Poker Busts: A Trail of Cooperators

Friday's announcement of a massive indictment against 11 big wigs in the world on online poker follow a predictable pattern: Earlier busts and flips.

Looking at today's indictment, available here, it's obvious there was an earlier, preceding indictment. The case is numbered 10-cr-336 which means it was filed in 2010. And today's indictment is called a "Superseding Indictment."

Who got indicted first in case no 10-cr-336? Daniel Tzvetkoff, age 27, owner of Intanet, an online payment processing company in Australia. He was indicted in New York in April, 2010 on money laundering and related charges for processing $543 million in payments for online gambling companies and disguising the transactions as being unrelated to gambling. [More...]

He was arrested in Nevada, at first ordered released on bond, but the Government got a stay pending a review hearing, and on April 28, 2010, he was ordered detained without bond as a flight risk. One of his two attorneys is Boston powerhouse Marty Weinberg, one of the best defense lawyers anywhere (and, disclosure, a long time friend.)

Pre-trial motions were due to be filed in August. None were filed. Instead the docket shows only a series of sealed documents placed in the court's vault.

According to the Australia newspapers, he's been released from jail. Since there's no indication of that on the court docket, it must be in one of the sealed documents.

Translation (mine): He was cooperating.

So how did they get Tzvetkoff? It looks to me like they got him through Andrew Thornhill, who was first charged in 2009 in a sealed complaint with violations of 18 U.S.C. 371, 1349,1956(h), conspiracy to commit fraud and conspiracy to commit money laundering. He was granted a $500,000 bond that required no money, only the signatures of two responsible people. His complaint is still not unsealed. Then, in June, 2010, two months before Daniel Tzvetkoff is indicted, he agreed to plead guilty to an information, charging him with Conspiracy under 18 USC 371 to Make False Statements in connection with Loan Applications and Conspiracy to participate in an illegal gambling business(Case 10 cr 533.) (The maximum penalty for each offense is 5 years, quite a reduction from money laundering.) He was sentenced to a whopping 3 months in prison. He also had to forfeit $96,000, his 2008 Audi, and his right to any payments Intanet (Tzvetkoff's company) owed for his services. Thornhill, age 40, was released from federal custody on March 4, 2011.

Shorter version (my assumption): Thornhill cooperated in exchange for his 3 month sentence and gave up Tzvetkoff and others.

Who else did Thornhill and/or Tzvetkoff give up? On July 30, 2010, Curtis Pope, who also worked with Intanet, was indicted in Case no. 10-cr-675 for money laundering, gambling and fraud offenses, including processing online payments for gambling businesses, in the amount of $543 million, same as Tzvetkoff. He has pleaded guilty and is awaiting sentencing. His lawyers also filed no motions and some documents in the case are sealed. (It's not possible to tell what he pleaded guilty to or what sentencing concessions he's getting since the documents are sealed.)

Pope's sentencing was continued for medical reasons until March, 2011, but there's no docket entry for his actual sentencing.

Translation (mine): He cooperated as well.

Another giveaway these three are related (in addition to Thornhill's Information mentioning Intanet and the new indictment having the same case number as Tzvetkoff's case): They were all charged with conspiracy for a time period beginning in February, 2008. (The end date for Tzvetkoff is March, 2009, for Pope it is May, 2009 and for Thornhill it is December, 2009, the month he was first charged.)

There's a lot more players involved in the story. One of the men indicted today is named Chad Elie. Chad Elie filed a civil lawsuit in Utah in December, 2010 against Jeremy Johnson and SunFirst Bank and others for fraud. (Case No. 10-cv-01273.) It just recently got unsealed. SunFirst is the bank mentioned in the DOJ press release today.

The FTC got mad at Elie and intervened in his Utah civil case saying he was greedy and trying to get all SunFirst's and Johnson's money for himself, as if he was their only victim, when there were hundreds of victims in Nevada, where the FTC had a case going against Jeremy Johnson. (Nevada Case 10-cv-02203). From its motion:

As explained in detail below, the FTC seeks to intervene because plaintiff Chad Elie has engaged in a secretive race to the courthouse in an effort to grab money held by the defendants. Meanwhile, the FTC has filed a lawsuit in the District of Nevada, FTC v. Johnson, CV 10-2203- RLH (GWF) (D. Nev.) (the “Nevada case”), charging Jeremy Johnson, nine of his underlings (including defendants Leavitt and Johnston), and 61 of his corporations with orchestrating a massive Internet fraud that has caused consumers to lose over $275 million.
Elie ended up dismissing his civil Utah case. But somebody must have still been pretty mad at him, because he's now one of the 11 indicted in the new gambling case. (He filed so many documents in the Utah case with exhibits, including e-mails, I wouldn't be surprised if he gave the government a road map to indicting him.)

