dollars in payment transactions that the Poker Companies tricked U.S. banks into processing, approximately one-third or more of the funds went directly to the Poker Companies as revenue through the “rake" charged to players on almost every poker hand played online.

As alleged in the Indictment, to accomplish their fraud, the Poker Companies worked with an array of highly compensated “payment processors"—including defendants RYAN LANG, IRA RUBIN, BRADLEY FRANZEN, and CHAD ELIE—who obtained accounts at U. S. banks for the Poker Companies. The payment processors lied to banks about the nature of the financial transactions they were processing, and covered up those lies, by, among other things, creating phony corporations and websites to disguise payments to the Poker Companies. For example, a PokerStars document from May 2009 acknowledged that they received money from U.S. gamblers through company names that “strongly imply the transaction has nothing to do with PokerStars," and that PokerStars used whatever company names “the processor can get approved by the bank."

By late 2009, after U.S. banks and financial institutions detected and shut down multiple fraudulent bank accounts used by the Poker Companies, SCHEINBERG and BITAR developed a new processing strategy that would not involve lying to banks. PokerStars, FullTilt Poker, and their payment processors persuaded the principals of a few small, local banks facing financial difficulties to engage in such processing in return for multi-million-dollar investments in the banks. For example, in September 2009, ELIE and others approached defendant JOHN CAMPOS, the Vice Chairman of the Board and part-owner of SunFirst Bank, a small, private bank based in Saint George, Utah, about processing Internet poker transactions. While expressing “trepidations," CAMPOS allegedly agreed to process gambling transactions in return for a $10 million investment in SunFirst by ELIE and an associate, which would give them a more than 30 percent ownership stake in the bank. CAMPOS also requested and received a $20,000 “bonus" for his assistance. In an e-mail, one of ELIE’s associates boasted that they had “purchased" SunFirst and that they “were looking to purchase" “a grand total of 3 or 4 banks" to process payments.

The indictment and civil complaint seek at least $3 billion in civil money laundering penalties and forfeiture from the Poker Companies and the defendants. The District Court issued an order restraining approximately 76 bank accounts in 14 countries containing the proceeds of the charged offenses. Pursuant to a warrant for arrest in rem issued by the U.S. District Court, the United States also seized five Internet domain names used by the Poker Companies to operate their illegal online businesses in the United States.

Defendants CAMPOS and ELIE were arrested on the morning of the 15th in Saint George, Utah and Las Vegas, Nevada, respectively. ELIE appeared later before a U. S. Magistrate Court Judge in Las Vegas, Nevada. CAMPOS appears before a U.S. Magistrate Court Judge in Saint George, Utah on April 18, 2011. Defendant FRANZEN is expected to appear for his arraignment on April 19, 2011 in the Southern District of New York. Defendants BITAR, SCHEINBERG, BURTNICK, TATE, TOM, BECKLEY, RUBIN, and LANG are not presently in the United States and have not yet been arrested. The U.S. Attorney’s Office for the Southern District of New York is working with foreign law enforcement agencies and Interpol to secure the arrest of these defendants and the seizure of criminal proceeds located abroad. BITAR, TOM, RUBIN, BECKLEY, CAMPOS, ELIE, and FRANZEN are U. S. citizens.

The most serious charge amongst 9 indictments, that of Money Laundering Conspiracy, which has a potential penalty of 20 years in prison, was made against ISAI SCHEINBERG (Pokerstars), RAYMOND BITAR (Full Tilt Poker), BRENT BECKLEY (Absolute Poker), NELSON BURTNICK (Full Tilt Poker), PAUL TATE (Pokerstars), RYAN LANG (Full Tilt Poker), BRADLEY FRANZEN (Full Tilt Poker), IRA RUBIN (Full Tilt Poker), CHAD ELIE (Full Tilt Poker) and JOHN CAMPOS (Full Tilt Poker).

Full list of charged in U. S. v. Scheinberg et al. (10 Cr. 336)
Defendant Citizenship Residence Age Company
ISAI SCHEINBERG Canada, Israel Isle of Man 64 Pokerstars
RAYMOND BITAR United States California, Ireland 39 Full Tilt Poker
SCOTT TOM United States Costa Rica 31 Absolute Poker
BRENT BECKLEY United States Costa Rica 31 Absolute Poker
NELSON BURTNICK Canada Ireland 40 Pokerstars
PAUL TATE ? Isle of Man ? Pokerstars
RYAN LANG Canada Canada 36 Full Tilt Poker
BRADLEY FRANZEN United States Illinois, Cost Rica 41 Full Tilt Poker
IRA RUBIN United States Costa Rica 52 Full Tilt Poker
CHAD ELIE United States Nevada 31 Full Tilt Poker
JOHN CAMPOS United States Utah 57 Full Tilt Poker

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