July 14, 2011
Arrest warrants were also issued for several of the founders of these companies for, among other things, money laundering, wire fraud, and bank fraud.
That same day, Full Tilt Poker froze all of the accounts of its U.S. players, and hasn’t released them yet.
What were these Internet poker companies doing wrong?
2006’s Unlawful Internet Gambling Enforcement Act made it a federal offense for a gambling business to “knowingly accept” payments “in connection with the participation of another person in unlawful Internet gambling.”
The Act defines “unlawful Internet gambling” simply as “betting, receiving, or transmitting a bet that is illegal under federal, state, or tribal law.”
While the companies didn’t actually directly accept payments illegal under the UIGEA, they set up a complex scheme of rerouting funds from U.S. customers in an effort to mask the transactions from federal authorities (thus, the wire fraud, bank fraud, and money laundering charges).
Now, the case at hand.
Several of Full Tilt’s customers are suing over their frozen accounts.
The complaint gives three causes of action, one conversion claim, and the other two based on the Racketeer Influenced and Corrupt Organizations Act (RICO).
Hot Doc: Segal v. Bitar
RICO is very complex, but essentially, it targets patterns of criminal activity.
It also allows any person injured in his business or property by reason of a violation of RICO a civil cause of action.
However, were the plaintiffs injured by Full Tilt’s RICO violations (wire fraud, bank fraud, and money laundering)?
That will be the most difficult issue for the plaintiffs to prevail on.
Although the complaint states Full Tilt lied to the plaintiffs about the nature of their financial transactions (the money’s being rerouted through multiple institutions), the transfers would have still been illegal under the UIGEA if they were simply done directly with Full Tilt.
Thus, any ignorance by the plaintiffs of the illegality of the transactions would have to be argued as ignorance of the UIGEA’s application.
Though that isn’t an impossible case to make considering the law’s vague definitions, it’s still quite difficult considering that real-life poker with actual money is illegal in the plaintiffs’ home states.
So are these players just out of luck (and their money)?
Absolutely not, since the Justice Department has already made arrangements with the three poker companies (including Full Tilt) for the return of all U.S. player funds.
So what’s the point of this suit?
Part of it may be that Full Tilt isn’t returning the funds fast enough, since PokerStars has already started refunding its players’ money.
But if that’s all the suit is about, the complaint would’ve stopped at its conversion claim.
Instead, there are two additional RICO civil claims, which allow for the recovery of threefold the damages sustained and legal fees.
So will the suit be successful?
Its chances on its conversion claim are far greater than its RICO claims, but the suit will have consequences reaching far beyond Full Tilt’s customers.
Because of the UIGEA’s vagueness and RICO’s continuing development, this suit – along with the criminal proceedings mentioned above – may at least clear up any ambiguities about the legality of Internet poker.