I was all set to fire off a long-winded and rushed post here on Friday evening, following the momentous events earlier that day in the online poker world. And then I thought better of it; I decided to wait a day or so, take the time to get a better feel of the situation, then try to write something that had a little bit more thought and a little bit less panicked reaction within it.
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It’s hard to imagine that if you follow this blog that you don’t know what this refers to, but just in case: On Friday the Southern District of New York of the United States Department of Justice indicted eleven seemingly prominent poker officials on charges including wire fraud, banking fraud, money laundering, conspiracy, and violations of the 2006 UIGEA (Unlawful Internet Gambling Enforcement Act). The eleven people indicted were either high-ranking officials of or working on behalf of the three largest US-facing online poker sites — PokerStars, Full Tilt Poker, and Absolute Poker. Absolute Poker is technically the parent company of the Cereus Network, and thus this company also includes UB.com, the old UltimateBet, which it acquired via merger about four and and a half years ago.
Black Friday FBI / DOJ Domain Seizure Image
A couple of the indictees directly connected to a bogus-looking bank-investment in Utah were detained by authorities on Friday, and a third is supposed to surrender tomorrow. The remaining eight of the eleven, including all of the big corporate names, reside outside the US, meaning that the US has to attempt extradition as they pursue the criminal complaints.
In direct response to this, PokerStars and Full Tilt have immediately suspended all real-money poker games for US citizens. The Cereus Network, meaning Absolute Poker and UB, continues to allow Americans to play. That might change or might not; Cereus is far more antagonistic towards US authorities than Stars or Tilt, although this probably does put the kibosh on a recent agreement wherein UB.com began to sponsor recent Heartland Poker Tour events. More importantly, the USDoJ action has already scuttled the recent and very large agreements between PokerStars and Wynn Entertainment, and between Full Tilt and Station Casinos’ new e-gaming entity. Add in the recent Washington D.C. legislation which went into effect and allowed the District to offer online poker by default, and this looks very much like a “the time is now” moment to counterstrike by the US feds.
In truth, however, the DoJ’s action has been planned for some time. The SDNY division of the DoJ is the same one that’s been behind all the shutdowns of online payment processors in the last several years, as well as the charges against a handful of online-gambling merchants that came within fire range for non-poker reasons, as in the BetOnSports mess. The filing of the indictments of America’s traditional tax day, April 15th, seems very intentional, in much the same way that the DoJ made many of its moves against the payment processors in the week prior to the Super Bowl in other years. Since many of those processors were also servicing online-sportsbook ventures, the immediate effect of those shutdowns was also obvious.
For evidence as to how coordinated this must have been, one need look no further than the seizures of the related domain names, including pokerstars.com, fulltiltpoker.com, absolutepoker.com, ub.com, and at least one other — probably fulltilt.con or ultimatebet.com. (Both now redirect to the FBI’s/DoJ’s “seizure” page. (Note also that this does not mean that the client software does not work. It does, though it’s a moot point for Americans; you can’t play on Stars or Tilt right now because it’s been disabled by those companies.) But… all those domains are housed by international Internet registrars, and not through United States-based services, although the central coordinating service is housed in the US. There are some questions as to whether such a seizure of domain names owned outside the US may violate international law, but it is a small technical matter, not worth pursuing here among these other, weightier matters. That the US often acts as if it owns the planet is something that non-Americans take for granted, anyway.
What poker players need to understand is that nowhere in any of the court documents that I’ve seen is the DoJ making the claims that the eleven people named were indicted for running a US-facing poker site. Not even now, with this, are the feds seemingly wanting to wage that war. What this is instead is an opportunistic move citing violations of banking laws, as a means to accomplish what the DoJ claims. They’d like you to believe online poker is illegal; this is simply not true. There is even court rulings in the favor of poker being a skill based game and not subject to online gambling laws. Just like the best penny auctions have made the case that they are not online gambling even though paypal has stopped processing payments at many of the top online penny auction sites claiming that they are gaming sites. Time will tell on both.
There are dozens of big-name players who have been directly attached to ownership stakes in these various sites, and a whole bunch of them, particularly the Full Tilt boys, have already had their names splashed inside of US legal documents as a result of the Clonie Gowen case and others. And yet no famous player has been named in this criminal complaint. Instead the allegations center solely on banking and payment-processing matters. While I recognized the names of six of the indictees, there are really only four names that the poker player with a casual interest in the industry might have heard before:
- Isai Scheinberg, the patriarch of the Israeli Scheinberg clan that founded PartyPoker;
- Ray Bitar, the co-founder of Full Tilt;
- Scott Tom and Brent Beckley, the stepbrothers who are two of the four “frat boy” co-founders of Absolute Poker.
It appears each of these four (along with the other seven), are specifically mentioned in documentation connected to the banking aspects of the case, hence their inclusion here.
So what’s the real scoop here?
My top-level reads of the first court documents here center on two real matters. First, the DoJ alleges that these sites, through various intermediaries, defrauded US banks and violated banking practices by opening fraudulent US-based accounts, often with monikers that would lead a casual investigator to believe that the businesses had nothing to do with poker. One of the names floated had to do with the online sale of golf balls (LOL — wonder how that works with six- or seven-digit wire transfers), and the others were similarly entertaining. The other matter, and for this non-lawyer the more serious of the two, has to do with alleged investments into a Utah bank in search of a “friendly” banking base from which to do payments to Americans, and the related attempt to find and invest in three or for more similar banks. That’s a dicey matter.
