United States v. Scheinberg is a lawsuit brought by the United States against three major online poker room operators and their associates. The three defendants in the case are:
- Absolute Poker
- Full Tilt Poker
The case alleges not only violations of UIGEA, but it also alleges criminal money laundering and bank fraud on the parts of the defendants.
The indictment came down on April 15, 2011, which is known (and not affectionately, either) as “Black Friday” by poker players. Until that point, poker players were still able to play poker for real money at the three Internet poker cardrooms named above. Not only did the federal action in this case prevent U.S. citizens from continuing to play poker at those sites, it also tied up the funds in those players’ accounts.
The Department of Justice took control of the .com Websites belonging to these cardrooms. Full Tilt Poker and PokerStars soon regained control of their domains for purposes of processing refunds to the United States players who still had funds in their accounts with those cardrooms.
The associates of these companies include the upper management at those sites, as well as an executive at a bank who was deliberately mis-coding transactions on behalf of these companies.
Editorial aside: If any of this sounds extreme to the reader, well, I agree with you. Allowing people to play poker on the Internet seems to be a minor offense at best, but when a lot of money is involved, you can expect the United States government to get involved. And if anyone thinks that money isn’t the motivator in this issue, let me know. I’ve got some great oceanfront property in Arizona I think you might be interested in buying. End editorial aside.
I wrote previously about how UIGEA doesn’t prohibit playing online poker for money, so they have to tie its enforcement to other laws prohibiting gambling. I won’t get into the details of UIGEA here, as I’ve already written about them in some detail in a previous post, but I’ll sum it up by saying that UIGEA only makes it illegal to receive funds for illegal Internet gambling. It doesn’t make gambling illegal–it makes receiving funds for illegal gambling illegal. Sounds complicated, doesn’t it?
At any rate, they needed a law that made playing poker on the Internet illegal in order to enforce UIGEA in this case, and that wasn’t hard to do, as several states have specific state laws on the books prohibiting Internet gambling. (Heck, in Washington state, playing poker for real money online is a felony.) The law that was used in this case was a New York state law that makes online poker a Class A misdemeanor.
PokerStars and Full Tilt Poker had large player bases throughout the world. In fact, their companies continued to operate, because they had enough real money players from other countries to continue to support their business. Absolute Poker, on the other hand, which is also known as “the Cereus Network,” derived most of their operational revenue from United States players, so this case effectively destroyed their business.
In 2012, PokerStars arranged to buy Full Tilt Poker and reimburse all their United States players as well. This deal was approved by the U.S. Federal government, and it led to the charges against the management at PokerStars and at Full Tilt Poker being dismissed. The two companies admitted no wrongdoing as part of the deal. That ended the civil case.
On the other hand, the criminal charges related to money laundering and bank fraud against the individuals named in the case are still in effect and have yet to be resolved. The government is seeking jail sentence for those eleven people:
- Isai Scheinberg
- Paul Tate
- Raymond Bitar
- Nelson Burtwick
- Scott Tom
- Brent Beckley
- Ryan Lang
- Ira Rubin
- Bradley Franzen
- Chad Elie
- John Campos
Most of the people on that list are management at the various poker rooms in the lawsuit, but a couple of them are management at the Suntrust Bank in Utah that was mis-coding the transactions in question.
United States v. Scheinberg isn’t over, at least not completely, and even when it is, its effects on the Internet poker industry will be felt for a long time.