The DOJ worked to web poker operations in the U.S. following the 2006 passage of a federal law that banned online poker. As part of a widespread online gamine crackdown, U.S. Attorney Preet Bharara also filed fraud charges against PokerStars founder Isia Scheinberg. While Tuesday's settlement resolves Bharara's inquiry into PokerStars, Full Tilt's Bitar continues to face criminal charges. He is awaiting trial and has pleaded not guilty.
The U.S. Attorney's investigation has led to a half dozen guilty verdicts, while 11 others have been hit with various fraud charges. Seven of those charged in the U.S. Attorney's inquiry remain at large.
Additionally, the U.S. Attorney's office filed a motion to settle with online gaming company Absolute Poker/Ultimate Bet, in a move that will force the company to forfeit all of its assets. All of Tuesday's poker settlements do not constitute an admission of guilt, wrongdoing, culpability or liability, the U.S. Attorney noted.
The poker settlements stem from the Unlawful Internet Gambling Enforcement Act, passed by Congress and written into law on October 13, 2006. Once the law was passed, internet gambling became a federal crime, however the likes of PokerStars, Full Tilt and Absolute Poker/Ultimate Bet continued to operate in the U.S. through offshore entities.In its settlement, the U.S. Attorney alleges that poker companies arranged for the money received from U.S. gamblers to be disguised as payments to hundreds of fake online merchants purporting to sell merchandise such as jewelry and golf balls, in a move that made it possible for banks and credit card issuers to unwillingly process law-breaking payments. "Poker companies allegedly used fraudulent methods to circumvent federal law and deceive these financial institutions into processing payments on their behalf," said the U.S. Attorney in a statement. There is still the prospect that lawmakers re-open U.S. to online gaming, with the prospect that Tuesday's settlement augurs well for PokerStars. Forbes reports that Las Vegas casinos like Caesars Entertainment (CZR) are petitioning for Congress to pass federal laws to reinstitute online poker. Forbes adds that states like California are also pushing for online poker legalization, on the state level. In late 2011 -- well after the U.S. Attorney's case was brought -- the U.S. Justice Department's Office of Legal Counsel issued a legal opinion stating that the 1961 Wire Act prohibited online betting only for sporting events and contests, not Internet games such as poker or lotteries, providing a legal intepretation for future attempts to set up online poker companies in the U.S. For more on the U.S. District Attorney in Manhattan, see details on a bank rate fixing inquiry and the insider trading conviction of Rajat Gupta, a former Goldman Sachs board director. -- Written by Antoine Gara in New York
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