Furthermore, charges of a series of economic crime and fraud were launched at a the companies and their executives, leading to the arrest of some, while others remain sought after outside the U.S.
The developments have led to the blocking of U.S. players on the indicted sites, as well as other consequences in terms of player traffic, live tournaments and TV coverage and non-American competitor sites.
Poker.org here brings you a round-up of the happenings as they unfolded, the involved parts and possible consequences for both players and industry alike.
The DoJ’s indictment was unsealed on Friday afternoon with no previous warning, and almost immediately the effects became clear as the DoJ and the FBI seized the domains of five major online poker sites in the U.S.
The five confiscated domains were those of FullTiltPoker.com,PokerStars.com, UB.com, Ultimatebet.com and AbsolutePoker.com.
Read the full indictment here.
Furthermore, the U.S. Department of Justice issued restraining orders on more than 75 bank accounts used by the online poker companies and theirpayment processors across the world, as well as eleven defendants were named in a press release on Friday.
The eleven defendants are: Founder of PokerStars Isai Scheinberg, Full Tilt Poker executives Raymond Bitar and Nelson Burtnick, Absolute Poker representatives Scott Tom and Brent Beckley, as well as Paul Tate of PokerStars, and Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie and John Campos, who are all identified as being behind illegal payment processors.
The defendants are are each being charged with four counts; violation of the Unlawful Internet Gambling Enforcement Act, operation of an illegal gambling business, conspiracy to commit bank and wire fraud and money laundering conspiracy. Each could face as much as 30 years of prison accompanied by massive fines if found guilty on all accounts.
Additionally, at least $3 billion in money-laundering penalties are being sought, allegedly with $1.5 billion coming from PokerStars, $1 billion from Full Tilt Poker and $500 million from Absolute Poker and UB Poker.
“As charged, 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. Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. 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,” Manhattan U.S. Attorney Preet Bharara said in the above mentioned press release.
“These defendants, knowing full well that their business with U.S. customers and U.S. banks was illegal, tried to stack the deck. They lied to banks about the true nature of their business. Then, some of the defendants found banks willing to flout the law for a fee. The defendants bet the house that they could continue their scheme, and they lost,” FBI Assistant Director-in-Charge Janice K. Fedarcyk added.
Reports has since Friday suggested that the case got underway by the help ofDaniel Tzvekoff, a payment processor who was charged with the same crimes in April last year as the online poker companies today.
Tzvekoff was allegedly processing $523 million illegally through his payment processing company Intabil and was originally denied bail upon his arrest by U.S. authorities. However, according to the reports he was released on bail in August in return for cooperating with federal authorities in the U.S. and it is hinted that he may be a key piece in the DoJ’s efforts to strike down on the named offenders.
Friday’s indictment came in the aftermath of several months of political debate in the States, focusing on the issue on online gambling.
Both federal and intrastate proposals to legalize and regulate online poker have seen the day of light over the past years, with states like California,Hawaii, Florida and New Jersey all presenting bills that could potentially legalize intrastate online poker in one way or another.
However, with a strong brick-and-mortar casino lobby reportedly not being keen on a rising online gambling regime under the current circumstances, many proposals have been met with fierce political resistance.
According to the opponents, gambling should be regulated by the federal government and undertaken by the casinos who can offer experience and expertise, and efforts to introduce regulated online gambling in the U.S. have therefore not been successful. Instead, offshore and foreign operators like PokerStars and Full Tilt Poker have been able to consolidate themselves increasingly as debates continued.
However, as they have done so under what is technically illegal conditions, the Department of Justice on Friday chose to act and indict the named companies for violating the Unlawful Internet Gambling Enforcement Act, which prohibits online gambling companies from knowingly accepting payments from online gambling.
The UIGEA came into effect as part of the SAFE Port Act, which was signed by President George W. Bush on October 13th, 2006.
According to the Act, Title VIII, the UIEGA “prohibits gambling businesses from knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”
The UIEGA Act effectively prohibited online poker companies from processing payments to and from players in the U.S.
This among other things lead then-giant PartyPoker to withdraw entirely from the U.S. market after facing charges similar to those of Black Friday.
PartyGaming founder Anurag Dikshit later settled with U.S. authorities for a $300 million fine and a one-year probation sentence, but in the meanwhile other companies chose to continue to offer U.S. players online poker.
Today, some 5 years later, it is these companies that now face charges for breaching U.S. gambling law, bank fraud and money laundering.
Both sites announced over the weekend that they would take immediate action and prevent U.S. players from playing on the sites until further notice.
Full Tilt Poker on Friday sent out a public response to the allegations brought to the company, arguing that online poker is legal, and that the DoJ’s indictment is based on a controversial view on poker as a game of luck and not skill.
The Ireland-based company further expressed its disappointment with the U.S. Government’s decision to bring the charges, and said that it was “looking forward to Mr. Burtnick’s exoneration.”
PokerStars over the weekend launched a similar message via the PokerStars client confirming that all U.S. players had been banned from the site as a result of the indictment.
Black Friday also had an effect on some of the areas outside online poker which have recently experienced the involvement of especially Full Tilt Poker and PokerStars.
On Saturday, Wynn Casinos announced that the Wynn-PokerStars alliance had been nullified, and soon after this was followed by Fertitta – the owner of the Station Casino chain – who pulled from a similar partnership with Full Tilt Poker, arguing that the deal was contingent on Full Tilt getting a gambling license.
Also live tournament play has been affected, first and foremost Full Tilt Poker’s Onyx Poker Cup, which was put on a hold yesterday until further notice.
ESPN also pulled all of its PokerStars endorsed content from the ESPN.com website, as well as the planned broadcast from the recent North American Poker Tour – also sponsored by PokerStars – was taken off air.
Meanwhile at the tables, Full Tilt Poker and PokerStars have experienced a drop in player traffic numbers, with some reports suggesting as much as 50% in the case of Full Tilt.
As many of the high stakes regulars are Americans, the recent developments have further meant a halt to the nosebleed action, but besides from this, non-U.S. players can continue to deposit, withdraw and play on both PokerStars and Full Tilt Poker without any problems.
Once again, official statements in this regard from CEREUS have still to reach the public.
The drop has also meant that other poker sites are experiencing a boost in traffic numbers, most notably those who continue to offer online poker to U.S. residents.
These include Bodog as well as rooms on the Merge and Cake networks.
The biggest winner so far, however, seems to be Bwin.party whose shares soared by some 35% this morning on the first day of trading since Friday.
888 Holding also witnessed a rise in share value by 15%, while Playtechjumped around 7%.
After Friday and this weekend’s announcements, it remains uncertain what will happen next, but in general only U.S. players will be affected, and all player funds as well as the general existence of the accused site should be guaranteed.
U.S. players are no longer able to play on the indicted sites, but otherwise it is business as usual for all non-U.S. players.
The charges brought to the companies are directed at executives and the companies as such, and neither American players nor non-American are therefore in danger of facing any charges.
With regards to player funds, both Full Tilt Poker and PokerStars have repeatedly guaranteed that all player accounts are safe and that they will remain so in the future.
“As you may have heard, we have had to suspend real money poker services to people based in the U.S. due to legal developments there,” a statement from PokerStars read on Saturday.
“The developments are confined to the U.S. and do not have any impact on your ability to continue using our services. Please be assured player balances are safe. There is no cause for concern. For all customers outside the U.S. it is business as usual.”
UB Poker and Absolute Poker have yet to react, but is expected to do so during this week.