Isai Scheinberg Surrenders to Federal Authorities

Isai Scheinberg has surrendered to federal authorities in New York City after avoiding them for nine years. The founder of PokerStars denies charges of operating an illegal gambling business.

Scheinberg, a 73-year-old Israeli-Canadian businessman, posted a massive $1 million bail fee and surrendered his passport.

The co-founder of online poker giant PokerStars flew from Switzerland to New York. Federal agents met Scheinberg when he disembarked the plane and took him into custody. Scheinberg lived on the Isle of Man, an offshore British dependency, where PokerStars had its headquarters. He actively avoided the United States due to several federal charges levied against him in 2011.

His move from the Isle of Man to Switzerland is what ultimately landed him in the United States. Switzerland has extradition treaties with the U.S. and government officials acted on them. Scheinberg voluntarily surrendered after initially digging his heels in.

The Original Charges Against Scheinberg

Scheinberg was originally charged with flouting the rules of the Unlawful Internet Gambling Enforcement Act of 2006 (UIGEA). Charges included operating an illegal gambling business, money laundering, and conspiracy to commit bank fraud. Each count carries a custodial sentence ranging from five to 20-years in federal prison.

A long-running legal battle ensued, resulting in the charges whittled down to operating an illegal gambling business. Scheinberg pled not guilty to these charges having always maintained he didn’t break any rules. The highly thought of businessman, estimated to have a net worth of $5 billion, is confident of avoiding jail.

Why Is Scheinberg Being Charged?

President George. W. Bush signed the UIGEA into law on October 13, 2006. The UIGEA doesn’t make it illegal for Americans to gamble online. Operators are the ones who must adhere to it.

Gambling companies are prohibited to knowingly accept payments in connection with the participation of betting on the internet. The onus is on the online gambling operators.

News of the UIGEA passing shook the poker community. partypoker’s owners at the time immediately withdrew from the U.S. market. This resulted in a fall of almost 60% in the value of its publicly traded stock. It also saw partypoker fall from the number one position in terms of poker traffic; PokerStars took over that mantle.

It is alleged that PokerStars used underhand tactics to facilitate financial transactions. These tactics included investing heavily in small failing banks on United States soil. Furthermore, some Americans depositing on PokerStars saw their bank accounts supposedly charged for items such as golf equipment as the site attempted to circumnavigate the law.

Then There Was Black Friday

April 15, 2011, also known as Black Friday, saw the online poker landscape change dramatically. The United States Department of Justice (DOJ) indicted PokerStars, Full Tilt Poker, Ultimate Bet, Absolute Poker and 11 gaming site and payment processing executives. Scheinberg was one of those 11 people.

PokerStars and Full Tilt Poker immediately withdrew from the U.S. market. Ultimate Bet and Absolute Poker were already almost dead in the water after a cheating scandal. PokerStars’ kept its customers’ funds in separate, segregated accounts so paid out Americans immediately. Full Tilt Poker discovered a huge black hole in its finances, but PokerStars bailed them out. PokerStars bought Full Tilt Poker in the process.

Full Tilt Poker’s customers had to wait more than six-years to receive their funds back. This is because Americans had to go through a remittance process controlled by Garden City Group, overseen by the DOJ.

Blair Hinkle was one such player. He won $1.2 million in an FTOPS event and waited until 2014 to receive $1 million of that sum.

Ultimate Bet and Absolute Poker disappeared into the ether with players’ bankrolls.

Jail Is An Option

Ten of the 11 charged executives have faced the judges. All either pleaded guilty or negotiated a deal. Some received jail sentences ranging from a few days to a couple of years.

Scheinberg looks set to negotiate himself a deal, likely to be a considerable cash sum in lieu of jail time.

Olga Zverovich, a federal prosecutor, hinted at a deal for Scheinberg.

“We have an agreement in principle on the basic terms,” she said at the hearing. Nobody knows the size of any potential fine. That is for the courts to decide. It is likely to be one of the biggest fines we have seen in many years based on the fact he is worth several billion dollars and bail was $1 million.

Matthew Pitt

If it’s something you can play online for real money, chances are Matthew knows a bit about it. He’s been writing about slots, craps and poker for the better part of the last decade. He’s written for PokerNews, PartyPoker and many other respected online gambling websites during the last nine years.

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