FBI charges three largest internet poker firms with fraud

The FBI has indicted founders of PokerStars, Full Tilt Poker and Absolute Poker, who face up to 20 years in prison if convicted.

Poker site operators Raymond Bitar and Nelson Burtnick of Full Tilt Poker; Isai Scheinberg and Paul Tate of PokerStars; and Brent Beckley and Scott Tom of Absolute Poker were all charged with violating the 2006 Unlawful Internet Gambling Enforcement Act and other laws. Others charged were Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie and John Campos.

The indictment and civil complaint seek three billion dollars in money laundering penalties and forfeiture from the poker companies and the defendants.

In addition, restraining orders have been issued against more than 75 bank accounts in 14 countries utilised by the poker companies and their payment processors, while five internet domain names used by the companies to host their illegal poker games have been seized.

"As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some US banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits.

"In their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud," Manhattan US Attorney Preet Bharara said in a statement.

Those charged face five to 20 years in prison and fine of USD 250,000 to USD 1,000,000 if convicted. The US also filed a civil money laundering and forfeiture complaint against the poker companies, their assets and the assets of several payment processors for these companies.

According to the indictment and civil complaint unsealed today, the poker companies allegedly used fraudulent methods to circumvent federal law and trick US banks and credit card issuers into processing payments on their behalf.

Scheinberg and Tate of PokerStars, Bitar and Burtnick of Full Tilt Poker and Tom and Beckley of Absolute Poker arranged for the money received from US gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewellery and golf balls.

Of the billions of dollars in payment transactions that the poker companies tricked US 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.

By late 2009, after US 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, the indictment said.