However, there’s a legal Catch-22 here that the lawyers are certainly going to have to explore as these case move forward. If online poker is not explicitly illegal, and the failures of Stars and Tilt to obtain US-based banking avenues can be directly placed on the DoJ’s efforts to unjustly include online poker in sweeps that also targeted forms of online gambling that are clearly illegal, then can Stars and Tilt be prosecuted for taking proactive measures in their attempts to continue to operate what they claim is a fully legal enterprise? That’s going to be the key question when the trials or DoJ-office negotiations come, and I don’t presume to know the answer to that one. Both Stars and Full Tilt can be shown to have made reasonable attempts to adhere to American law as they understood it, with this banking thing in Utah the big curious question mark in the matter.
Cereus is another matter. Absolute Poker was among the first sites to include blackjack as an online offering, and UltimateBet (UB.com’s precursor) did the same. Blackjack is a house game and is a rather more clear violation of American anti-online gambling statutes, and its original inclusion as an offering by these sites was a matter of contention within these companies. However, the Cereus Network has not shown any signs as I write this of departing the US market; the core owners have long since taken the Calvin Ayre approach, moved to Central America and the Caribbean, and issued a permanent “Fuck you!” to the US.
Anyhow, casual players are probably going, “Oh my God, the sky is falling, what do we do now?”
Well, we wait. And we understand that this day has always been going to happen; it’s only been a matter of when, not if. The DoJ has been trying to isolate Stars and Tilt and forcibly bring them within US jurisdiction and to have their revenue streams subject to US corporate taxation, and this has long been one of the secret battlegrounds. Stars and Tilt want to formally recognized in the US, too, but the USDoJ wants blood money, and they have precedent in the $300 million they were able to extort, errrm, negotiate, from UK-base PartyGaming a few years back.
The civil complaint attached to the indictments also shows that the feds are seeking $3 billion in restitution for the recent years of service offered to US poker players. I’m not sure what “blood money” is defined as in the dictionary, but I think three billion qualifies.
From this writer’s perspective there’s little doubt that Party has been supportive of the DoJ’s efforts to put Stars and Tilt and others out of the US market, so that they themselves can attempt to reclaim the standing as top banana in a refigured market. And this comes despite the fact that Party intentionally offered casino-style games to Americans back in 2005 and 2006, thereby given US legislators ample fuel to ramp up the UIGEA legislative fires. Party comes off at the very least as being Machiavellian, perhaps even Pyhrric, in willing to help torch the US market to reclaim a spot near center stage.
Of course, lots of fingers are being pointed at Full Tilt and Stars as well. Those sites used the services of many fly-by-night payment processors in an attempt to keep the money train going to and from America. One of those processors was a young Australian entrepreneur named Daniel Tzvetkoff, whose Intabill enterprise enjoyed a meteoric rise and a just-as-sudden collapse, crippled by all accounts by Zvetkoff’s own graft, internal fraud and mismanagement. But the “lying down with dogs, getting up with fleas” axiom holds true here as well. Full Tilt execs are believed to be the ones who tipped off US authorities to Tzvetkoff’s presence at a Las Vegas business symposium a couple of years back, and Tzvetkoff was quickly arrested and charged with money-laundering crimes.
However, Tzvetkoff was quickly released just a few months later after reportedly turning states evidence against the very sites that his business supported, including Stars and Tilt. It seems that this tit-for-tat affair has come full circle, with American poker players the real loser.
So… you’re an American who plays online poker. What do you do now?
In the short term, meaning the next year or so, you’re very likely not going to be able to play on Stars or Tilt, nor are you likely to be able to get your money off of those sites, whether via direct withdrawal or transfer to a non-American third party. I’d suggest not to waste your time even trying. If matters such as the NeTeller fiasco are any indication, your funds are there but are, for now, inaccessible.
You can try playing on any of the smaller sites that still accept Americans, too. Which brings me to a closure for this long-winded post.
One of the things I’ve ranted about in blog posts of yore was the insistence of Stars, Tilt and a few others to conduct their banking business with Americans from a US-located core. They’ve done this out of concern for their whales, those high-dollar players that want to move lots of money around and do it quickly. They’ve done it despite the fact that instruments of payment such as good old-fashioned paper cheques are not rendered illegal by the UIGEA, this regardless of any claims made about online poker’s own status.
It’s just that paper checks take a lot longer to clear.
I’ve sampled a lot of sites over the years, at micro and small stakes, and one middling network I’m fond of uses paper cheques as one of its methods for withdrawals made by players, and those payments are processed by banks outside the US who nonetheless issue these cheques payable in US funds. To the best of my knowledge this is totally legal, and I’ve never understood why all sites haven’t at least included this as an option. Stars and Tilt, by most accounts, have seemed insistent on finding a cheque issuer inside the US. That may or not be legal, again dependent on what the courts rule as online poker’s status amid these other banking charges, but to my way of thinking it has always posed an unnecessary legal risk.
And remember, playing online poker has nothing to do with the UIGEA. I am not a lawyer, but “poker” appears nowhere within the language of the UIGEA, and I’ve suffered through every word of that legislative turd more than once. I don’t worry about playing the game, but of course finding sites where I can safely play is again a cause for concern. There are still some good sites out there, but when the US forces reputable sites such as Stars and Tilt to suspend operations, it opens the door for less-reputable concerns to step into the space left vacant by their (hope-it’s-temporary) departure.
