PokerStars’ founder, Isai Scheinberg, finally appeared before US prosecutors nearly a decade after being charged, among other allegations, with illegal gambling, bank fraud, and money laundering, the Forbes reported.
A few months ago, during a trip Mr Scheinberg was taking to Switzerland, federal prosecutors released an extradition request. Initially, the Israeli-Canadian businessman tried to fight the extradition but then decided to travel to New York voluntarily to face charges levelled against him.
Mr. Scheinberg pleaded not guilty at a hearing at the federal court in Manhattan earlier this month, and was released on $1 million bail. It is understood he gave up his passports and promised not to move beyond New York and Washington D.C. Zones.
Federal prosecutor Olga Zverovich said earlier this week that the government and Mr. Scheinberg had entered into discussions on an agreement and that talks on the topic were “far along.” Ms. Zverovich clarified that they have an agreement on the basic terms in principle. The charges against Mr. Scheinberg stemmed from what is known as Black Friday in the online poker world. On Friday, April 15, 2011, Manhattan’s former US Attorney, Preet Bharara, unsealed the indictment of 11 top online poker executives including the PokerStars founder, other online poker giant staff, as well as poker room employees Full Tilt Poker and Absolute Poker.
Mr. Scheinberg was charged with violations of the 1970 Illegal Gambling Business Act, the 2006 Unlawful Internet Gambling Enforcement Act, and bank fraud and money laundering conspiracies. Isai Scheinberg’s son, Mark, who co-founded PokerStars with his father, has never faced US government charges.
Mr. Scheinberg and the other accused members of the poker industry emerged on the government radar screen after their poker rooms continued to serve online poker players by taking deposits and paying out winnings to players. Online poker was an illegal gambling practise under UIGEA law according to prosecutors.
Unlike the other people charged, Mr. Scheinberg pleaded not guilty, maintaining that poker was not a gambling practise but a skill game.
In 2001 Isai and Mark Scheinberg established PokerStars. Running the company initially from Costa Rica, before moving their headquarters to the Isle of Man in 2005. Since gaining a place in the tournament by winning an online tourney on PokerStars, Tennessee accountant and former poker player Chris Moneymaker took down the World Series of Poker Main Event in 2003.
Online poker took off after news about the spread of Moneymaker’s victory, and its success rocked to its highest levels. PokerStars soon became the largest online poker room in the world, hosting thousands of tournaments and cash games daily.
It continued its operations in the U.S., its biggest market, even after UIGEA law was implemented in 2006, and so did other, smaller, poker rooms… until April 15, 2011, when they were all shut down as part of the crackdown on unauthorised online gambling by the US government.
Full Tilt Poker, the most serious rivalry PokerStars had at the time, collapsed after what online poker players called Black Friday. The poker room had been unable to recover player deposits of $330 million. The founders, Ray Bitar, Howard Lederer, and Chris “Jesus” Ferguson were accused of running a Ponzi scheme and using player deposits to raise more than $440 million in dividends from Full Tilt’s owners and board members.
PokerStars escaped such trouble as its creators were smart enough to keep the funds of the players apart from the other funds of the organisation. The poker operator was able to pay all $150 million in deposits with the company to US players quickly.
PokerStars then entered into a civil lawsuit settlement with US attorneys to buy Full Tilt for $731 million and compensate the players for what the poker room owes.
While Mr. Scheinberg maintained the innocence of both himself and his company, he agreed not to occupy a formal management position at the poker company he founded. Mr. Scheinberg’s friend, Mark, sold PokerStars in 2014 to fellow Israeli-Canadian businessman David Baazov and his company Amaya Gaming (now The Stars Group) in a $4.9 billion transaction backed by the Blackstone Group’s credit division.
The deal gave PokerStars the opportunity to return to the regulated US poker room. The company currently provides poker services in New Jersey and Pennsylvania, and is part of a huge gaming empire controlling some of the world’s largest gambling brands, including PokerStars itself as well as Sky Betting & Gaming and BetEasy Australia. The Stars Group is also on the cusp of merging with Flutter Entertainment in a deal that will create a gaming behemoth with a strong presence across all major regulated markets and millions of players involved.
As for Mr. Scheinberg’s option of travelling to New York and eventually going before prosecutors, this put an end to one of the longest and most nuanced sagas in Internet history.