Blogs: DoJ Stepping up Online Poker Busts


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PartyPoker & PartyCasino, RIP. January 2019

DoJ Stepping up Online Poker Busts
June 21, 2009 (version 0.2)

Southern District of New York Grand Jury Updates

What is happening at the Southern District of New York grand jury hearings from June 18th? Excellent question. Any official press releases should appear at the DoJ - Southern District of New York Web site.

As of June 20/09, there hasn't been any updates on

The U.S. attorney also sent a subpoena to Allied Wallet, another third-party payment processor, to appear before a grand jury in New York on June 18.

The Las Vegas Sun
Will Web poker bust spark fight or flight?
Little agreement on how feds’ multimillion-dollar seizure will shake out
By Liz Benston
June 15/09

The federal government’s recent seizure of millions of dollars from bank accounts used to process online poker transactions is sending shock waves through the Internet gambling community. ... The seizures, which follow other federal efforts to crack down on Internet gambling sites accepting bets from Americans, are among the most aggressive government actions to date involving poker sites. ... By targeting payment processors, the Justice Department — which has long maintained that all forms of Internet gambling are illegal — aims to cut off the sites’ money supply.

Until recently, many operators and players believed their money was safe from federal meddling because it was handled by foreign companies and held in offshore accounts. American banks and credit card companies have generally exited the business of processing credit card transactions for online bets, which can be traced by merchant codes. That void has been filled by debit card transactions and third-party payment processors, which maintain domestic bank accounts subject to U.S. laws.

On June 2, a federal judge signed a warrant issued by the U.S. attorney for the Southern District of New York to seize the assets in a Wells Fargo account in San Francisco held by Account Services Inc., a company that processes transactions for major online poker sites that accept U.S. bets. Details of the seizure were filed under seal, and the U.S. attorney and Justice Department have declined to comment.

The U.S. attorney also sent a subpoena to Allied Wallet, another third-party payment processor, to appear before a grand jury in New York on June 18. The subpoena requested documents including correspondence, records of financial transactions and contracts between Allied Wallet and Internet gambling companies dating to 2001 as well as information on owners and employees. [emphasis added]

Both documents cite alleged violations of Title 18, Section 1955, of the U.S. Code, which prohibits “illegal gambling businesses” operating in violation of state laws. The subpoena also cites Section 1956, which prohibits financial transactions with unlawfully obtained proceeds.

The feds reportedly seized or froze more than $30 million in online gambling funds at multiple banks doing business with major sites, including Full Tilt Poker and PokerStars.

This isn’t the first seizure of its kind. Last year, the Justice Department seized more than $20 million in U.S. bank accounts linked to Bodog, a major online gambling site that operates in Antigua. The seizure included $9.9 million deposited in Las Vegas at Nevada State Bank. This followed the 2006 arrest of CEO David Carruthers and the extraction of $105 million in fines from online gambling giant Party-Gaming, which has admitted to breaking the law and has exited the U.S. market. PartyGaming’s co-founder also surrendered $300 million. [links added]

Internet poker supporters have downplayed the significance of such actions, saying the sites invited prosecution by offering sports betting, a major target for the feds. Poker enthusiasts have argued that online poker involves a great deal of skill and therefore can’t be viewed as illegal gambling, which would involve games of chance. Some add that their sites aren’t conducting gambling themselves and are merely hosting bets that occur among players — an argument similar to that made by music file-sharing Web sites that attempted to skirt federal copyright laws.

Such arguments are no match for the will and means of the Justice Department and its associates in the FBI and IRS, said Sanford Millar, chief financial officer and general counsel of Centaurus Games, a Las Vegas company that hosts free and subscription-only poker tournaments online. “The Department of Justice has never agreed with those arguments,” said Millar, a Los Angeles-based tax lawyer who teaches law at California State University, Northridge. “If they think they are going to outmaneuver the U.S. government they are out of their minds.” [links added]

... Bricks-and-mortar casinos — which are no doubt concerned about opening the door to new competition, especially in a downturn — have remained largely silent. One exception is Harrah’s Entertainment (see the Bloomberg story of April 26/07 on Frank's previous bill), which is backing a bill by Massachusetts Rep. Barney Frank to have the feds regulate online gaming. The company recently created a Montreal-based interactive division to promote the company’s World Series of Poker-branded tournaments worldwide. Harrah’s spokesman Gary Thompson calls the seizure of funds a “nonevent” that won’t slow online gambling or the company’s lobbying efforts. “The fact that there are some zealots in the Justice Department that are cognizant of the support for legalizing Internet gambling in the United States and want to try to make a name for themselves before there’s some legislation that passes and some rational approach toward this in this country won’t deter us,” he said. [links added]

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