PokerStars founder Isai Scheinberg is in federal custody almost nine years after being indicted by the US Department of Justice on charges that include bank fraud, money laundering, and illegal gambling.
According to Forbes, which first broke the story, the 73-year-old surrendered to authorities after entering the country on a flight from Switzerland on January 17. Scheinberg pleaded not guilty to all charges in Manhattan’s federal court later that day and was released on a $1 million bail bond.
He has also agreed to surrender his passports and to restrict his movements to the New York and Washington DC areas.
The Lithuanian-born Canadian citizen is the last of 11 individuals charged in the so-called Black Friday indictments to face the music.
These included representatives of online poker networks PokerStars, Full Tilt Poker, and the CEREUS network, as well as payment processors that had facilitated deposits and withdrawals for US customers after the federal Unlawful Internet Gambling Enforcement Act (2006) had made such transactions illegal.
So why now? According to Forbes, federal prosecutors initiated extradition proceedings against Scheinberg in Switzerland several months ago. The billionaire initially fought extradition, but later decided to travel to the US to face charges.
Before UIEGA, online poker sites operated in a legally gray area in the US because there was no specific law that prohibited their operations. After UIEGA, many sites quit the US market, most notably Party Poker – then the biggest in the world – whose business never really recovered from the withdrawal.
Others, like PokerStars, Full Tilt, and CEREUS, gambled on staying, because they suspected online poker was not really the target of UIGEA and that US authorities were more interested in battling online sports betting.
They were wrong. On April 15, 2016 — a day remembered gloomily by US online poker players as “Black Friday” — the US Department of Justice seized domain names linked to the three networks, freezing player balances.
The DOJ revealed that, unlike PokerStars, Full Tilt and CEREUS had comingled player funds with operating costs, meaning they did not have enough liquidity to cover player balances.
According to the DOJ complaint, Full Tilt owed players around the world $390 million, but had only $60 million in its bank accounts. Preet Bharara, the US Attorney in Manhattan, called it a “Ponzi scheme.”
$731 Million Settlement
Despite the indictment against him, Scheinberg stepped in, agreeing to a $731 million settlement with the DOJ that would see Full Tilt’s customers repaid.
In 2014, he sold PokerStars for $4.9 billion to Amaya Gaming, now The Stars Group. The deal paved the way for the online poker giant’s return to US markets that have since legalized the game. But until this month, Scheinberg remained a fugitive from US justice.
Scheinberg’s fellow indictees have received sentences ranging from a few months to three years in prison. All pleaded guilty to the charges against them.