Department of Justice Shuts Down Three of the Largest Internet Poker Sites in US, Charge Owners with Unlawful Internet Gambling, Fraud, Money Laundering, and Seek to Recover $3 Billion in Civil Penalties.
On April 15, 2011, federal prosecutors indicted eleven people in connection with their involvement in running PokerStars, Full Tilt Poker, and Absolute Poker, three of the largest internet poker sites in the United States. The Department of Justice has charged these individuals with multiple charges including violations of the Unlawful Internet Gambling Enforcement Act (“UIGEA”), conspiracy to commit bank fraud and wire fraud, operating an illegal gambling business, and money laundering conspiracy. A copy of the indictment can be read here.
Additionally, the FBI obtained a court order to block seventy-six bank accounts and five internet domain names associated with the poker websites. As of April 15, 2011, the FBI had shut down two of the sites, Full Tilt Poker and Pokerstars and were working to shut down Absolute Poker. The Department of Justice is also seeking $3 billion in civil money laundering penalties.
Prosecutors allege that, in an effort to get around the prohibitions on unlawful internet gambling under UIGEA, the defendants engaged in a fraudulent scheme to deceive US banks and financial institutions as to the true identity of the funds being transferred and payments being processed. Authorities allege that the companies used highly compensated third party payment processors to disguise money received from US poker players as payments to non-existent online merchants and phony companies. Authorities alleged that the phony websites, ranging from flower shops to pet supply stores, were all created to handle credit card payments to get funds from US players. A copy of the Department of Justices press release can be read here.
Though the law does not specifically address internet pay for play poker sites, UIGEA defines “unlawful internet gambling” as: 1) placing, receiving or transmitting a bet, 2) by means of the Internet, even in part, 3) but only if that bet is unlawful under any other federal or state law applicable in the place where the bet is initiated, received or otherwise made. However, since UIGEAs passage, debate has raged over whether pay for play poker qualifies under the act with poker sites and federal prosecutors reaching opposite conclusions. Internet poker site operators have argued that UIGEA does not apply because poker should be classified as a game of skill, not a game of chance, and thus beyond the reach of UIGEA.
The indictments may mark a shift in the strategies of federal prosecutors in dealing with internet pay for play poker websites. As we previously reported, prosecutors have previously focused their efforts on payment processors, the financial outfits that move money between online poker sites, their players, and the banks, rather than internet poker sites directly. However, with these new indictments, the Department of Justice has made clear its belief that internet pay for play poker sites do, in fact, violate UIGEA.
If you have questions pertaining to UIGEA, the BSA, anti-money laundering compliance, and how to ensure that your business maintains regulatory compliance at both the state and federal levels, or for information about Fuerst Ittlemans experience litigating white collar criminal cases, please contact us at email@example.com.