VOLUME 08 ISSUE 10
PAYMENTS
E-gaming fund seizures to
continue in the US
Authorities in the US have recently
initiated a vast anti-gambling
financial campaign by seizing funds
from the accounts of payment
processors linked to internet
gaming sites. Processing internet
gambling transactions is unlawful in
the US under a variety of
regulations, most notably the Illegal
Gambling Business Act and the
Wire Act. Linda Shorey, Dennis
Ehling, Anthony Holtzman and
Ashley Camron, of K&L Gates,
examine the recent seizure cases in
the US.
The US Attorney’s Office (‘the
USAO’) for the Southern District
of New York (‘the SDNY’) is often
in the news in connection with the
seizure and forfeiture of funds
related to internet gambling. A
2008 press release from that office
touted that its Asset Forfeiture Unit
had set a record in 2007, when it
‘forfeited or reached agreements to
forfeit more than $1.1 billion’1.
According to the press release, $236
million out of the $1.1 billion were
funds forfeited by Neteller PLC
and its co-founders. Most recently,
as described in the article ‘IGBA:
Legal Basis for New Online
Gambling Activities’, which
appeared in the August 2009 issue
of this Newsletter, the USAO for
the SDNY reportedly seized
approximately $30 million in funds
from accounts in the names of
payment processors who allegedly
provided services to entities
conducting internet poker.
The USAO for the SDNY is not
the only USAO active in this area.
The USAO for the District of
Maryland has likewise made
headlines in connection with
forfeitures and seizures related to
internet gambling.
The Baltimore City Paper, on 30
October 2008, reported that the
12
USAO for the District of Maryland
had filed charges against two men
who had been ‘described in two
forfeiture proceedings earlier this
year, which resulted in the seizure
of a total of $24 million from
numerous bank accounts, as
processors of illegal gambling
transactions in the United States
on behalf of Bodog’2.
The USAO for the District of
Maryland initiated the two
forfeiture proceedings on 12 March
2008 and 28 July 2008 by filing
forfeiture complaints with the US
District Court for the District of
Maryland - United States v.
$9,869,283.05, Dkt. No. 1:08-cv01954 (funds seized from accounts
held by ZipPayments), and United
States v. $14,200,195.73 (funds
seized from accounts held by JBL
Services), Dkt. No. 1:08-cv-00661.
The USAO supported its forfeiture
complaints with affidavits made by
a special agent with the US Internal
Revenue Service assigned to the
Baltimore Field Office.
The affidavits reveal that the
special agent, since 2006, had been
‘investigating the operations of an
internet gambling website called
Bodog.com’, which the agent stated
‘operates extensively in the United
States, taking bets from US
gamblers over the phone and via
the internet’. The affidavits, in
addition to ZipPayments and JBL
Services, name MPS Processing
Ltd., Direct Channel LLC, EGALO,
and Transaction Services as
payment processors that Bodog
was using in the US to transfer and
distribute funds to individuals,
believed to be gamblers,
throughout the country. The
accounts held by these payment
processors were identified as being
in banks located in multiple states.
Among the laws the affidavits
identify as applicable to the facts
set forth in the affidavits are:
18 U.S.C. §1084 (Wire Act);
18 U.S.C. §1955 (Illegal
Gambling Business Act); and
Maryland Criminal Code §12102 (Betting, wagering, gambling,
and related activities).
Forfeiture was ordered in United
States v. $14,200,195.73 on 17 July
2008 and in United States v.
$9,869,283.05 on 5 February 2009.
The Baltimore City Paper, on 11
and 24 September 2009, reported
that investigators had filed
applications for seizure warrants to
seize funds in accounts held by
Electracash, Inc., HDM, Inc., and
Forshay Enterprises, Inc3.While the
11 September news article
suggested these seizures are
connected to the Bodog
investigation and internet
gambling, the 24 September article
acknowledged that such a
connection is not clear from the
documents that are available from
the federal district court.
According to the court
documents associated with the
seizures reported by the Baltimore
City News, the USAO applied for
seizure warrants on three dates.