Another person who was indicted today is John Campos, a shareholder and Vice-Chairman of SunFirst Bank. According to the DOJ press release,

Campos allegedly agreed to process gambling transactions in return for a $10 million investment in SunFirst by ELIE and an associate, which would give them a more than 30% ownership stake in the bank. CAMPOS also requested and received a $20,000 "bonus" for his assistance.

The financial stakes are much higher with the new Indictment. The Government is seeking to forfeit $3 billion from those indicted.

Several of the new defendants reside outside the U.S. Full-Tilt Poker, in Ireland, has released a statement of support for both its CEO Raymond Bitar and Nelson Burtnick.

Online poker is a game of skill enjoyed by tens of millions of people in the United States and across the world. And, Full Tilt Poker remains as committed as ever to preserving the rights of those players to play the game they love online.

Mr. Bitar and Full Tilt Poker believe online poker is legal – a position also taken by some of the best legal minds in the United States. Full Tilt Poker is, and has always been committed to preserving the integrity of the game and abiding by the law.

“I am surprised and disappointed by the government’s decision to bring these charges. I look forward to Mr. Burtnick’s and my exoneration,” said Mr. Bitar.

And the bad news for those in the U.S. who played through Full Tilt Poker:

Unfortunately, as a result of this action, Full Tilt Poker has decided that it must suspend “real money” play in the United States until this case is resolved. However, Full Tilt Poker will continue to provide peer-to-peer online poker services outside of the United States.

[Note: The assumptions above are based only on publicly available court files through PACER. I have never heard of any of these people, or the poker businesses involved, before today. Criminal charges contained in indictments are merely allegations. They should not be taken as a sign of guilt. Also,while those who have pleaded guilty have made admissions and allegations against others, keep in mind that those who make deals to cooperate against others in exchange for leniency for their own misdeeds have a motive to embellish and fabricate. Freedom is a commodity far more precious than money.]

Update 4/17: I forgot a big one: Douglas Rennick. Rennick, a Canadian involved in the payment processing business, was indicted in August, 2009, on charges of bank fraud, money laundering and illegal gambling(Indictment here.) The bank fraud charge alone carried a sentence of up to 30 years. Via PACER, Rennick surrendered on the Indictment on May 10, 2010 and was granted release on bond. The very next day, he pleaded guilty to a one count information charging a violation of 18 USC 1084, Transmission of Gambling Information, which carries a maximum penalty of two years. His sentence? On September 15, 2010, he was sentenced to 6 months of probation, on house arrest in California.

Translation: The plea deal was worked out over months, before Rennick ever appeared in court on the charges in the Indictment.

On May 11, 2010, the same day he pleaded guilty, he also agreed to the forfeiture of $565 million ($565,908,208) representing the proceeds of the "gambling conspiracy offense"; $16,341,941.59 million seized on June 2, 2009 in an account at Wells Fargo in the name of "Account Services"; $759,115.29 and $16,637.33 seized on June 12, 2009 in accounts at Union Bank in the name of "Account Services".

What a deal for Rennick. It sure seems like he must have cooperated to get it. Only, there's no reference to cooperation in the Government's sentencing memorandum. The Government says Rennick spared it the cost of extraditing him from Canada by agreeing to surrender. There are no sealed documents. And he did have excellent attorneys (Gerald Lefcourt in New York and Michael Pancer in CA). Maybe they just did a great job, and got the Government to dismiss the bank fraud and money laundering charges, and let him plead to a two year offense for which his guidelines are 6 to 12 months, provided he forfeits boatloads of money, all of which except the $565 million is already in the Government's possession. On the forfeiture: The Government got the money when it obtained seizure warrants in 2009 for a slew of bank accounts. They are not available on PACER, either because they are sealed or because they aren't "civil actions" but "warrants" which aren't electronically filed. A few of the seizure warrants and affidavits were unsealed and released with heavy redactions after a media group, Costigan Media, sued to intervene and obtain them.

I suspect a much fuller picture will emerge when the full affidavits for the seizure warrants are released. That should be very soon, since the civil forfeiture suit the Government filed on Friday when it filed the new criminal Indictments states that the affidavits are attached as exhibits to the complaint. While the civil complaint is available online, it's not yet on PACER. Once it's on PACER, the affidavits for the seizures, which are attached as exhibits, should also be available. (The SDNY is very slow getting documents on PACER for some reason. Other places, the documents are available the minute they are filed.)

