

The fallen Aussie tycoon who aced poker giants for FBI, to beat life behind bars - JacobAldridge
http://www.brisbanetimes.com.au/technology/technology-news/fallen-aussie-tycoon-aces-poker-giants-for-fbi-to-beat-life-behind-bars-20110418-1dkkr.html

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nikcub
Some info on this guy to make the story clearer. He started an 'e-wallet'
company specifically to cater to US poker players, who needed to use this
style of online processor to get around having their transactions marked as
being for gambling.

Intabill became popular quickly because of its low transaction fees. Tzvetkoff
instantly became one of Australia's richest young men - purchasing a $25M home
etc. etc. You may wonder how he became so rich so quickly from a company in a
competitive industry - and it was because he was skimming money from the
business and was not honoring withdrawls.

Full Tilt and Pokerstars finally stopped accepting Intabill and Tzvetkoff made
off with the remainder of the deposits - which the poker companies had to
cover players for.

When he visited the USA last year for a gambling conference in Vegas, Full
Tilt and Pokerstars, ironically, tipped off his presence in the country to the
FBI, who arrested him. He was surprisingly granted bail, and we now know why -
he turned states witness in the case against the poker companies.

To the DOJ the online poker companies were bigger fish to catch rather than
the guy who stole hundreds of millions of dollars.

And now:

> [accepting payments for poker] which has been illegal in the US since 2006

UIGEA was a rider on the Safe Ports Act of 2006[1], which means that it was
never debated directly and was never voted on or approved directly. It did no
come into effect until years after passing (the DOJ keeps quoting that the
sites have been breaking the law since 2006, somehow not knowing that the law
wasn't enforced until much later). The poker players association along with
representatives who were working to overturn UIGEA, such as Barney Frank,
worked tirelessly to continuously postpone enforcement of the act.

Frank was close to getting a bill passed last December that would have
excluded online poker from UIGEA, Washington DC made it legal last week and a
number of other states such as Nevada were about to do the same.

With it looking like online poker was about to be exclusively excluded from
UIGEA, the DOJ knew that they had to act on their case now.

Most players have known for some time that there was a Grand Jury
investigating the poker sites. It is known that a former member of Team Full
Tilt, Clonie Gowen, testified against the company to the grand jury as part of
a legal dispute she had with Full Tilt over compensation.

The poker sites relied on legal opinion which advised them that online poker
is not considered 'online gambling'. Full Tilt went to the extreme of bringing
in five separate firms to each give an opinion - and each found in favor of
online poker not being online gambling. UIGEA makes specific mention of online
gambling, but not poker specifically. The US Supreme Court and various higher
courts have previously found that poker is a game of skill, as part of legal
efforts by various states to legalize card rooms (see case law from the
American Bar association[2])

The banks wouldn't take that risk though. They effectively shut out online
poker transactions by not approving the poker sites as merchants. This didn't
happen overnight - for eg. Citibank were one of the last to shut out online
poker as late as a year ago.

Because there was effective collusion between the banks to lock online poker
out of the market under vague threats from the DOJ - the poker sites had to
work around it themselves by improvising and masking the transaction purposes
by setting up their own banks and merchant accounts.

You have to ask yourself if this is fair - there are millions of online poker
players in the USA, tens of thousands of whom play poker as a full time
profession and make a living from it. The banks, with no direct law barring
them from accepting the transactions, were persuaded by various lobby groups
and the DOJ to lock the poker sites out of the market.

Some believe that what the banks did may have broken various WTO and free
trade laws, not to mention the Sherman Act.

It is now apparent that in an effort to get around being blocked by the banks
some of the sites and operators may have overstepped other laws such as money
laundering, with new PATRIOT Act provisions - where you break the law even if
you are the head of the company that is masking transactions in some way even
if you were not directly involved or didn't know about it.

Online poker was weeks away from being legitimized in the USA. Pokerstars had
weeks ago signed a new partnership agreement with the Wynn casino group. Full
Tilt had struck similar partnerships. The Democrats were working to explicitly
allow online poker transactions so that UIGEA would not have to be tested with
online poker. Various states were working to legalize transactions for online
poker. There is a strong chance that within a year or so online poker will be
a legitimate, no-question-marks, fully transparent, billion-dollar online
business.

When the DOJ dropped their case on Friday, Wynn announced that they had
cancelled their partnership with Pokerstars and other companies/groups did the
same with Full Tile and UB. All the effort from the players lobby, the
companies themselves, the reps, etc. was blown up. Forget innocent until
proven guilty, we are months away from any trial, only 3 of the 12 defendants
are even in custody, yet domains have been seized and businesses destroyed by
an 11-point case filing, of which only 2 or 3 points may ever get to trial

If the site owners are found guilty, they could be facing decades in jail.
Penalties for money laundering that were increased as a way to lock up leaders
of drug cartels and terrorist groups are being applied to people who built
successful legitimate companies and had to work around all US banks being
sacred of the vagueness of a law that was never directly enacted.

So even if online poker is found not to apply as 'online gambling' it will be
too late for these entrepreneurs, who had to find their own way to work in the
vacuum of nobody really knowing what was legal or not. The DOJ had a hell of a
way of telling them that they didn't think it was.

A lot of people here on HN are entrepreneurs, so I hope you would support
online poker entrepreneurs by lobbying your local reps, etc. Imagine if the
industry you were in was being manipulated and artificially barred from
trading by a small minority of those in positions of power. An industry which
in this case is one of the largest and most popular passtimes in the USA. to
me this is all sheer madness

[1] <http://en.wikipedia.org/wiki/SAFE_Port_Act>

[2]
[http://apps.americanbar.org/buslaw/committees/CL430000pub/ne...](http://apps.americanbar.org/buslaw/committees/CL430000pub/newsletter/200905/humphrey.pdf)

~~~
JacobAldridge
This is why I keep coming to HN - you've taken a considerable amount of time
to further explain some of the details of an article that already explains a
lot, with references, and in doing so have added massive value to my reading
and understanding the news of the day.

Unfortunately, I can't see how many points you've received to recognise that
contribution, so I'm writing this in case you haven't been fully recongised by
other users voting with their mouse. Thanks nikcub.

~~~
cma
Let's please not start contentless replies like this on every single good post
just because points aren't visible.

------
RuadhanMc
Is anyone else not very outraged that these poker sites have been shut down
(or at least domains seized)? They were indeed knowingly selling their
services to US customers despite that being illegal.

They could have used GEO IP blocking to stop people from countries were online
gambling is illegal from using the site, but they didn't -- instead they chose
to create an elaborate scheme with shell companies used to hide transactions
from prying eyes (which all came undo when Tzvetkoff talked).

Whether or not you agree with online gambling being illegal in the US is not
the point. I don't think there should be speed limits, but there are, and so I
have to deal with the consequences of ignoring those laws.

Why the outrage?

~~~
tybris
If a law is so silly that it makes criminals out of millions of regular
people, you expect it to be changed, not enforced. Several European countries
where online poker became popular are legalizing it.

~~~
RuadhanMc
It looks like Congress did look at changing the law in 2010, not sure what
happened to this, NY Times article:

<http://www.nytimes.com/2010/07/29/us/politics/29gamble.html>

Banning online gambling doesn't really make sense if you still permit gambling
at a state level, so I think this law is probably going to be toast in the
long run.

~~~
pyre
Banning online gambling is essentially protectionism of the state-level
gambling industries. A number of countries and WTO denounced the US a number
of years ago for this policy, but the US just ignores WTO when it's convenient
and uses it as a hammer against other countries when it _is_ convenient.

