On Friday, April 15, 2011, the U.S. Attorney’s Office for the Southern District of New York unsealed a grand jury indictment against 11
individuals, including the founders of the three largest online poker sites —PokerStars, Full Tilt Poker, and Absolute Poker —charging them with bank fraud, money laundering, illegal gambling offenses, and violations of the Unlawful Internet Gambling Enforcement Act (UIGEA). The U.S. Department of Justice seized five Internet domains and issued restraining orders against 75 bank accounts in 14 countries with a total of about $7 billion. Prosecutors are seeking at least $3 billion in civil money laundering penalties.
The focus of the case is two-fold:
(1) whether the source of the funds (i.e. online poker) was disclosed to financial institutions which processed the funds; and
(2) whether online poker is "primarily" a game of chance or skill.
The government alleges that the online poker companies schemed to improperly code credit card and automated clearinghouse (ACH) electronic check transactions of U.S. online poker players so that they would appear to banks as being for merchant transactions unrelated to gambling . The government also claims that the defendants invested in smaller U.S. banks so that they would process transactions from U.S. players. Two of the persons indicted were executives of U.S. banks alleged to have been involved in such transactions.
The prosecution has significant implications for U.S. banks which may have been victims. US Banks may seek recourse against those responsible for the alleged fraudulent scheme. The U.S.gaming industry, which recently saw the announcements of partnerships being formed between the leading online poker companies
and casinos will be hard hit. Wynn Resorts Ltd. is reported to have cancelled its agreement with PokerStars after the indictment was announced, and a spokesperson for Fertitta Interactive (a company formed by the owners of Station Casinos, Inc.) said that the company had ended its affiliation with Full Tilt Poker.