In any event, Rennick seems to be a part of the story of the new case. Whether he provided information to help the Government remains to be seen.

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  • Display: Sort:
    500 mil is a crime, even 3 bil is, (5.00 / 2) (#7)
    by jeffinalabama on Sat Apr 16, 2011 at 10:06:39 AM EST
    but robosigning, 700 billion, CDFS, etc. aren't.

    BTD, we're betting in the wrong casino, like someone said last night.

    Thanks, Jeralyn, for your work. For this and many other reasons you deserve another Koufax.

    Absolutely agree (5.00 / 2) (#8)
    by Dadler on Sat Apr 16, 2011 at 10:26:01 AM EST
    Squirrel nuts.  Since the Feds can't go after the biggest financial criminals (because those crooks actually control pols and the law), they have to get off on this.  

    Europe must be laughing at us again.  They just legalize and regulate.  No Puritan reside for them.  All their Puritans got on boats a long time ago, and they sailed right here.


    I'm still trying to figure out (none / 0) (#10)
    by nycstray on Sat Apr 16, 2011 at 10:40:16 AM EST
    why it's illegal :P

    I have gambling right up the road from me about 5-10 minutes away. I just don't get it . . .


    One is taxed and regulated (none / 0) (#18)
    by CoralGables on Sat Apr 16, 2011 at 01:19:17 PM EST
    the other one isn't

    That's the only difference (none / 0) (#9)
    by Militarytracy on Sat Apr 16, 2011 at 10:37:43 AM EST
    One casino bought itself a government and the other ones didn't

    And, in fact, (none / 0) (#21)
    by Zorba on Sat Apr 16, 2011 at 03:38:45 PM EST
    our son, who had been making a significant part of his living (not the main part, but enough to make a difference) from online gambling, has decided to start reading up on, studying, and analyzing the stock and commodities markets.  He may be onto something.  Legal gambling.

    Nooooo!!!!! (5.00 / 1) (#29)
    by kdog on Sun Apr 17, 2011 at 06:33:35 AM EST
    Hate to see us lose another sharp cat to grifting, they already are drawing some of our best and brightest math minds to create new scams.

    Narural outcome of valuing grifting as a society I guess, it just breaks my heart.  Say what you will about poker, selfish pursuit or what have you...but it doesn't cause widespread harm like finance gaming.  


    People need to make a living though (5.00 / 0) (#35)
    by Militarytracy on Sun Apr 17, 2011 at 11:24:32 AM EST
    And regulating doesn't destroy jobs, it just creates different jobs.  Sad though huh?

    I have long said that (none / 0) (#30)
    by jimakaPPJ on Sun Apr 17, 2011 at 08:35:04 AM EST
    the average Joe is better off playing blackjack in Vegas than trying to do "market timing" investments. At least in Vegas he'll get free booze, food and perhaps a nice free room.

    (IRA's and other long term investments are different.)


    BTW, Jeralyn, you should change the 3 of clubs... (5.00 / 1) (#22)
    by Dadler on Sat Apr 16, 2011 at 06:01:28 PM EST
    ...to a 7.  Worst statistical starting hand in Hold 'Em.  

    interesting use of (5.00 / 1) (#24)
    by cpinva on Sat Apr 16, 2011 at 08:43:42 PM EST
    scarce, allocable resources, by DOJ. the "titans" of wall street nearly crash the entire world economy, with their secret, illegal gambling, and.....................nothing.

    obviously, the owners of these gambling sites need to start employing a better crowd of lobbyists on capital hill.

    This is the kind of unique and original (none / 0) (#1)
    by andgarden on Sat Apr 16, 2011 at 01:43:17 AM EST
    analysis that I come here for. Thanks Jeralyn!

    thanks for reading it (5.00 / 4) (#2)
    by Jeralyn on Sat Apr 16, 2011 at 01:47:23 AM EST
    it only took me four hours to research and write and I was wondering if anyone would even care!

    I could tell that you didn't (5.00 / 1) (#3)
    by andgarden on Sat Apr 16, 2011 at 01:52:51 AM EST
    just throw this together. This is the kind of thing that you need experience and familiarity with the process to write. $300M or not, Huffpo isn't likely to have anything like it. ;-)

    It got more interesting as I read on (5.00 / 1) (#6)
    by ruffian on Sat Apr 16, 2011 at 08:10:28 AM EST
    I like the process analysis, even if online poker in itself is not a hot button topic for me.



    It really is great analysis (none / 0) (#4)
    by Big Tent Democrat on Sat Apr 16, 2011 at 07:53:56 AM EST
    I gave the legal short shrift in my spot.

