Update: Third Party Payment Processor Sentenced to Jail Time for Processing Internet Poker Company Funds
On October 3, 2012, Judge Lewis A Kaplan of the United States District Court for the Southern District of New York sentenced Chad Elie to five months in prison for his role in facilitating the processing of payments for three online poker companies. A copy of the Department of Justices press release announcing the sentencing can be read here.
As we previously reported, the poker companies, Fill Tile Poker, Absolute Poker, and PokerStars, were shut down by the FBI on April 15, 2011 as part of an investigation and eventual indictment of 11 people for various gambling related charges including violations of the Unlawful Internet Gambling Enforcement Act (“UIGEA”) 31 U.S.C. §§ 5361-5366, bank fraud 18 U.S.C. § 1344, wire fraud 18 U.S.C. § 1343, and money laundering 18 U.S.C. § 1956. A copy of the indictment can be read here.
As a result of the indictment, PokerStars and Fill Tilt reached a $731 million settlement with the federal government. Additionally, several top executives have pleaded guilty for their roles in the alleged UIGEA, bank fraud, and money laundering conspiracy. More information on these guilty pleas and the PokerStars settlement can be read in our prior reports here, here, and here.
According to authorities, the companies used third party payment processors to disguise financial transactions between the companies and U.S. players so that the transactions would appear to be unrelated to online gambling. The third party payment processors would then lie to U.S. financial institutions about the source of the funds processed, often times facilitated by the creation of nonexistence online companies and phony websites.
Authorities alleged that between 2008 and 2011, Elie served as a payment processor for each online poker company. Authorities further allegedly that in order to conceal the sources of the funds he was processing, Elie falsely represented to U.S. banks that he was processing “payday loans” and payments for online club memberships. As a result of these allegations, Elie pleaded guilty to participating in a conspiracy to commit bank fraud and to operating illegal gambling businesses.
In sentencing Elie to five months in prison, rather than the federal Probation Departments recommended sentence of probation, six months home confinement, and community service, Judge Kaplan found that the evidence against Elie indicated that he continued to process payments for the poker companies despite his knowledge of the federal investigation and arrests of other payment processors and company executives. In addition to prison, Elie was ordered to two years of home confinement and was ordered to forfeit $500,000 to the United States. Elies sentencing highlights the potential consequences and criminal penalties payment processors can face when processing ill-gotten assets on behalf of others.
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 Ittleman David and Josephs experience litigating white collar criminal cases, please contact us at firstname.lastname@example.org