The fugitive PokerStars founder surrendered to US authorities this week. Isai Scheinberg, the founder of the online casino, PokerStars is finally in federal custody after nine years on the lamb. He is charged with bank fraud, money laundering and illegal gambling after being indited by the US Department of Justice.
Introduction: Fugitive PokerStars Founder Surrendered to US Authorities
After the Lithuanian-born Canadian citizen entered the US on a flight from Switzerland, the 73 year old surrendered to authorities at the airport on January 17th. Later in the day, he pleaded not guilty to all charges. After the hearing was adjourned in Manhattan’s Federal Court, Scheinberg was released after posting a $1million bail bond. He also agreed to surrender his passport and have his movements restricted to New York and Washington.
He is the last of eleven individuals who have been charged in connection with the so called “Black Friday” indictments. According to online poker news in the US, hese included management from various online gambling sites, including PokerStars, FullTilt Poker and Absolute Poker‘s CEREUS network. They also included payment gateway processes that helped move both deposits and withdrawals. The government claims that they all fell foul of the Unlawful Internet Gambling Enforcement Act (UIEGA) (2006), and as such, all their transactions were illegal. But you can still play Intertops poker online.
Face the Music
But the question on everyone’s lips, is why now? Well, it transpired that the US has already started extradition proceedings against Scheinberg some months back. And though the billionaire initially fought the extradition, his lawyers advised him to face the music by flying to the states.
Before the UIEGA, there was a grey area in which online poker sites were able to operate in within the US. After the gaming act became law, many companies, including PartyPoker, quit the US. And it’s true to say that their business has never really recovered from the move. But other online poker sites in the US, like PokerStars and Full Tilt Poker decided to take the risk that these new laws were actually aimed at sports book gamblers rather than online poker players. Well, they were wrong!
On April 15, 2016, The US Department of Justice seized domain names linked to the three networks. This was “Black Friday”. Of course this caused the freezing of player accounts and balances. FullTilt, PokerStars and Absolute Poker’s CEREUS network were accused of manipulating banks into processing billions of dollars of gambling transactions, thus violating the Unlawful Internet Gambling Enforcement Act. But for gamblers, an even bigger problem was that FullTilt and the CEREUS network had mixed the players funds with their operating cost. This is a huge no-no. It turned out that they didn’t possess enough liquid cash to cover their positions with their players balances.
The Department of Justice stated that FullTilt had a debt to players of around $390 million, yet only had $60 million in the bank. The U.S. Attorney in Manhattan, Preet Bharara, called it a “Ponzi scheme.” Though Scheinberg had a current and ongoing indictment against him, he agreed to fully pay back all of FullTilts customers to the eye watering tune of $731 million.
He was to later sell PokerStars to the Amaya Gaming, now The Stars Group, in 2014. He received a whopping $4.9 billion for his efforts. This huge deal paved the way for PokerStars to return to the US as a legal entity. But that still didn’t mean that Scheinberg was in the clear. He was still “at large” and wanted on the federal extradition charges. Now he’s back in the US. Keep in mind that he has a huge bundle of cash, which can usually make the hurt go away. Check out Intertops poker, one of the few sites still left to play in the US.