NEW YORK—For years, the online adult industry has smacked its lips in anticipation of a change of heart by U.S. lawmakers that would lead to a loosening of legal restrictions against online gambling in the States and ultimately to greater business opportunities between the online sex and gambling industries. While the wet dream remains a potent one, yesterday's arrest by federal agents in New York of Full Tilt Poker CEO Raymond Bitar on charges he ran a global Ponzi scheme that defrauded players out of hundreds of millions of dollars could lessen the likelihood of such a détente.
As AVN has reported, the federal indictment against Bitar and a bevy of co-conspirators was originally filed in April 2011, during what is called the Black Friday crackdown on Big Internet Poker. But even that action was the culmination of years of federal investigations into Big Poker.
"In June 2009," reported AVN at the time, "the DoJ froze bank accounts belonging to the online poker sites, Poker Stars and Full Tilt Poker, that held millions of dollars of users winnings. Yesterday, the DoJ seized those same sites, and Absolute Poker, along with issuing criminal indictments against 11 individuals they say either ran or processed funds for the businesses."
The feds accused the group of perpetrating "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."
As AVN also reported, it was alleged at the time by Australia's Courier-Mail, and since corroborated by direct testimony, that a Big Poker insider named Daniel Tzvetkoff, who was himself arrested in 2010 in Las Vegas by the feds, was charged with money laundering, bank fraud and conspiracy for processing $543 million in illegal Internet gambling earnings through his payment processing firm, Intabill.
Tzvetkoff, who testified for the government this March in the trial of Black Friday defendants John Campos and Chad Elie, used to operate adult processor Merchant Solutions, which was in business as late as 2007, when it was nominated for an XBIZ award. That same year, Tzvetkoff founded online payment processor Intabill. Neither Intabill nor Merchant Solutions are still in business.
Campos, who was facing up to 45 years in prison, eventually pleaded guilty to one misdemeanor count related to the illegal processing of payments for PokerStars and Full Tilt Poker while he was the vice chairman of SunFirst Bank in Utah, and only a few days ago received a three-month prison sentence after the prosecutor agreed to accept the much lesser charge. He did have to agree to a lifetime ban from working in banking.
It's unlikely Bitar will be treated so magnanimously, however, not only because, as the chief executive of Full Tilt Poker, his hands are supposedly dirtier, but also because his past associate, Daniel Tzvetkoff, is not only likely to testify against him, but as part of his plea deal provided federal prosecutors with over 90,000 documents that were used in the case against Campos and Elie that presumably can also be used against Bitar. Though Elie's lawyer argued earlier this year that the "mountain of documents" dumped all at once with little time to prepare impeded their defense, Bitar's lawyers will have no such excuse when he goes to trial.
What is notable about the new charges that were added this week to the original indictment against Bitar and co-defendant Nelson Burtnick, the head of Full Tilt Poker’s payment processing department, is the fact that the most egregious charge of running a global Ponzi scheme took place, according to the feds, after Black Friday.
"Among other things," the feds state in an announcement issued Monday, "Bitar is charged with promising players that their funds would be protected in 'segregated' accounts when the company actually used them to pay for Full Tilt operations and to pay Bitar and other owners over $430 million. As a result of Bitar’s alleged fraud, Full Tilt Poker was unable to pay the approximately $350 million it owed to players in the U.S. and around the world."
Manhattan U.S. Attorney Preet Bharara said yesterday, “With today’s arrest and the new charges brought against him, Raymond Bitar will now be held criminally responsible for the alleged fraud he perpetrated on his U.S. customers that cost them hundreds of millions of dollars. The indictment alleges how Bitar bluffed his player-customers and fixed the game against them as part of an international Ponzi scheme that left players empty-handed.”
FBI Assistant Director-in-Charge Janice K. Fedarcyk said, “Bitar and Full Tilt Poker persisted in soliciting U.S. gamblers long after such conduct was outlawed. As alleged, Bitar has already been charged with defrauding banks to conceal the illegal gambling. Now he stands accused of defrauding Full Tilt’s customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The on-line casino became an Internet Ponzi scheme.”
In addition to the above comments, however, the fed's announcement also detailed the manner in which the alleged Ponzi scheme was undertaken even after the defendants had been put on notice by the U.S. government.
"Only weeks before U.S. law enforcement took action against Full Tilt Poker in April 2011, Full Tilt Poker’s internal financial statements reported $390 million in debts to players but only $60 million in its bank accounts," it alleges. "Following the law enforcement action, as players around the world began demanding their funds from Full Tilt Poker, rather than suspend operations, BITAR lured players to continue gambling with Full Tilt Poker by continuing to promise them that their funds were safe. In actuality, BITAR was using new customer deposits to pay off some of the backlog of player requests to withdraw funds and to cover the company’s operating expenses, including salary for Burtnick and himself. In effect, Full Tilt Poker operated what was, by then, nothing more than a Ponzi scheme. When the scheme finally collapsed, Full Tilt Poker was unable to pay players the approximately $350 million it owed them."
Of the eleven men named in the 2011 federal indictment, Bitar is the seventh to be arrested. The other six— Bradley Franzen, Ryan Lang, Ira Rubin, Brent Beckley, Chad Elie and John Campos—have all pleaded guilty, with only one, Campos, having been sentenced. The remaining four defendants—Nelson Burtnick, Isai Scheinberg, Paul Tate, and Scott Tom—remain at large.
Bitar, who was arrested at JFK Internation Airport yesterday after arriving on a flight from Dublin, appeared before U.S. Magistrate Judge Debra Freeman Monday afternoon, when he pleaded not guilty to the charges. Bail, which was objected to by the prosecutors, who argued that the enhanced charges and possible 100+ year sentence could impel Bitar to flee the country, was nonetheless set at $2.4 million, with a required cash deposit of $1 million. According to PokerFuse.com, Bitar has yet to raise the money and currently remains incarcerated.
