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Beneficiaries of Friday’s Online Poker Busts Already Becoming Clear

Written by:
C Costigan
Published on:
Apr/17/2011

Who were the major beneficiaries of this past Friday’s indictments and subsequent shutdowns of the three largest US-facing online poker rooms?

An immediate victor in all of this was the United States Justice Department, which for years has been trying to go after the biggest fish in online poker, PokerStars and Full Tilt Poker.  This became abundantly clear in Costigan Media’s (Gambling911.com parent company) filing of a Motion to Intervene as a means of gaining access to sealed affidavits against payment processors doing business with the two Web poker room behemoths back in 2009.   

Costigan Media was awarded such access by the Honorable Judge Laura Taylor Swain, but with one caveat:  Information and names pertaining to ongoing investigations were to remain redacted as not to jeopardize such cases. 

As a result, much of what appeared on the released court documents was blackened out (click on the pdf file link at bottom of this article), with one very significant exception.  Both PokerStars and Full Tilt were mentioned by name. 

It became abundantly clear that the US Justice Department had two key targets they were in hot pursuit of.  The fact that defendants named in the original court documents (payment processors like Douglas Rennick) were later being let off essentially with a slap on the wrist after being told their crimes could result in up to 75 years in prison, made it almost inevitable that prosecutors had much bigger fish to fry. 

Legal representation for both companies played off the initial stages of the investigation, suggesting that defendants like Rennick would stand up and fight, which they did for approximately a month before rolling over.  Rennick (facing a few dozen years behind bars) found himself let off with a small fine and 6 months probation. 

As we can see after reviewing Friday indictments, simple violation of the Unlawful Internet Gaming Enforcement Act (UIGEA) acts as a rather insignificant deterrent even for the smallest of online gambling companies.  Five years maximum behind bars and a small fine (in comparison to the overall revenue generation from what we already know is a multi-billion industry).  Let’s face it, the $250,000 penalty for a Full Tilt Poker or PokerStars is like paying a parking ticket off for the rest of us mere mortals.  The DOJ was after something much bigger, a criminal act that even the Poker Players Alliance and playing community in general would ultimately have a tough time defending.  In fact, the ordered released documents by Judge Taylor was enough to discourage some organizations from working with either of the two companies, fearing a probe that went beyond the scope of simply violating the UIGEA.  There were a few notable exceptions (see Indicted Online Poker Rooms Contributed to 68 Nevada Political Campaigns)

Enter Counts 8 and 9 of the indictment:  Conspiracy to Commit Bank Fraud and Wire Fraud and Money Laundering Conspiracy.  These, in total, carry a maximum sentence of 50 years behind bars. 

There’s a reason why Nevada state lawmaker and former U.S. attorney Greg Brower wants to go after those 68 politicians believed to have taken financial contributions from the two major online poker firms. 

Some within the online gambling arena have already suggested to Gambling911.com that the heads of PokerStars and Full Tilt are likely to pay out a lofty fine and serve little if any prison time.  We believe otherwise, unless the defendants can ultimately prove their innocence. 

The charges levied against Isai Scheinberg and Raymond Bitar of PokerStars and Full Tilt Poker, respectively, allege these two individuals not only attempted to “misrepresent” money transactions, they also apparently took an active role in ensuring such transactions went through by forming a more integral (and some would say, cozy) relationship with at least one specific banking institution.  This enabled both companies to enjoy a significant leg up on their competition.  The indictment leads into this relationship with the header “The Scheme to Defraud”.  There, the US Justice Department goes on to explain how the two poker companies promised “multi-million dollar investments” in the banks that processed payments on their behalf.  They would in essence own these banks and carry out the alleged fraud directly, as opposed to doing so through intermediary parties.  

 

Other Beneficiaries

 

Immediately following the indictments, other online poker rooms witnessed solid increases in traffic at their respective websites.  Bodog, for example, saw a 21 percent surge in player traffic. 

While many in the online gambling community were left wondering “Who Might Be Next?”, others suggested there might not be a “Next”, at least for the foreseeable  future. 

That’s because they simply don’t get much bigger than a PokerStars or Full Tilt.  The scale these two companies are on when compared to their much smaller competitors is enormous.  The likelihood of other online gambling ventures having eCom capacity is rather minute as well.  The focus now is likely to be on “clean up” efforts, ensuring the prosecution of PokerStars, Full Tilt and – to a lesser degree – UB.com.  Prosecutors will spend this time preparing their case. 

It could be that others involved in this referenced scheme will be brought to justice, however, quietly, the rest of the sector we suspect is thrilled to have PokerStars and Full Tilt Poker out of the way (PartyPoker we know must be celebrating). 

The European online poker rooms and smaller US-facing card rooms have the potential to benefit enormously from Friday’s action, not withstanding the likelihood that there will still be smaller investigations and directives related to the industry carried out by localized law enforcement agencies. 

Some banks, that previously feared conducting business with the online gambling industry, may feel a burden is lifted from their shoulders by having the elephant(s) in the room taken out of the equation.  Others may be shaking in their boots more than ever.  Ultimately, a leaner and meaner industry will move forward. 

- Christopher Costigan, Gambling911.com Publisher 

 

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