Indicted online poker kingpin returns to face beefed-up charges
Arrested in NY, Full Tilt Poker CEO accused of huge credit card Ponzi scheme
By Martin Merzer | Published: July 3, 2012
A central figure in what federal authorities call "an Internet Ponzi scheme" that siphoned hundreds of millions of dollars from credit card holders is now in jail, facing newly fortified charges related to his online poker operation.
Raymond Bitar, 40, CEO of Full Tilt Poker, was arrested Monday at John F. Kennedy International Airport in New York. Though the net was tightening around him, he and his lawyers said he voluntarily returned to the United States from Ireland.
Originally sought on an April 2011 indictment that, upon conviction, could have sent him to prison for just a few years, Bitar now faces 145 years in prison if convicted of all charges listed in a "superseding indictment" that was unsealed in court Monday.
Among those charges: bank and wire fraud, money laundering, conspiracy to violate gambling laws and operation of an illegal gambling business. That would be Full Tilt Poker, one of the largest of the Internet poker operations and one of three that were essentially shuttered by federal officials during the past year or so.
Bitar pleaded not guilty and was ordered held in lieu of $2.5 million bail. In a statement released in court, he said he was determined to repay credit card holders for their losses. Not their poker losses, but rather for the loss of their winnings and their stakes -- the balances they thought they held in their Full Tilt accounts.
"I know that a lot of people are very angry at me," Bitar said. "I understand why. Full Tilt never should have gotten into a position where it could not repay player funds."
It turns out that the gamblers were gambling to an extent they did not know, and the odds do not favor full or even significant repayment to those credit card holders.
Feds: $430 million drained
According to federal officials, Bitar and his partners drained $430 million out of the company, most of it from customer deposit accounts that supposedly were segregated from the company's general accounts. Only about $70 million was left behind. The problem: Full Tilt customers, most of whom funded their accounts through credit card transactions, thought they had $350 million in those accounts.
"It truth and in fact, and as Bitar well knew, Full Tilt Poker did not protect player funds in separate accounts and instead used player funds for whatever purposes Bitar directed, including to pay Bitar and the other owners of Full Tilt Poker hundreds of millions of dollars," according to the indictment.
[Bitar] stands accused of defrauding Full Tilt's customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The online casino became an Internet Ponzi scheme.
|-- Federal indictment of Raymond Bitar|
Worse, after the original indictment in 2011 placed extreme pressure on Full Tilt and the other two firms, PokerStars and Absolute Poker, Bitar allegedly doubled down. According to the indictment, he intensified efforts at Full Tilt to attract fresh deposits from new poker players so he could satisfy cash withdrawal demands from existing poker players.
"As alleged, Bitar has already been charged with defrauding banks to conceal illegal gambling," said FBI Assistant Director in Charge Janice Fedarcyk. "Now, he stands accused of defrauding Full Tilt's customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The online casino became an Internet Ponzi scheme."
Law pushed online poker offshore
In all, this is the latest chapter in a yearslong federal attempt to block Americans from engaging in Internet poker (and other forms of online gambling), even though poker players insist they have a right to decide for themselves if they should indulge in the activity from the comfort of their homes, offices, commuter trains, whatever.
Following the money, seeking to cut off the lifeblood of Internet gambling, which almost always is funded through credit card transactions, the federal Unlawful Internet Gambling Enforcement Act of 2006 prohibited the transfer of funds from U.S. financial institutions to gambling sites. That law required credit card networks and banks to navigate a forest of conflicting definitions and rules, but it had only a minor impact. It pushed virtually all of the online gambling industry overseas, allowing the firms to keep operating from safe havens in Ireland and elsewhere.
Not good enough, federal authorities said as they issued that 2011 indictment. Bitar and the others allegedly were still breaking U.S. law by engaging in huge, creative conspiracies to camouflage illegal gambling-related credit card transactions as legitimate business or entertainment expenses.
That indictment and its aftermath had a more profound effect. Full Tilt Poker ceased U.S. operations in April 2011 and international operations about two months later.
... I will continue to do whatever is required to get the players repaid, and I hope that it will happen soon.
CEO, Full Tilt Poker
Poker comeback draws limited support
Meanwhile, even as federal authorities continue to press forward with their crackdown on Internet gambling, poker players have their supporters in Congress and in some state legislatures.
Nevada recently approved two online gambling licenses that could permit Internet gambling within that state. On the federal level, efforts by retiring U.S. Rep. Barney Frank, D-Mass., and others to repeal or soften the 2006 Unlawful Internet Gambling Enforcement Act have gone nowhere -- not a single measure has made it out of committee.
Back in New York City, Bitar was the seventh of the 11 original defendants to be arrested, according to U.S. Attorney Preet Bharara. The first six pleaded guilty and are in prison or awaiting sentencing. The other four are still at large.
"Raymond Bitar will now be held criminally responsible for the alleged fraud he perpetrated on his U.S. customers that cost them hundreds of millions of dollars," Bharara said. "The indictment alleges how Bitar bluffed his player-customers and fixed the game against them as part of an international Ponzi scheme that left players empty-handed."
For his part, Bitar insists that he'll figure out a way to repay victims of Full Tilt's full tilt.
"I believe we are near the end of a very long road," he said, "and I will continue to do whatever is required to get the players repaid, and I hope that it will happen soon."
Neither Bitar's attorney nor representatives of the gaming industry responded when asked how Full Tilt's customers could line up for possible repayment.
- DIY credit card arbitration: You may be able to opt out – Consumers can preserve their right to go to court instead of private arbitration in many cases by going through and opt-out process ...
- CFPB rule: Consumers should be able to band together and sue – Banks, GOP oppose measure that would end "mandatory arbitration" clauses that prevented class-action suits ...
- Bluesnarfing is newest card fraud at gas pumps and ATMs – With a skimmer and Bluetooth technology, fraudsters can sit nearby and intercept your payment transaction details ...