Ray Bitar who was charged with bank fraud, money laundering and online gambling offences faced a jail sentence of 65 years
Ray Bitar, the online poker tycoon who ran the world’s second largest poker site from servers in Guernsey, has abandoned his defence against criminal charges brought by US prosecutors, striking a plea bargain as he awaits a heart transplant in California.
Bitar, 41, one of the founding figures behind Full Tilt Poker, becomes the second of 11 senior poker executives and payment processor intermediaries charged two years ago with bank fraud, money laundering and online gambling offences.
He was charged in April 2011 on five counts, and faced a maximum jail sentence of 65 years. Full Tilt was shut down and assets frozen. In four and a half years since the US enacted anti-online gambling laws, prosecutors alleged Full Tilt – branded around star players Phil Ivey, Howard Lederer and Chris “Jesus” Ferguson, each of whom had a stake in the business – had taken “at least an estimated $1bn” from the US alone.
However, bank fraud and money laundering allegations turn out to be just the start of Bitar’s woes. Detailed investigation led the US authorities to further allege that he and co-conspirators had secretly been plundering purportedly ring-fenced customer accounts, where poker players thought they had safely deposited cash and winnings.
Preet Bharara, US attorney for the southern district of New York, said Full Tilt had become a “Ponzi-style scheme”, with a $350m (£228m) black hole. The formidable prosecutor – best known for breaking the insider trading ring linked to New York hedge fund Galleon – said Bitar had “bluffed his player-customers and fixed the game against them as part of an international Ponzi scheme that left players empty-handed.”
A fresh indictment was issued and Bitar returned to his native the US last July. At the time he issued a statement through his lawyers saying: “I know that a lot of people are very angry at me. I understand why. Full Tilt should never have gotten into a position where it could not repay player funds.”
On Tuesday, his US lawyer John Baughman confirmed to the Guardian that an unusual plea bargain had now been struck, which took account of his exceptional health circumstances. Bitar is said to be awaiting a heart transplant in California. His serious health condition had not been made public previously.
Full Tilt had operated under a licence from the remote Channel Island of Alderney, though inadequate IT infrastructure meant it was forced to locate its servers on nearby Guernsey. Allegations that player accounts were plundered and that the company had been deeply involved in bank fraud for many years are highly damaging the reputation of the Channel Islands, where the offshore financial industry trades a on a reputation for not tolerating criminality.
While Full Tilt’s regulatory and IT functions were largely conducted from the Channel Islands, other operations were located on a business park just south of Dublin. Bitar is said to have spent much of his time between the Channel Islands and Ireland.
Together with market leader PokerStars, Full Tilt came to dominate the multibillion online poker industry after the US introduced tough laws making it illegal for banks to process payments from US citizens for internet gambling.
Scores of websites closed their operations in the US, including Party Poker, now part of London stock market-listed Bwin.party. PokerStars and Full Tilt for years appeared to flout the rules, continuing to take bets from America, which was said to account for almost half of global demand for poker games.
The two sites allegedly used a string of intermediaries who set up sham online retail websites – purporting to sell golf clubs, watches, bicycles, jewellery, clothing, or even settling medical bills. In truth, payments through these sites masked deposits into poker accounts.
PokerStars, based in the Isle of Man, was also targeted by Bharara, but struck a deal last July that saw it forfeit $547m to the US authorities. It had managed to continue trading outside the US, unlike Full Tilt. In addition, PokerStars agreed to rescue Full Tilt, pledging to reimburse $184m owed to the effectively bankrupt group’s players outside the US.
The Full Tilt site has since been resurrected and is operated by PokerStars.
Under the terms of its settlement with Bharara, PokerStars had to promise that its founder Isai Scheinberg would step down as a director of the company. Scheinberg, a former Canadian executive with IBM, is one of three facing outstanding criminal charges and is said by the US authorities to still be at large. Two years ago was charged in the US with five offences of variously committing bank fraud, money laundering and online gambling offences. Reputedly resident in the Isle of Man, but with strong links to Israel, he faces a maximum of 65 years in jail.
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