It’s been a hectic 10 days for the online poker community. On April 15th, the founders of PokerStars, Absolute Poker, and Full Tilt Poker were indicted, along with eight others, on charges that included money laundering, bank fraud, illegal gambling, and violating the Unlawful Internet Gambling Enforcement Act (UIGEA).
Monitoring the situation has been the Interactive Media Entertainment and Gaming Association (iMEGA), whose Chairman, Joe Brennan, told Poker News Daily that the situation was ripe for legal action to occur.
Brennan elaborated, “In some ways, it’s shocking. In some ways, it’s not a surprise. All the signs were there for the better part of two years. The DOJ has been doing what the DOJ does: working from the outside slowly in. They started with the little guys, got them to roll, and got everything they needed.”
Payment processors have largely been the targets of the Department of Justice in recent years and have included Account Services’ Douglas Rennick and Intabill’s Daniel Tzvetkoff. According to an article that appeared in Business Insider, information obtained from Tzvetkoff may have contributed to the drastic legal action 10 days ago.
Were the 11 indictments inevitable? Was it just a matter of time until the passage of the UIGEA and the eventual enforcement of its regulations resulted in a major legal strike from the U.S. Department of Justice?
To that end, Brennan noted that it was easy to say yes based on the results. However, he added, “When you look at how overt the fraud is alleged to be when it comes to not only recoding transactions, but also going allegedly so far as to coop banks, you’d have to say they were working on borrowed time. The only thing that I would say surprised me was the allegation about the bank in Utah.”
In Utah, John Campos, the Vice Chairman of the Board and co-owner of SunFirst Bank, “allegedly agreed to process gambling transactions in return for a $10 million investment in SunFirst by [Chad Elie] and an associate, which would give them a more than 30% ownership stake in the bank. Campos also requested and received a $20,000 ‘bonus’ for his assistance.” Those allegations are according to the Department of Justice.
We’ve had several members of the online poker community ask if PokerStars, Full Tilt Poker, and Absolute Poker have a case against the Federal Government. On that question, ESPN’s Gary Wise told the PocketFives.com Podcast last week that the Department of Justice only typically brings cases it can experience some success in.
Brennan echoed those sentiments, telling us, “Generally, the Government wouldn’t go public with this if it didn’t strongly believe that it has a strong case.” The penalties include up to 30 years behind bars and up to $1 million in fines.
The effects of the indictments of individuals related to PokerStars, Full Tilt Poker, and Absolute Poker and their associated payment processors have been felt throughout the community. Brennan explained what we could see as a result: “In the near term, even for the sites that didn’t get taken down, they’ve seen increase in withdrawals because people have this run on the bank mentality. You’ve seen operators have their processing tighten up.”
Sites like Carbon Poker, Cake Poker, Bodog, and DoylesRoom remain open to U.S. players, as the indictments did not target those sites. On the status quo of the industry following its upheaval, Brennan hypothesized, “I wouldn’t be surprised if there were some operators out there who see this is as analogous to 2006 when PartyPoker pulled out and there was a race to redistribute that large audience.”
In 2006, when the UIGEA was tacked onto the SAFE Port Act at the last minute of the Congressional session, PartyPoker was the largest site in the industry and fresh off spreading the gospel about its Monster promotion en masse in Las Vegas during the World Series of Poker. As a result of the new law, Party Gaming, the site’s parent company, pulled out of the U.S. market in deference to shareholders.
Also departing the market in 2006 were sites like Sportingbet’s Paradise Poker, 888’s Pacific Poker, and the iPoker Network’s CD Poker. In the aftermath of the barrage of sites leaving the market, PokerStars and Full Tilt Poker became top dogs. Will a new top player emerge? Stay tuned to Poker News Daily to find out.