BETonSPORTS Folds US Hand

Red Herring reporter, Cassimer Medford, compares BetonSports with another company, BetCorp, and why the later found itself in a similar situation as BoS but hasn't missed a beat.  So why did BetonSports close?



In an intriguing development, BETonSPORTS said Friday it is throwing in its hand and closing its operations in both Costa Rica and Antigua, effectively ending the online gambling firm’s U.S.-facing business.

In a statement attributed to the board, the company said it had thoroughly reviewed its options and no longer considers its U.S. business to be viable.

The company folded its hand completely, making no mention of issues relating to the legal jurisdiction of the U.S. Justice Department over bets transacted on servers based in foreign countries.

The fact that BETonSPORTS did not stake out a defensive position leaves it open to charges that it either knowingly broke U.S. law, or was unaware of the fact that it had failed to pay taxes on billions of gambling receipts in the United States.

“Most online gambling companies would not have folded completely like BETonSPORTS,” said Christopher Costigan, president of Gambling911.com, a gambling research and marketing firm. “Worldwide Telesports continued to operate after two of its executives were indicted.”
 

In May the U.S. Department of Justice unsealed an indictment against Worldwide Telesports for laundering more than $250 million worth of revenue from U.S. bettors.


Executives William Scott and Jessica Davis took off, and the stock of parent company Betcorp fell but later recovered the lost ground. Both Mr. Scott and Ms. Davis are fugitives. They are believed to be in Antigua.


“BETonSPORTS is not Betcorp though,” said Mr. Costigan. “The company’s management is completely disheveled without David [Carruthers] and Gary Kaplan [BETonSPORTS’ fugitive founder]. The current management is just trying to cover themselves.”


The company’s U.S. business, which generates the vast majority of its revenue, has been shuttered since U.S. law enforcement issued a temporary restraining order against the company and arrested CEO David Carruthers three weeks ago (see Feds Deal Web Gambling Blow).


Tax Evasion

Mr. Carruthers was nabbed in Dallas by U.S. law enforcement while in transit between the United Kingdom and Costa Rica. Mr. Carruthers, a British citizen, is being held as a possible flight risk. He has to answer charges that BETonSPORTS failed to pay taxes on $3.3 billion collected from U.S. bettors.


BETonSPORTS fired Mr. Carruthers less than three weeks ago, saying he had become ineffective because of his detention by U.S. law enforcement (see BETonSPORTS Fires Jailed Chief).


The board of BETonSPORTS said it will cease its U.S. operations, pay its staff and creditors “in an orderly manner, and repay balances due to U.S. customers in an orderly manner.”


Paying staff, creditors, and customers will take time, the statement said, because the company was unsure of the state of its legal access to its bank accounts and other financial resources.


“It also will depend on the company’s ability to realize further and sufficient funds from its assets and operations outside Costa Rica and Antigua and to earn sufficient profits from operations which are not U.S. facing,” the statement said.


The company will attempt to bolster the Asian piece of its business. Last year BETonSPORTS took in about $20 million in wagers from its Asian operations.

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Cassimer Medford, www.redherring.com

Originally published August 11, 2006 3:53 pm EDT