I am starting this thread mostly to save the LC thread for what it’s meant: actual LOW content. Also, I think there may be some confusion about what has been alleged in the indictment.

I know there are other threads at legislation and NVG, but I don’t have the energy, time or inclination to read them, and I suspect some of you may feel the same. So, here is my two cents for the benefit of politards who don't stray far from here.

For now, I’m just going to summarize the factual allegations..

Later, I’ll write about the elements of the crimes charged, and perhaps answer questions about possible defenses

(If you've already read the indictment, then this first post will probably not be worth your time, because I'm simply summarizing what is claimed, without analysis, at the moment.)

My summary of the factual allegations

The defendants
The indictment names eleven defendants (and there could be others in related indictments that have yet to be unsealed). Those eleven include:

-the founder and principal of Pokerstars (Isai Scheinberg)
-the founder and principal of Fulltilt (Raymond Bitar)
-founders and principals of Absolut (Brent Beckley and Scott Tom)
-an executive in the payment processing departments of both Stars and Fulltilt (Nelson Burtnick)
-employee in the payment processing department of Stars (Paul Tate)
-two guys who acted as intermediaries between “poker processors” (i.e., people and entities willing to process payments and the companies (Ryan Lang and Bradley Franzen)
-guy who helped companies find poker processor
-guy who was a poker processor, in that he processed payments for the companies by disguising the payments as payments to phony internet merchants (Ira Rubin)
-guy who opened bank accounts in US through deceptive means (Chad Elie)
-vice chair of a bank in Utah, which processed payments for Stars and Full Tilt (John Campos)

Background
Starting around 2001, credit card companies required banks to apply a particular code to internet gambling transactions. Some banks decided not to extend credit to customers for gambling, automatically declined transactions with that code. Thus, even before UIGEA was enacted in 2006, most US banks blocked transactions with that code. A large part of the indictment is premised upon the claim that the defendants directed others to apply incorrect transaction codes to gambling transactions, thereby creating the false appearance that the transactions were unrelated to gambling.

This was accomplished several ways.


Fraudulent credit card processing
To begin with, the defendants employed“fraudulent credit card processing,” in two specific ways.

The first method was by creating phony companies (flower shops, pet stores, etc.) that would initiate the credit card charges. (The indictment specifies that Full Tilt and Absolute employed this method). Becuse the credit card companies usually caught on after a while, the defendants relied on a supply of stand-by phone merchants (twenty or more).

The second method (by each company) was to use pre-paid cards (including phone cards). They would load those cards with funds from the gamblers, without using the necessary code. They even created fake web sites and reviews of the cards, to make it appear that the cards had other legit purposes.

Fraudulent E-Check processing
The second category of conduct involved “fraudulent e-check processing.”

The indictment explains that the Automated Clearinghouse System (ACH) required merchants to open accounts in US. The companies turned to third-party processors to open those accounts, so that they would process e-check transactions using names of phony companies.

To accomplish this, the companies agreed to pay the processors much higher fees than would ordinarily be charged for e-checks. The processors worked with the sites to disguise the fact that the transactions actually involved gambling proceeds.

More specifically, the processors opened bank accounts in the US, pretending that the accounts would be used for a wide variety of merchants (but not gambling). The various defendants would then create phony corporations and websites, so that money that was debited from customers’ (player’s) bank accounts would appear to be consumer payments to non-gambling businesses.

Here is one interesting tidbit. Players sometimes got confused by seeing names of phony companies on their accounts. This resulted in email inquiries to the fake companies. Responses would come directly from the pokersites (specifically, pokerstars). And because this process resulted in some “administrative” difficulties, pokerstars had to modify its software.

“Transparent processing”
The third category of conduct involved “transparent processing,” which was invoked after the e-check processing operations collapsed in late 2009. Simply put, the defendants stopped lying to the banks and asked them to participate directly.

The companies turned to processers they had used before (including Chad Elie, even though the companies had sued him for $4 million before). Elie was able to persuade small banks (who were in financial distress) to process the payments in exchange for sizable investments in the banks. The indictment in particular discussed one 10 million investment/payoff.

OK: that’s it for the factual allegations. Later, I’ll discuss the crimes charged, the elements and potential defenses (if people are still interested).

Thanks for this. I wanted to read the whole thing but haven't been able to with finals approaching. Solid summary.

Goog job.
Also can you make sense of this?

Tyty wynton and definitely interested in the elements of the crimes and potential defenses.

Holy ****, Wynton isn't going to post again for a YEAR after all that...

This is how I deposited fwiw, lmao

Do they even have a defense? From my end (and I'm sure alot of people here as well) I can verify that the last deposits I made to Tilt (around Nov 2010) showed up as some BS charge (I think buying internet time). But it seemed pretty clear that either the site was lying to the bank or the bank was making the site lie for some level of plausible deniability. Pokerstars interestingly said Pstars on my statement, which seemed less shady to me but maybe it really wasn't.


EDIT: And thanks Wynton for the most readable summary so far. Definetely worth it's own thread, and interested in anything else you are willing to write up.

My guess is "hell no they don't have a defense." I recommend plastic surgery and identity theft.

They have multiple solid defenses to all of the charges except the big one, the bank fraud count. I haven't researched bank fraud enough to have a clear idea of what defenses they have to that count, if any.

All of the other counts are premised on poker being "illegal gambling," and some of the counts are premised on the sites having "operated," in jurisdictions such as NY where they can argue they never operated.

lol, I will give you 10-1 odds that this defense -- if they even make it -- fails

Yeahhh that's gonna bomb.

Thanks for the excellent summary Wynton. This is especially helpful since I'd rather discuss this with the politics-regs vs. attempting to navigate NVG.

No graphs.

Nice write up Wynton. I read all that.

Booked on stars!


Oh.

****.