    I know some of the landscape but don't reallyknow the law.

    Great stuff.


    Very interesting... (none / 0) (#5)
    by kdog on Sat Apr 16, 2011 at 08:00:53 AM EST
    Freakin' banksters man...no honor among those thieves, eh?

    Conclusion...banksters have their hands in everything, and eventually ruin everything. The markets, housing...online poker the latest victim. Banking is a cancer.

    The interesting thing is that (none / 0) (#11)
    by jimakaPPJ on Sat Apr 16, 2011 at 10:51:12 AM EST
    there is no allegation that any player was cheated.

    So you have to wonder what was the basis of the underlaying law that those indicted are alleged to have violated.

    So you have to wonder what was the basis of the underlying law that those indicted are alleged to have violated.

    When Internet gaming started in the late 90's many maintained that it violated the Wire Act which makes it illegal to transmit via a

    wire communication facility" to transmit information related to wagering on "any sporting event or contest." 18 U.S.C. § 1084(a). An exception exists if that act is legal in both the source and destination locations of the transmission. § 1084(b)...... The Department of Justice maintains that, under the Wire Act, all Internet gambling by bettors in the United States is illegal.....The Fifth Circuit disagreed, ruling that the Wire Act applies only to sports betting, not other types of gambling. In re MasterCard Int'l Inc., 313 F.3d 257 (5th Cir. 2002).

    The 2006 law noted in the indictment was passed after a spate of stories about people maxing out their credit cards, or their parents' cards. Since some states have laws that make gambling debt collections illegal the question was if the debt to the credit card company was a gambling debt. The answer is obviously no more than a purchase from Men's Wearhouse is a clothing debt. But it was terrible publicity and there were legal challenges in the pipeline. And Congress, ever anxious to protect us from ourselves and the banks from us, acted.

    In 2006, Congress passed the Unlawful Internet Gambling Enforcement Act, which made it illegal for wagering businesses to knowingly accept payment in connection with unlawful Internet gambling (though it does not itself make Internet gambling illegal). 109 Pub. L. 109-347, Title VIII (Oct. 13, 2006) (codified at 31 U.S.C. §§ 5301, 5361-67). It also authorizes the Federal Reserve System to create regulations that prohibit financial transaction providers (banks, credit card companies, etc.) from accepting those payments. See 31 U.S.C. § 5363(4). This Act, along with threats of prosecution under the Wire Act from the Department of Justice, has caused several Internet gambling businesses to withdraw from the U.S. market.


    Of course the major credit card companies, months before the law was passed, had stopped the use of their cards for funding gaming activities. Some on line payment services, such as Fire Pay, continued until the law was passed.  PayPal had stopped when purchased by Ebay months before.

    When the law went into effect the general consensus of those I spoke with was that the law did not outlaw gambling but it did outlaw funding gambling activities by making the electronic transfer of funds for gambling purpose illegal. Thus it appeared to be aimed at sports betting which has had a long history of secondary problems. i.e. Game fixing, point spread manipulation, etc.

    Some will argue that those indicted were in clear violation of the law. I will let a jury decide, but then I, as a social liberal and somewhat Libertarian, believe that the government's function in life is to insure the "games" aren't crooked, something it seems to be unable to do when it comes to oil pricing, not to tell us what games we can and can't play.

    As for the law, I will let others explain why it is illegal to accept money from an activity that is not illegal.

    And for those who think that the owners of the establishment running a poker game are "gambling," I can only say they have never watched all that money disappear down the hole into the box that contains the "drop."

    Kids maxing out credit cards to game (none / 0) (#14)
    by andgarden on Sat Apr 16, 2011 at 11:33:06 AM EST
    sounds more than plausible to me. The state has a strong interest in preventing that.

    But banning all online gambling seems like an overbroad response to me. Requiring the credit card companies to issue the banking equivalent of "vertical licenses" to underage cardholders seems like it would have been a much better fit.


    And I have no (none / 0) (#13)
    by jimakaPPJ on Sat Apr 16, 2011 at 10:55:26 AM EST
    idea why some of my comments are "doubling."

    I am using Google Chrome. Anyone noticed anything similar?

    i only see one version (none / 0) (#15)
    by jeffinalabama on Sat Apr 16, 2011 at 12:28:46 PM EST
    of each comment, Jim.

    I deleted the duplicate (5.00 / 1) (#16)
    by Jeralyn on Sat Apr 16, 2011 at 12:30:54 PM EST
    but let his comment about it stay because of his concern about Chrome.

    Emily Litella time (none / 0) (#17)
    by jeffinalabama on Sat Apr 16, 2011 at 12:32:36 PM EST
    never mind!

