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Former Full-Tilt Poker CEO Pleads Guilty And Is Sentenced In Manhattan Federal Court

FOR IMMEDIATE RELEASE
Monday, April 15, 2013

Preet Bharara, the United States Attorney for the Southern District of New York, announced that RAYMOND BITAR, the former Chief Executive Officer of Full Tilt Poker, pled guilty today to unlawful internet gambling and to conspiracy to commit bank fraud and wire fraud and was sentenced to time served by U.S. District Judge Loretta A. Preska. In pleading guilty, BITAR admitted to working with others to defraud his poker customers by lying to them about the security of their funds and falsely promising players that their funds would be protected in “segregated” accounts. In connection with his plea and sentencing, BITAR agreed to forfeit $40 million dollars in money and other property derived from his offenses. In sentencing BITAR, Judge Preska made clear that she would have imposed a substantial term of imprisonment had it not been for the fact that BITAR has an extremely serious heart condition and is in urgent need of a heart transplant.

Manhattan U.S. Attorney Preet Bharara said: “With his guilty plea and sentencing today, former Full-Tilt Poker CEO Raymond Bitar now stands convicted and must forfeit tens of millions of dollars in ill-gotten gains in connection with the massive fraud his company orchestrated against the U.S. banking system and the scheme that defrauded Full-Tilt Poker’s U.S. customers.”

The following allegations are based on the Superseding Information filed today in Manhattan federal court, the Superseding Indictment unsealed following the defendant’s arrest in 2012, and the Indictment unsealed on April 15, 2011 in which BITAR was initially charged, other documents previously filed in the case, and statements made in court:

In late 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act ("UIGEA"), making it a crime to "knowingly accept" most forms of payment "in connection with the participation of another person in unlawful Internet gambling." Notwithstanding the enactment of UIGEA, Full Tilt Poker – a company founded by professional poker players in the U.S. in 2004 – contined to offer Internet gambling to U.S. residents, and took in an estimated $1 billion from U.S. residents through April 15, 2011. Because U.S. bankes were laregely unwilling to process payments for illegal Internet gambling, BITAR relied on fraudulent means designed to trick U.S. banks by disguising payments to Full Tilt Pker as payments unrelated to Internet gambling.

In order to encourage players to deposit money with Full Tilt Poker, BITAR directed Full Tilt Poker employees to falsely assure potential customers that player deposits would be held in segregated accounts that would be kept separate and distinct from the company’s operating accounts. In fact, Full Tilt Poker did not protect player funds in segregated accounts, and instead, used them for whatever purposes BITAR directed, including to pay him and other owners millions of dollars. Because player funds were being used to cover operating expenses, Full Tilt Poker experienced an increasing shortfall between the cash it had in its bank accounts and the money it owed to players. For example, by early November 2010, Full Tilt Poker owed its customers approximately $344 million but had only approximately $145 million in all of its bank accounts. To conceal this financial shortfall, BITAR directed Full Tilt Poker employees to misrepresent how much cash the company had on hand. Among other things, Full Tilt Poker

Further, to prevent players from learning about Full Tilt Poker’s shaky finances and to induce them to continue gambling with Full Tilt poker, BITAR concocted a scheme in which Full Tilt Poker players were led to believe they were gambling real money when in actuality they were gambling with “phantom” online credits. As explained in greater detail in the Superseding Indictment, in the fall of 2010, Full Tilt Poker lost its ability to reliably collect deposits from U.S. bank accounts. Rather than terminate its U.S. operations – an option that would likely have exposed the fact that Full Tilt Poker was not holding player cash in segregated accounts, and was holding less than half of the money it owed players – BITAR arranged for Full Tilt Poker to continue approving player deposits, and to award credit to depositors even though Full Tilt Poker had not actually collected the money from players and had no ability to do so. As United States players gambled and won or lost these phantom funds – ultimately totaling over $130 million – Full Tilt Poker would list the phantom funds on players’ online account statements, even though the funds were never collected, or available to pay the winning players.

Only weeks before U.S. law enforcement took action against Full Tilt Poker in April 2011, Full Tilt Poker’s internal financial statements reported $390 million in debts to players but only $60 million in its bank accounts. As players around the world began demanding their funds from Full Tilt Poker following the law enforcement action, rather than suspend operations, BITAR lured players to continue gambling with Full Tilt Poker by continuing to promise them that their funds were safe. In actuality, BITAR was using new customer deposits to pay off some of the backlog of player requests to withdraw funds and to cover the company’s operating expenses, including salary for himself and others. In effect, Full Tilt Poker operated what was, by then, nothing more than a Ponzi scheme. When the scheme finally collapsed, Full Tilt Poker was unable to pay players the approximately $350 million it owed them.

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BITAR, 41 of Glendora, California, was also ordered to pay a $200 special assessment fee.

Mr. Bharara thanked the Federal Bureau of Investigation for its outstanding work in the investigation, which he noted is ongoing. He also thanked Immigration and Customs Enforcement’s Homeland Security Investigations New York and New Jersey offices for their continued assistance in the investigation.

BITAR is the eighth of the eleven defendants charged in connection with the original Internet poker indictment to have been arrested, all of whom have pled guilty. In addition to BITAR they are: Bradley Franzen, Ryan Lang, Ira Rubin, Brent Beckley, Chad Elie, John Campos and Nelson Burtnick. Charges are still pending against the remaining three defendants – Isai Scheinberg, Paul Tate and Scott Tom – who are at large, and are presumed innocent unless and until proven guilty.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Arlo Devlin-Brown, Niketh Velamoor, and Nicole Friedlander are in charge of the criminal case, and Assistant U. S. Attorneys Sharon Cohen Levin, Jason Cowley, Andrew Goldstein, Michael Lockard and Christine Magdo are in charge of related civil money laundering and forfeiture actions.

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U.S. v. Raymond Bitar S1 Information(PDF)

 

 

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