America's War on Internet Gambling Hit and Miss
While the internet gambling community is left in another tailspin following Monday's arrests of two founding principals of the immensely successful eWallet solutions company, NETeller, others are left wondering what impact this will have on the web gaming world, if any.
Stephen Lawrence and John Lefebvre were charged Tuesday with conspiracy in connection with a multibillion-dollar money laundering scheme linked to internet gambling. The two NETeller founders were arrested during the morning hours of Monday, one in the US Virgin Islands, the other in Malibu, California.
Gambling911.com first braced customers of NETeller Monday evening, several hours before the company issued an official statement and nearly 24 hours before the FBI announced the charges.
"I am pulling all my funds out of NETeller now," an antsy gambler told Gambling911.com late Monday.
But the company had already been inundated with similar withdrawal requests and processing of payments had come to a near halt by midnight.
Many industry analysts agree the impact here could be substantial should NETeller choose to leave the US market. At press time Tuesday night, there was no indication that the company would be departing the US market, though many suspect this to be an inevitable scenario. NETeller, which is listed on the London Stock Exchange, suspended shares temporarily Tuesday.
The case against Lawrence and Lefebvre is the latest in a series of events that has delivered a near crippling blow to internet gambling. But not all the indictments have had a lasting impact.
Hit and Miss
In July of this past year, BetonSports.com CEO, David Carruthers, was arrested while changing planes in Fort Worth, Texas. He and nearly a dozen others were indicted on various charges ranging from money laundering to tax evasion. BetonSports reacted by shutting down what was then the second largest online sports betting firm catering to the North American market. They promptly fired Mr. Carruthers.
But Carruthers, who remains under house arrest awaiting trial outside of St. Louis, Missouri, has pleaded "Not Guilty". Those close to Carruthers have told Gambling911.com he would never have shut down BetonSports.
The actions of its Board of Directors left an industry in disarray at the time.
But only two months prior, a separate indictment was lodged against BetWWTS.com and its founding principals, William Scott and Jessica Davis. BetWWTS.com had been incorporated into Australian publicly traded BetCorp through a reverse acquisition that lead to Scott becoming one of the firm's biggest shareholders and Davis retaining a position with the company.
Scott and Davis were both indicted twice in 1998 for charges related to violating a 1962 "Wire Act".
Following the May 2006 indictment - which is prominently mention in the complaint against NETeller's two founders - BetCorp continued to operate without missing a beat. The company eventually pulled out of the US market in October following the passage of a law that sought to curb some forms of online gambling via banking instruments. Bodog.com acquired BetCorp that same month.
In August, the state of Louisiana issued an arrest warrant for Peter Dicks, a one time executive with Sportingbet.com. New York State, which detained him during a routine check at Queens JFK Airport, refused to extradite Dicks to Louisiana. He was quickly set free.
NETeller's Next Move
Company issued releases suggest that NETeller is attempting to distance itself from both Stephen Lawrence and John Lefebvre, though the two were clearly among NETeller's largest shareholders.
There are various mindsets that come into play here.
A complete pullout from the US market at this juncture in time would support the US Justice Department's notion that NETeller has been engaging in "illicit" activities on American soil. If NETeller truly believes they have done nothing wrong, they will continue to operate business as usual.
NETeller has long argued that they act as a third party intermediary between online gambling companies and their customers and that they themselves do not take bets.
On the other hand, the US government argues that NETeller has facilitated such transactions.
Most industry analysts agree that NETeller leaving the US market would have a significant impact on operations as a number of internet gambling companies have become dependent on the payment processor in recent years.
"If NETeller stops taking US funds it is going to make life difficult for operators, What are 'we' to do? Cut checks to customers on the bank of panama?" one operator asked.
For the average online gambler and someone new to the world of betting over the Web, however, a departure by NETeller will hardly make a dent as most of these individuals tend to join using credit cards and electronic checks.
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Christopher Costigan, www.gambling911.com
Originally published January 16, 2007 11:02 pm ET
