More Online Gambling Indictments Inevitable

An industry that sits on pins and needles is all but assured that additional indictments against online gambling operators and companies will be forthcoming, more sooner than later if past history is any indication.  

On April 15, three of the world’s largest US-facing Internet poker rooms – PokerStars, Full Tilt Poker and UB.com - were indicted and charged with bank fraud and money laundering.  The charge related to violating the Unlawful Internet Gaming Enforcement Act (UIGEA), which carries with it a mere 5-year reduced sentence, seemed like an afterthought at the time. 

The biggest assault against the industry prior to April 15 occurred March 5, 1998.  That’s when the US Attorney’s Office in the Southern District of New York filed a complaint against 21 offshore sports betting operators for violation of the Wire Act, 18 U.S.C. § 1084.  They would go on to become known as the “Internet 21”.  A number of the companies charged continued to prosper long after the charges were handed down:  World Sports Exchange, World Wide Tele Sports and BetRoyal.com (then known as Galaxy).

Only Jay Cohen, founder of World Sports Exchange, decided to take on the US Government and fight the charges.  Despite having famed attorney Ben Brafman representing him (Brafman is Dominique Strauss-Kahn’s attorney), Cohen was eventually found guilty of violating a 1960’s wire act.  He also lost on appeal and served nearly 2 years behind bars.  Most of the other defendants either received a slap on the wrist or remain on the lam to this day.   

Additional charges were filed against about a half dozen other operators and companies approximately one month later, all in connection with the same investigation.  The investigation ultimately wrapped up as the Government focused in on prosecuting Jay Cohen. 

“It would probably be safe to say that the US Attorney’s Office in the Southern District of New York will have its hands full trying to prosecute the principals in Full Tilt Poker, PokerStars and UB.com in addition to collecting fines,” noted Chris Costigan, Gambling911.com’s founder and publisher. 

Because the indictments against PokerStars, et al. were superseding, the evidence overwhelmingly suggests that one (and quite possibly two) more complaints will be filed in connection with this matter.

One industry observer, who wished not to be named, was quick to point out the apparent “leap over” referencing both Daniel Tzvetkoff and Douglas Rennick, cooperating witnesses who processed for the gambling firms.

“People have already noted that the case number for the (Daniel) Tzvetkoff indictment (10 Cr. 333) is the same as the case number for the April 15 indictments against the online poker operators, with one major exception. The “Black Friday’s” indictment is listed as a "superseding indictment" with the case number S3 10 Cr. 333,” the industry observer noted. 

“This indicates to me that there are at least two additional superseding indictments relating to this case number that, to my knowledge, have not been unsealed. I have heard at least one source indicate that the (Douglas) Rennick indictment was the first superseding indictment for 10 Cr. 333, but the copy that I have shows that Rennick's indictment case number is 09 Cr. 752 (although it's possible that there is a new indictment case number for Rennick)”.

Costigan Media, which owns the Gambling911.com website, was awarded access to prior seizure warrants related to the investigation into Full TIlt Poker and PokerStars. The Honorable Laura Taylor Swain found in favor of Costigan Media's Motion to Intervene nearly two years ago.  As part of her ruling, Costigan Media (and Gambling911.com) was supposed to receive notice regarding critical developments in the ongoing case. 

Costigan noted:  “Contrary to some of the wild theories we are reading out there, the US Government will not just swoop down on any and all US-facing online gambling companies overnight, or even in a year for that matter.  The process is slow and arduous.  In the case of the aforementioned investigation, we are talking nearly 5 years of leg work.  Any forthcoming charges will likely have been three to five years in the making."

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- Alejandro Botticelli, Gambling911.com