    Pokerstars just indicated (none / 0) (#19)
    by jeffinalabama on Sat Apr 16, 2011 at 01:20:09 PM EST
    that 31k of my bankroll is cashable, if i so desire. At present, I'll let it sit.

    Gutsy, no? (5.00 / 1) (#20)
    by oculus on Sat Apr 16, 2011 at 02:07:16 PM EST
    Get it out (5.00 / 3) (#25)
    by Big Tent Democrat on Sat Apr 16, 2011 at 10:00:37 PM EST
    I sure would (5.00 / 2) (#27)
    by andgarden on Sat Apr 16, 2011 at 10:55:49 PM EST
    Not even a question.

    BTD is right (5.00 / 2) (#26)
    by jimakaPPJ on Sat Apr 16, 2011 at 10:48:33 PM EST
    get it out if you can.

    The indictment calls for seizing the assets. It can easily be argued that your "bankroll" is actually chips that have not been cashed in. The question then becomes, who has first claim on the money in the "cage?" You or the government?

    I think we know who would win that argument.


    Request is in... (5.00 / 1) (#38)
    by jeffinalabama on Mon Apr 18, 2011 at 06:48:12 AM EST
    followed everyone's advice.

    Phil Ivey (none / 0) (#23)
    by AngryBlackGuy on Sat Apr 16, 2011 at 06:31:49 PM EST
    One of the best poker players in the world and a personal hero has a stake in one of those companies.

    If he gets caught up I might cry.

    Lots of men named. (none / 0) (#28)
    by lilburro on Sun Apr 17, 2011 at 03:29:25 AM EST
    Few women.  Gambling is always interesting.

    Some of the best players (none / 0) (#32)
    by jimakaPPJ on Sun Apr 17, 2011 at 09:58:09 AM EST
    are female as are many of the room managers.

    This is about alleged law violations in money transfer, not poker players.


    Since it was a "payment processing" biz, (none / 0) (#33)
    by Peter G on Sun Apr 17, 2011 at 10:33:59 AM EST
    maybe the $565 mil that was in Rennick's possession and which he agreed to forfeit was not even his money, but rather money he/his company was holding for processing as an intermediary between the gambling enterprise(s) and the bettors.  Am I wrong about that TL (not having read the docs as you have)?

    I don't think the $565 million (5.00 / 1) (#37)
    by Jeralyn on Sun Apr 17, 2011 at 06:10:12 PM EST
    was ever in his possession. That's the total of the amount involved in "the gambling conspiracy." Theoretically, he owes that to them, as they only collected $17 mil from him.

    As to the $17 mil seized from bank accounts of his company, Account Services, he filed a declaration (to establish standing) saying  his company, Account Services, owned the accounts and had a possessory (not ownership) interest in the funds seized

    ASC owned the accounts, which consisted in large part of money held in trust by ASC 5 for approximately 13,800 individual poker players, as well as operating funds, and 6 a small amount of other funds unrelated to online poker. See Decl. of Douglas G. Rennick, attached as Exhibit 2. ASC owed each of those individual players a fiduciary duty, which it breached when checks issued by ASC, payable to the individual players, bounced as a result of this seizure.

    Notwithstanding the fact that some of the players may have been credited for their lost funds by the operators, ASC still has an interest in and a need for return of the money. In many cases, individual players cash their checks at check cashing businesses across the country; ASC is now.liable to every one of those cash checking business that paid players for what were bad checks, and receives daily demands for reimbursement of the bounced checks.

    So I think you are correct, the $565 million is not his money, but the total amount that was sent and received by all participants.

    The pleadings are in the Southern District of California case. (Rennick was represented there by Mike Pancer, a really great lawyer as I've said before, and the reply brief was written by Rick Barnett, a top-notch forfeiture lawyer in San Diego.)

    The loss of that suit had nothing to do with the money or crime, but the fact that the Government said the San Diego court had no jurisdiction to grant a Rule 41(g) motion once the New York indictment was returned. The money was seized in June, he filed his motion for the return in July, and two days before the answer was due, the Government indicted him in New York.

    The court in San Diego sided with the government on this, Rennick appealed, and then dismissed the appeal, which I take to mean he had reached his settlement with the Govt. on the criminal case. He then appeared in NY on the criminal case in May, 2010 and pleaded guilty to a minor charge, agreeing to forfeit the money. In September, 2010, he was sentenced to probation.


    Off topic comments deleted (none / 0) (#36)
    by Jeralyn on Sun Apr 17, 2011 at 05:45:30 PM EST
    as well as a comment reprinting a huge section of a statute.