Yorky Pud

Over the weekend I was speaking to a few family and friends about the recent developments in the United States of America, in regards to online poker, that we have all collectively named “Black Friday.” A few of them were rather misinformed about the whole situation, which is to be expected as they are not poker players themselves, but one asked me if PokerStars, Full Tilt Poker and Absolute Poker actually did commit fraud and money laundering on a grand scale and how could they when they are regulated in places such as the Isle of Man.

This got me thinking so I did some digging on the internet and found a couple of articles and new pieces. Obviously, in a case such as this there will be a ton of rumours and unproven stories but some of them are going to either be true or be such a coincidence that they simply have to be linked.

The actual indictment states, “As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits. Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like simply because they can’t bear to be parted from their profits.” It is this “tricking some U.S. Banks” that I think the FBI and Department of Justice do have a real case against the sites.

Part of the same indictment alleges that a PokerStars document from 2009 shows they lied to banks by creating companies that strongly implied the transaction had nothing to do with PokerStars. I have so far read about companies pretending to sell golf balls and jewellery to fool banks into processing the financial transactions that were made illegal with the passing of the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006. If this is true then that alone could be enough to charge the 11 defendants with fraud.

By all accounts it looks as if most of these fake company bank account were shut down by late 2009 and the sites are then alleged to have gone down a different route of offering to finance small and struggling banks and financial institutions in exchange for them processing gambling transactions for them. This is one of the reasons 76 bank accounts in 14 countries have been seized, one of which actually made the news in Arizona, USA.

The Vensure Federal Credit Union showed that on December 31, 2010 it had assets of $2.7m and 94 members and had net income of $592,000 for the year but has now closed, rumoured to be one of the 76 bank accounts seized by the FBI. The story of the poker sites buying banks in one way shape or form seems to apply to this particular financial institution. Record show that in 2009 they only signed off a single $5,000 loan, with 5% interest, yet still managed to being in income of $336,000 and pay out $82,000. Then in 2010 they had income of $1,800,000 and they paid out around $700,000. The full article can be found here and makes very interesting reading in my opinion.

All we can do is speculate about whether the sites in question are guilty of this but if these stories are true they are going to have a ton of explaining to do and nobody knows if they will be able to afford the reported $3bn fines that are being talked about. It should be a very interesting few months to say the least.

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