Three major Internet poker website holders and a number of their financial processors were recently charged with conspiracy to commit money laundering, conspiracy to commit bank fraud, and violations of United States anti-gambling laws. The companies, Full Tilt Poker, Absolute Poker, and PokerStars, are all based overseas, but have been providing Internet gambling services to US customers. The charges were brought by the US Attorney’s Office in Manhattan.

Four of the nine counts are charges arising out of alleged violations and conspiracies to violate the Uniform Internet Gambling Enforcement Act (UIGEA) and three counts are for operating an illegal gambling business. The UIGEA makes it a federal crime for gambling businesses to “knowingly accept” most forms of payment in connection with the participation of another person in unlawful Internet gambling. Shortly after the enactment of the UIGEA, Absolute Poker announced that “‘the US Congress has no control over’ the company’s payment transactions.” Absolute Poker, along with the other defendant companies continued to accept payment for Internet gambling from US customers. Each of the illegal gambling charges carries a possible penalty of five years in prison, a fine of $250,000, and three years of supervised release. A conviction for operation of an illegal gambling business may also result in forfeiture of all proceeds received as a result of the crime.

The indictment includes one count of conspiracy to commit bank fraud. This is a result of the allegations that the companies attempted to use false company names and intermediary “payment processors” to hide the nature of their transactions from financial institutions. According to the US Department of Justice (DOJ) press release, when some banks realized what was happening and closed the fraudulent accounts, the companies paid smaller banks to process the payments. The “payment processors” and the participants from those smaller banks are defendants as well. The final count, conspiracy to commit money laundering, arose from the same set of facts. The DOJ seeks approximately $3 billion in connection with the money laundering charges and the court has frozen approximately 76 bank accounts in 14 countries.

In addition to the nine counts above, the DOJ seized domain names owned by the defendants, but access to “pokerstars.com” and “fulltiltpoker.com” was restored to facilitate the withdrawal of funds by US customers. When visiting Full Tilt Poker’s website, a notice from the Federal Bureau of Investigation (FBI) and the DOJ indicates that the website has been seized due to the investigation and pending charges in the US District Court for the Southern District of New York. The only activity currently permitted on the site in the United States is to permit users to withdraw funds held by the companies. In addition to the notice from the FBI and the DOJ, the PokerStars website also indicates that it is no longer accepting “real money” bets from US customers, but will continue to permit “play money” bets. The Absolute Poker domain name is not active as an agreement has not yet been reached between the company and the DOJ.

These recent charges brought against Full Tilt Poker, Absolute Poker, and PokerStars are a reminder that the US government does not permit online gambling for US residents in the United States. Through this action, the DOJ is communicating its commitment to enforce the UIGEA and similar laws. Companies involved in Internet gambling and payment processing should be aware of the UIGEA and these recent charges.

Arent Fox is continuing to monitor issues related to Internet gambling. Please contact Anthony V. Lupo, Sarah L. Bruno, or Eva J. Pulliam with questions.

Anthony V. Lupo
lupo.anthony@arentfox.com
202.857.6353

Sarah L. Bruno
bruno.sarah@arentfox.com
202.775.5760

Eva J. Pulliam
pulliam.eva@arentfox.com
202.857.6323