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). In connection with the indictment, the U.S. Department of Justice seized five Internet domains and issued restraining orders against approximately 76 bank accounts apparently connected to the online poker companies in 14 countries reported to contain approximately U.S. $7 billion. In addition to forfeiture of these funds, prosecutors are seeking at least $3 billion in civil money laundering penalties.
The allegations and charges focus on the financial means that the online poker companies used to circumvent the UIGEA's prohibition on U.S. banks and credit card companies processing transactions transferring funds for "unlawful" online gambling. It is alleged 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 (for example, travel agencies) by using payment-processing intermediary companies created for that purpose. The allegations also describe efforts to "bribe" or invest 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.
It is expected that the online poker companies will vigorously fight these charges. Full Tilt Poker CEO Raymond Bitar, one of the 11 persons indicted, issued a statement saying that his company believes online poker is legal, a "position also taken by some of the best minds in the United States," and that he would be "exonerated."
This indictment has the potential to create issues throughout the U.S. banking and gaming industries. It is unclear what, if any, fallout from this indictment there may be for U.S. banks that processed the transactions as victims of the alleged fraudulently misrepresented transactions with which they were presented, or the potential for these banks to seek recourse against those responsible. The U.S. gaming industry, which recently saw the announcements of partnerships being formed between the leading online poker companies targeted by this indictment in the event that online poker was legalized in the United States, is in the process of reacting to this news. 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.
Further, there is some indication that in the wake of this indictment, individual states may become involved in investigating the online poker companies as well. On April 18, 2011, it was reported that Nevada State Senator and former U.S. Attorney Greg Brower is calling for federal and state investigations into political contributions made by PokerStars.
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