Isai Scheinberg, founder of PokerStars, has pled guilty in a New York court to running a multi-million dollar unlawful internet gambling business.
Scheinberg pled guilty to one count of operating an illegal gambling business, for which he faces a maximum sentence of up to five years in prison. Judge Lewis Kaplan will be responsible for determining the punishment, with the date for sentencing yet to be set.
All other charges were dropped.
Geoffrey Berman, US Attorney for the Southern District of New York, revealed that Scheinberg, 73, had been arrested in Switzerland on 7 June 2019, as a result of the US charges. The Swiss Federal Office of Justice then ordered his extradition to the US in October that year, a decision that he appealed.
However, Scheinberg then withdrew his appeal and surrendered to federal agents on 17 January, and was arraigned before Judge Katharine Parker that day.
“Ten years ago, this office charged 11 defendants who operated, or provided fraudulent payment processing services to, three of the largest online poker companies then operating in the United States – PokerStars, Full Tilt Poker, and Absolute Poker – with operating illegal gambling businesses and other crimes,” Berman said.
“As Isai Scheinberg’s guilty plea today shows, the passage of time will not undermine this office’s commitment to holding accountable individuals who violate US law.”
A spokesperson for Scheinberg told iGB: “Mr Scheinberg is pleased to put this matter behind him and that all charges other than violating the 1971 Gambling Act have been dropped.
“Notably, all PokerStars players were paid back immediately and Mr Scheinberg played an important role in ensuring that all of the players from other sites were repaid as well.”
The former executive becomes the last individual to face charges in the crackdown against online gaming sites targeting US customers, launched in March 2011. While the passage of the Unlawful Internet Gaming Enforcement Act (UIGEA) in 2006 saw most igaming operators pull out of the US, a small number continued to serve the market.
The Department of Justice ultimately took action against these sites, with PokerStars, Full Tilt Poker and Cereus, operator of the Absolute Poker and Ultimatebet sites shut down on 15 April 2011.
In total, 11 defendants were charged in the original indictments. On the operator side, Scheinberg was indicted alongside PokerStars’ payments director, while Full Tilt CEO Raymond Bitar and director of payment processing Nelson Burtnick were also charged, as were Cereus’s Scott Tom and Brent Beckley. Payment processors Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie and John Campos were also charged.
All ultimately pled guilty, and aside from Scheinberg, have all been sentenced, ranging from fines to jail time.
While the charges against its founder remained outstanding, PokerStars agreed to settle a civil forfeiture and civil money laundering action brought by the US authorities in 2012. This saw it forfeit $547m to the US and take responsibility for reimbursing $184m owed to Full Tilt Poker players, after the operator collapsed in the wake of the indictments, while acquiring its former rival’s assets.
As part of that agreement, Scheinberg was banned from serving in a managerial or directorial role for the business, resulting in his son Mark taking charge. In 2013 Mark Scheinberg agreed to forfeit an additional $50m to the Department of Justice, to be released from any future claims linked to the Black Friday indictments.
The case is being handled by the Complex Frauds and Cybercrime Unit, within the US Attorney’s Office for Southern District of New York, with assistant US attorneys Olga Zverovich, Sarah Lai, and Jason Cowl in charge of the prosecution.
Berman thanked the the Federal Bureau of Investigation and Homeland Security Investigations for their aid in the investigation and prosecution. He also thanked the Swiss authorities and the Department of Justice Criminal Division’s Office of International Affairs for their assistance with the arrest and extradition proceedings.
Under Mark Scheinberg’s control, PokerStars’ parent company Rational Group was sold to Amaya Gaming Group in June 2014, for $4.9bn.
The business was renamed the Stars Group and went on to acquire Sky Betting & Gaming in in April 2018, before striking a deal to merge with Paddy Power and Betfair operator Flutter Entertainment in October last year, to create a new gaming giant with annual revenue of £3.8bn.