Online Gambling Funds Seizure Case

2 Comments   Email   Print

Even before the passing of the UIGEA the Department of Justice (DoJ) was taking steps against online gambling. The prosecutions of the owners of Neteller and PartyGaming are examples. In a move that took everybody by surprise, the DoJ under the Obama administration went much further in its efforts to curb online gambling. It seized funds meant for disbursement to online players.

In June 2009, the United States District Court of Southern District of New York issued a civil seizure warrant against funds in named accounts in specified banks. The warrant was issued on the basis of an affidavit given by a special agent of the Federal Bureau of Investigation. The agent averred that the funds were subject to seizure and civil forfeiture as per law. Accordingly Arlo Devlin-Brown, the assistant U.S. Attorney for the Southern District of New York instructed the four banks to freeze said accounts. The accounts were in a Wells Fargo bank in San Francisco and in Alliance Bank of Arizona among others. The accounts belonged to an online payment processor. The exact reason given for the seizure was that the funds were involved in “money laundering transactions and illegal gambling offenses”. The total amount seized was between $30 million and $40 million.

The online gaming industry was up in arms against this seizure. The online poker industry was most affected because most of the funds seized came from PokerStars and Full Tilt Poker. The Poker Players Alliance (PPA) spoke out strongly against the DoJ. It claimed that there was no legal standing for the action because the UIGEA regulations were not yet applicable and the Wire Act applied only to sports betting. Costigan Media filed a motion in the court to unseal the court records relating to the issuance of the warrant so that the legality of the action could be examined. Account Services Corporation, the payment processor whose funds had been seized, filed a motion for the return of property.

While all these legal battles were playing out in the courts, the DoJ and the FBI delivered a second punch in the case. They filed an indictment charging the owner of the seized accounts with bank fraud and other offenses. The owner was Douglas Rennick who operated a number of payment processing companies such as KJB Financial Corporation, Account Services Corporation and Check Payment Financial Co. It is alleged that since 2007 Rennick has processed more than $350 million for online gambling operators. His modus operandi was as follows. He opened the accounts stating that he would be using them to issue rebate checks and for payroll processing. However, funds from offshore online gambling companies were received in the accounts and disbursed to U.S. residents withdrawing their gambling winnings.

The 34 year old Rennick is a resident of Canada. He has been charged with one count each of conspiracy to commit bank fraud, conspiracy to engage in money laundering and conspiracy to operate an illegal gambling business. The punishment that Rennick faces if found guilty is a maximum of 30 years in prison and a fine of $1 million fine on the bank fraud charge, 20 years in prison and a fine of $500,000 on the money laundering charge and 5 years in prison and a fine of $250,000 fine on the illegal gambling charge.

Article Tools

 Email     Print     Digg     Del.icio.us    StumbleUpon

Comments

 Add Comment

Add Comment

More Articles