The first group of three
applications was filed on 20 July
2009 and docketed on 3 August
2009. These applications requested
seizure warrants for funds in
accounts held by Electracash, Inc.
in banks located in California,
South Dakota, and New Jersey. The
affidavits in support of these
applications were made by a special
agent for the US Immigration and
Customs Enforcement. Motions to
seal the affidavits were granted and
they were ordered sealed ‘until
further order of this court, or until
20 January 2010, whichever is
earlier’. The applications describe
the funds sought to be seized as the
‘proceeds of an illegal gambling
business’.
The second group of three
applications was filed on 4
September 2009 and docketed on
10 September 2009. These
applications requested seizure
world online gambling october 2009
PAYMENTS
warrants for funds in accounts
held by HMD, Inc. in banks
located in California. The affidavits
in support of these applications
were made by a Maryland State
Trooper who is also an officer with
the US Immigration and Customs
Enforcement Task Force. A motion
to seal the affidavits was filed at the
same time as the applications. The
applications describe the funds
sought to be seized as the ‘proceeds
of an illegal gambling business’.
The final application was filed on
8 September 2009 and docketed on
23 September 2009. This
application requested a seizure
warrant for funds in accounts held
by Forshay Enterprises in a bank in
California. The affidavit in support
of this application was made by an
Anne Arundel County (Maryland)
Police Detective who is also an
Officer with the US Immigration
and Customs Enforcement Task
Force. A motion to seal the
affidavit was filed at the same time
as the application. The applications
describe the funds sought to be
seized as the ‘proceeds of an illegal
gambling business’.
None of the recent applications
for seizure warrants disclosed the
amounts held in the accounts for
which the warrants were sought.
There may be any number of
efforts to seize alleged illegal
gambling proceeds underway that
have not been made public.
Publicity may result when a
forfeiture action is filed and a
claim is made for the property at
issue, as happened in United States
v. $9,869,283.05. It may also result
when the USAO puts out a news
release, as it did in connection with
Neteller PLC and its co-founders.
The fact that the recent
applications by the USAO in
Maryland for seizure warrants were
accompanied by motions to seal
the supporting affidavits indicates
an ongoing investigation
concerning gambling that may not
world online gambling october 2009
There may be
any number
of efforts to
seize alleged
illegal
gambling
proceeds
underway
that have not
been made
public
be known to all those who are
suspected of violating antigambling laws. The activity by the
USAO for the District of Maryland
also shows that at least one USAO
other than the USAO for the
SDNY is, and has been for at least
three years, actively investigating
activity associated with illegal
gambling. Whether coordinated or
not, the activities of the USAO for
the SDNY and for the District of
Maryland show the US
Department of Justice are taking
an aggressive approach toward
what they believe to be illegal
gambling operations, by attacking
pathways for funds to flow into
and out of these operations.
Linda J. Shorey Partner
Dennis M.P. Ehling Partner
Anthony R. Holtzman Associate
Ashley J. Camron Associate
K&L Gates
linda.shorey@klgates.com
dennis.ehling@klgates.com
anthony.holtzman@klgates.com
ashley.camron@klgates.com
1. ‘US Attorney's Asset Forfeiture Unit
Sets $1.1 Billion Record’, available by
clicking on 'Asset Forfeiture Record' at
www.usdoj.gov/usao/nys/pressreleases/
2008index.html.
2. Van Smith, Bodog Internet Gambling
Investigation Leads to Money-Laundering
Charges (30 October 2008), Baltimore
City Paper, available at
www.citypaper.com/news/story.asp?id=1
6952.
3. See Van Smith, Feds in Maryland
Seize Bank Accounts Tied to On-Line
Gambling (11 September 2009) and
Feds in Maryland Seize Six More Bank
Accounts Tied to Laundering Gambling
Proceeds (24 September 2009),
Baltimore City Paper (available at
www.citypaper.com/news/story.asp?id=1
8640 and
www.citypaper.com/printStory.asp?id=19
013).
13
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