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| Online Poker |
Eleven executives at PokerStars, Full TiltPoker and Absolute Poker were charged with bank fraud and money laundering in an indictment unsealed in a Manhattan court. Two of the executives were arrested on Friday morning in Utah and Nevada. Federal agents are searching for the others.
Prosecutors are seeking to immediately shut down the sites and to eventually send the executives to jail and to recover $3 billion from the companies. Prosecutors seized five Internet domain names used by the poker companies. By Friday afternoon Full Tilt Poker's site displayed a message explaining that "this domain name has been seized by the F.B.I. pursuant to an Arrest Warrant."
The online gambling industry has taken off over the last decade, drawing an estimated 15 million Americans to bet online.
In 2006 Congress passed a law prohibiting online gambling. Most of the leading sites found ways to work around the law using foreign banks, but prosecutors allege that in doing so they broke the law.
Federal prosecutors in Manhattan have alleged the pokercompanies, which are located outside the U.S., tried to sidestep U.S. laws prohibiting banks and credit-card issuers from processing gambling payments by disguising billions of dollars from U.S. gamblers as payments to nonexistent online merchants for golf balls, jewelry, flowers and other merchandise.
After U.S. banks and financial institutions began detecting and shut down bank accounts used by the scheme in late 2009, prosecutors allege, a new strategy was developed in which twoonline poker websites allegedly persuaded a few small, local banks facing financial difficulties to process their payments in return for multimillion-dollar investments in those banks.
"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," said Preet Bharara, the U.S. attorney in Manhattan. "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."
Representatives of PokerStars and Full Tilt Poker didn't immediately respond to requests for comment Friday. Contact information for Absolute Poker couldn't immediately be located.
Federal authorities also have filed restraining orders against 76 bank accounts in 14 countries allegedly associated with thepoker companies and others as a part of a separate civil forfeiture action. They are seeking at least $3 billion in civil money-laundering penalties and forfeiture.
Friday's indictment and seizures mark the latest effort by U.S. authorities to crack down on online gambling. In recent years, some executives of overseas online-gambling firms have been arrested when they travel to the U.S.
In the latest indictment, U.S. prosecutors have alleged that thepoker companies recruited third parties to open bank accounts and process "e-check" transactions using phony company names. Four men who allegedly acted as middlemen in collecting payments also have been charged.
About a third of the funds deposited by gamblers went to thepoker companies as revenue, known as the "rake," prosecutors said. A rake refers to a percentage of a poker pot that is collected by a casino or online poker site after a player wins the hand.
Poker fans took to Twitter in droves, worried about the money in their online gaming accounts, fretting that online poker's days were at an end.
"Well the good news is I think I only had about $300 left on theonline poker sites overall," tweeted Jimi Schindler of Madison, Wis. "Maybe I'll see that money?!!?"
