PokerStars Settles $731 Million Suit With Justice Department, Acquires Full Tilt Poker
August 1, 2012

PokerStars Settles $731 Million Suit With Justice Department, Acquires Full Tilt Poker

Lawrence LeBlond for - Your Universe Online

The world´s largest online poker company has agreed to pay more than $730 million in a settlement of a US government investigation charging the company used fraudulent methods to process payments and evade US restrictions on Internet gambling, according to officials involved in the case.

A federal judge approved the $731 million settlement, which will be paid up by British-gambling firm PokerStars. In the settlement, the US Justice Department (DOJ) also approved PokerStars to acquire the assets of Irish-based Full Tilt Poker, which had been seized by the FBI last September.

Some of the settlement fee -- about $184 million -- will be reimbursed to non-US online gamblers who had money on deposit at Full Tilt Poker, the US attorney for the Southern District of New York said on Tuesday.

The deal should end the drama surrounding Full Tilt Poker, which was developed by Ray Bitar with the help of poker legends like Chris “Jesus” Ferguson and Howard Lederer. The company has been labeled as a Ponzi scheme by US Attorney Preet Bharara.

While the doors are closing on Full Tilt, Bharara is continuing investigations against PokerStars frontman Isai Scheinberg, who has been indicted for opening an illegal gambling business. Scheinberg is believed to be hiding out in the Isle of Man.

In a related matter, Bharara´s office has also asked the court to accept an agreement with a third company, Absolute Poker, requiring that company to also forfeit all of its assets. Absolute Poker is also charged with money laundering and fraud.

The DOJ had two goals in mind when it launched its investigation: protecting online gamblers and swiftly punishing foreign companies for allowing Americans to place wagers illegally. It became illegal beginning in 2006 for any company to accept money from an American for online gambling. However, that law failed to deter Americans from placing wagers online anyway.

It has been previously estimated that Americans spent $16 billion a year gambling online before the government´s move to shut down online gambling in 2011.

The latest settlement would allow “for serious compensation of victims” and the case “should serve as a deterrent to others who look to actively circumvent United States law – onshore or offshore, you will be held responsible for those actions,” Janice K. Fedarcyk, head of the FBI, said in a statement.

“Today's settlements demonstrate that if you engage in conduct that violates the laws of the United States, as we alleged in this case, then even if you are doing so from across the ocean, you will have to answer for that conduct and turn over your ill-gotten gains,” Bharara said in a statement.

“This is another shoe dropping in a longstanding effort by the federal government to try and freeze these companies out of the American market,” Daniel C. Richman, a professor of law at Columbia and a former federal prosecutor, told Michael Schmidt at the NY Times. “As some state governments reconsider their gambling laws, we may see more of these cases against foreign gambling companies.”

Bitar, who was charged in the Full Tilt case last year for bank fraud and money laundering, flew back to the US to resolve the matter. On an online betting forum he told his former employees that he had “returned to the US to deal with civil and criminal case that are pending against me in New York” and to allow for transfer of assets of Full Tilt Poker to PokerStars.

Under Tuesday's settlement, Bitar, Scheinberg and others facing charges in the US are prohibited from serving in the management of PokerStars, and the firm is barred from offering gambling in the US as long as it remains illegal.

While doling out $731 million will hurt, Scheinberg said PokerStars should be able to continue its dominance in the international online poker market and, without the longtime rival Full Tilt Poker to contend with, it should accrue revenue fairly quickly. He also noted that paying customers back and continuing operations outside the US should only help PokerStars, because it will be seen as coming to the financial rescue of the online poker community.

Las Vegas casino companies have been trying to get Congress to pass a federal law bringing online poker back in the US. If such a move were to happen, PokerStars, which denies any wrongdoing despite agreeing on a settlement, said in a statement that an agreement with the DOJ “explicitly permits PokerStars to apply to relevant US gaming authorities, under both PokerStars and Full Tilt Poker brands, to offer real money online poker when State or Federal governments introduce a framework to regulate such activity”

“We are delighted we have been able to put this matter behind us, and also secured our ability to operate in the United States of America whenever the regulations allow,” Mark Scheinberg, Isai Scheinberg´s son and now chairman of PokerStars, told Nathan Vardi at “This outcome demonstrates our continuing global leadership of the online poker industry, and our commitment to working with governments and regulators to ensure the highest standards of protection for players.”