April 16, 2011 -- The owners and founders of the three largest online gambling sites in the United States have been indicted and charged with bank fraud, money laundering and illegal gambling offenses.
New York prosecutors say they've issued restraining orders against more than 75 bank accounts in 14 countries used by the poker companies, which they say will interrupt the illegal flow of billions of dollars, according to The Associated Press.
Eleven individuals were charged over their involvement running PokerStars, Full Tilt Poker and Absolute Poker for violating the 2006 Unlawful Internet Gambling Enforcement Act.
The Justice Department has filed a civil complaint for money laundering that seeks $3 billion being held by the companies.
According to a federal indictment, the owners of the companies sought ways to get around restrictions placed on U.S. banks that prohibited them from handling financial transactions connected to online gambling.
"Some of the defendants found banks willing to flout the law for a fee," Janice Fedarcyk, the assistant director in charge of the FBI's New York Field Office, said in a prepared statement. "The defendants bet the house that they could continue their scheme, and they lost."
Federal prosecutors and FBI agents also have obtained a district court order to block 76 bank accounts and five Internet domain names associated with the poker websites.
"This is a potentially game-changing moment for the online poker industry, as PokerStars and Full Tilt are, by quite some distance, the two largest operators not just in the U.S., but globally," James Kilsby, Americas editor with the business intelligence service GamblingCompliance, told ABC News.
"Previous DOJ enforcement efforts have honed in on sports betting operators and payment companies," Kilsby said. "Meanwhile, some of the poker operators themselves have claimed that U.S. gambling laws do not apply to poker. It seems clear from today's action that the Justice Department doesn't agree."
Isai Scheinberg and Paul Tate of PokerStars, Scott Tom and Brent Beckley of Absolute Poker, and Raymond Bitar and Nelson Burtnick of Full Tilt Poker, the indictment claims, engaged in a scheme "to deceive United States banks and financial institutions into processing billions of dollars in payments for the poker companies, by, among other things, arranging for the money received from United States gamblers to be disguised as payments to hundreds of non-existent online merchants and other non-gambling businesses."
The indictment alleges the poker-company owners "relied on highly compensated third party payment processors ... who lied to United States banks about the nature of the financial transactions they were processing and covered up those lies through the creation of phony corporations and websites to disguise payments to the poker companies."
The allegedly phony websites included online flower delivery shops and pet supply stores that would handle credit card payments to get funds from U.S. customers.
The 52-page indictment also alleges that conspirators used electronic checks to try and disguise their payments.
Some Indicted Over Alleged Role Processing Payments
The indictment identifies four individuals as the payment processors -- Ryan Lang, Ira Rubin, Bradley Franzen and Chad Elie.
Franzen was arrested March 16 in Chicago on a previously issued criminal complaint and is scheduled to have an arraignment in New York on Monday.
Elie was arrested in Las Vegas, where he was slated to appear before a federal magistrate. An attorney for Elie could not be located by ABC News.
The owners and operators of the websites all are outside of the United States and were not in custody. PokerStars is registered in the Isle of Man, Full Tilt is registered in Ireland and Absolute Poker and its associated companies originally was founded in Costa Rica but is now registered in Antigua.
Justice Department officials said they were in contact with local law enforcement agencies in those countries and Interpol to seek their arrest.
"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," said Preet Bharara, the U.S. attorney for the Southern District of New York, where the case was filed.
Also indicted was John Campos, vice chairman of the board at SunFirst Bank, based in St. George, Utah, which allegedly processed more than $200 million for Full Tilt and PokerStars.
Campos was arrested this morning in St. George, Utah.
Members of the conspiracy allegedly agreed to invest $10 million in SunFirst, which gave them a 30 percent stake in the bank, according to the indictment. In April 2010, Campos also allegedly sought a $20,000 bonus that he allegedly called an "invoice" for "Check and Credit Card Processing Consulting."
"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," Bharara said in a prepared statement. "We allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud."
The indictment alleges that Elie was deeply involved in negotiating with banks to secure processing transactions.
"Chad Elie ... and his associates were, however, able to persuade the principals of certain small, local banks that were facing financial difficulties to engage in such processing," the indictment reads. "In exchange for this agreement to process gambling transactions, the banks received sizable fee income from processing poker transactions as well as promises of multi-million investments in the banks from Elie and his associates."
With the seizure of the websites, it is unclear what will happen to the funds of U.S. players who have accounts on the websites. In 2007, NETELLER, a firm that handled online gambling transactions, was charged by prosecutors from the New York U.S. Attorney's Office but entered into a deferred prosecution agreement with the U.S. government and returned such funds to their owners.
The issue of Internet gambling has been debated on Capitol Hill recently, with legislation being proposed both for and against it.