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The feds' pressure was working. By 2009, an audit of Absolute Poker revealed that almost one-third of its revenue went to disguising the money trail.
Says Sarafa: "The allegation is that the companies tried to find banks that were essentially in distress, providing them with a very lucrative lifeline, and that the transactions were disguised as other types of transactions so it wouldn't raise regulatory eyebrows."
Some congressmen, realizing that playing a few hands of poker after work wasn't exactly the height of fiendishness, tried to fight back. Rep. Barney Frank (D-Mass.) introduced a bill to legalize online games.
But while that measure was winding through the House, the U.S. Attorney's Office of the Southern District of New York was pressing ahead. In 2009, it filed charges against Allied Systems and Account Services for processing poker money. The feds seized $34 million owed to 27,000 players.
The sites reimbursed their customers and rolled on. PokerStars and Full Tilt discovered that SunFirst, a struggling Utah bank, was willing to handle the payments in exchange for fees and an investment.
But the feds killed that deal a year later. They also quashed Full Tilt's attempts to make similar arrangements with two Illinois banks.
Full Tilt's problems were multiplying. Believing that their revenue stream would soar eternally, its owners had pulled $444 million in profit from the business over the previous four years. But when the government began seizing their payment processors' funds, the company had no war chest to cover the losses.
By last March, its customers held $390 million in their accounts. But Full Tilt had only $60 million in the bank to cover them. When the feds seized the company's assets a month later, American players alone were owed $150 million. The government accused the company of running a "global Ponzi scheme."
Four summers ago, Maxwell Fritz was making minimum wage serving cotton candy and curly fries at an amusement park. He had just finished his first year at Princeton, where he was studying to become a math teacher.
Fritz had played online casually with friends back in high school. He had turned a few hundred dollars profit, and that planted the seed for the next summer's job. It had to pay better than minimum wage.
He made $10,000 after school let out, so he continued gambling during the school year. Over 18 months, while still attending Princeton and working his teaching internship, Fritz took home $100,000. Over the next six months, he would grab $200,000 more.
Then Black Friday hit. Suddenly, Fritz had not only lost his income but also $65,000 that was seized from his Full Tilt account.
He was among the fortunate to recover quickly. A fellow player provided a reference that allowed him to move from one kind of gambling to another: Wall Street.
"I figured if gambling online is illegal, I might as well go to legalized gambling in the form of the stock market," Fritz laughs. A friend had gone to a Wall Street firm and "just blew the doors off, and he said what he learned in poker really helped him. They were like, 'Well, we need to hire more poker players.' "
For Michael LaTour, the game was a way out of unemployment. The Syracuse man landed a job out of college selling mortgages and personal loans for American General Finance. But a year later, spectacularly inept bets by American General's parent company, AIG, put him back on his ass.
"There weren't many jobs out there, and I'd been on unemployment for a while," LaTour says. "I saw some people being successful at poker, and I decided if I was ever going to seriously take a shot at it, now would be the time to do so."
He played for two years, earning $50,000 in 2010. He was doing much better last year, averaging $10,000 a month until the feds came calling. In an instant, the $35,000 in his PokerStars account was seized.
"The days after it was really a panic," he says. "Nobody knew what was going on. It's been draining emotionally."
If he and his girlfriend hadn't bought a house, LaTour might have gone to Canada. Instead, he has taken the Syracuse police officer exam, but the academy doesn't offer classes until April. Two years after pulling himself off unemployment by his wits, he's back to searching for a job.
"This isn't something I wanted to do my entire life," he says, "but the money was out there, and it made more sense than any entry-level job just because of the potential to win such huge amounts of money."
Players weren't the only ones thrown out of work. The feds blew up an entire industry. In 2003, Michael Minkoff started a business that handled the shipping of poker books and videos sold on websites. His Las Vegas company also did freelance video production. It was a modest affair, employing three people and a passel of part-time help.
Then came Frist and Kyl's stealth attack in 2006. Sites began closing and paring costs, hurling little guys like Minkoff to the side of the road. Black Friday nearly finished him. At the height of his success, he was moving more than a thousand books a month. Nowadays, he sells fewer than 50, hardly enough to employ himself part-time.
Online Poker game has faces so many assault and that's why many people in trouble to join this great online gambling or not. This is the serious matter for the player.
Once the Wire Act was clarified ( and it seemed like the ruling was delayed?), maybe there was some culpability?
Online poker is a game of skill, as this article indicates, and it should be the right of anyone who chooses to play to do so. The PPA (http://theppa.org) is fighting to regulate and legalize US poker, check out their site for more information.
US Players have been continously victimized by shady operators, cheating scandals, poker action flops, faulty software, simple outright fraudulent sites, and payment processors being shut down.
It has been estimated that regulated legal online poker would produce up to 3 Billion Dollars in tax revenues VOLUNTARILY from players who would welcome protection. Legalized, trustworthy sites would automatically attract players from around the world creating a new American industry and thousands of USA jobs.
Thanks for this informative article about online poker and what the government did to it. An entire industry was destroyed last year. This is the first article that really illustrates the situation. We need federal legislation that licenses and regulates online poker in the U.S. and brings back an industry.
Oh, and @rudedude, you're wrong. Playing online poker is not, and has not been, explicitly illegal except in a couple of states.
Poker is a game of skill. For the Feds (or anyone else) who thinks it's just dumb luck like casino games or horse racing, sit down at a poker table with an accomplished player and play for a few hours. Let's see if you can get lucky. You won't. Oh you may win a hand or two. You might even come out ahead after an hour or two. Play long enough and skill will take all of your money. Bank it. That, if truth be known, is why the current administration hates the game. They want government to control you from the time you wake up until you go to sleep. To have something that they can't control, or even understand, is intolerable to them.
Duh, the Fed are seizing assets. They get to keep the cash. That makes them look great to the other bureaucrats who promote them into better paying jobs. The prosecutors are attacking because it is easy to get convictions, as these guys aren't hardened criminals.
Any time congress or ObammaBoy want to stop this they can, but it is in their narrow interests to continue. So they will.
Term limits, guys. Kick the pigs away from the trough.
It needs to be more massive than term limits like maybe just abandoning the current system in favor of another government with more democracy and less partisan bullsh*t. This current crap system shuttered everything not to keep the cash but to keep the cash out of your pocket. They collapsed the financial markets, and are now driving the dollar down by causing hyperinflation by printing money on top of money. No one you elect or reelect will change that. Wash. D.C. as the fed and state gov't. will NOT stop until everyone and I mean everyone (except themselves of course) has lost their home, job and is living on welfare. That way we become like Cuba dependant on Big Brothers hand outs so we can't and won't say anything against them for fear of losing our slice of bread.
Hello! its ALWAYS been ILLEGAL!
just because you got away with it for so long...
-not unlike internet taxes. the day is coming... don't be shocked.
Thank you for this article! Great background and good information on what has led up to our current situation here in the US and where we are now. It's way past time for the US to move forward with regulating the online poker industry.
Thanks for this informative article about online #poker. I hope other media will do the same. We need federal licensing and regulation, like H.R.2366.