Charges Made In Online Gambling Funds Case

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A few months ago the United States Department of Justice (DoJ) had seized funds from Wells Fargo and Union Bank that were meant for paying players at Internet gambling sites. Pursuing that lead the DoJ has obtained the indictment of a Canadian resident named Douglas Rennik. This story was first broken by the Agence France Presse news agency and has spread across the Internet like wildfire.

The indictment was obtained in the Southern District of New York at the same US court that ordered the seizure of the Internet gambling funds. Rennik has been charged with bank fraud and other charges related to the distribution of Internet gambling winnings to US players disguised as other payments. The DoJ has specifically alleged that between 2007 and 2009 Rennik processed $350 million for Internet gambling firms. The funds were transferred to US banks from a bank in Cyprus. The modus operandi was opening bank accounts in the United States in the names of dummy corporations like "KJB Financial Corporation", "Account Services Corporation" and "Check Payment Financial Co". Rennik falsely declared that the purpose of opening these accounts was to issue rebate checks, refund checks, sponsorship checks, affiliate checks and minor payroll processing.

The DoJ further claimed that Rennik and others, who have not yet been named, actually used these accounts to receive payments from offshore Internet gambling companies and remit them via checks to US players who had requested withdrawals of their gambling winnings. The Internet gambling companies offered products like poker, blackjack, slots and other casino games. The indictment stated that the US banks would not have processed the transactions if they were aware that the transactions pertained to Internet gambling and therefore Rennik had provided false and misleading information about the nature of the transactions.

If the charges stick in the courts then the maximum punishment that Rennik faces is a prison term of 30 years and a fine of at least a million dollars under charges like bank fraud and money laundering. The DoJ has also asked for forfeiture of the seized funds. The DoJ has all along claimed that Internet gambling is illegal under the Wire Act even if the Internet gambling sites are owned by foreign companies. In the past the DoJ has acted against these foreign operators like PartyGaming. However now the Unlawful Internet Gambling Enforcement Act (UIGEA) has been passed and the DoJ is on much firmer ground acting against the processing of financial transactions for Internet gambling. Such financial transactions are illegal under the UIGEA.

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