Neteller

[Dominique]

Have you guys heard the neteller news?

http://www.hemscott.com/news/comment...em.do?id=19294

Any thoughts?

[vinism]

Thanks for the post Dominique. We've been chasing this story as fast as we can. There's also been some chatter in the private forums about this. Here's what we know for sure:

-- Two NETeller founders, Stephen Lawrence and John Lefebvre were arrested Monday in the United States while traveling separately. Neither is currently employed by NETeller.

-- Lawrence's arrest is being handled by the U.S. Attorney's Office in the Southern District of New York. A press release on the case will be issued later today.

-- The status -- or jurisdiction -- of Lefebvre's case is still unknown.

-- Neteller says they had no prior warning or knowledge that this would happen.

All of this information is know and has been verified. Anything beyond that is speculation.

We still don't know why they were arrested. Nor do we know what the charges are.

We will be updating the story throughout the day (link provided below).

http://www.casinocitytimes.com/news/...ntentID=163572

[vinism]

Update: NETeller founders charged with laundering Internet gambling proceeds. We'll be posting PDFs of the DOJ release and complaints shortly.

NETeller founders Stephen Lawrence and John Lefebvre are being charged with laundering billions of dollars of Internet gambling poceeds, U.S. Attorney Michael Garcia announced today. The founders were arrested Monday "in connection with the creation and operation of an internet payment services company that facilitated the transfer of billions of dollars of illegal gambling proceeds from United States citizens to the owners of various internet gambling companies located overseas," according to a statement just released by the U.S. Attorney's Office in the Southern District of New York and the FBI.


Lawrence and Lefebvre were traveling separately when they were arrested, according to a statement released by NETeller today. Both founders are shareholders, but have no other current connections with company, the statement added. NETeller suspended trading on the London AIM after the arrests.


Lawrence and Lefebvre made more than $427 million when they sold just over half of their holdings in the third-party payment processor popular with Internet gamblers. Reuters reports Lawrence currently owns a 5.91 percent stake in Neteller while Lefebvre holds a 5.54 percent stake.


Last summer, former BetOnSports.com CEO David Carruthers was arrested on charges of of racketeering, conspiracy and fraud. Carruthers is still awaiting trial.


And in October, President Bush signed into law the Unlawful Internet Gambling Enforcement Act, which forces U.S. banks and financial institutions to block electronic transactions to Internet gambling businesses. NETeller had previously announced they would comply with the legislation.


"NETELLER, a company registered outside the U.S., will comply with the Act and its related regulations as if it were subject to the Act's jurisdiction," said the e-wallet in a statement released shortly after the UIGEA was signed into law.


The Isle of Man-based company said they received no warnings or communications from the U.S. about possible arrests.

[CityGuard]

Here are statements that have been released thus far about the situation.

Statement released by the United States District Attorney's Office (Southern District of New York) is available in pdf format at:
www.gpwa.org/news/neteller_arrests_pr.pdf

Charges against Stephen E. Lawrence are available in pdf format at:
http://www.gpwa.org/news/neteller_la..._complaint.pdf

Charges against John D. Lefebvre are available in pdf format at:
http://www.gpwa.org/news/neteller_le..._complaint.pdf

[Dominique]

Thanks for all the info!


These links don't seem to work?

[MichaelCorfman]

Thanks for all the info!


These links don't seem to work?

Dominique:

Sorry, I changed the location of the documents. The links are now updated in the previous post so they should work fine again.

Michael

[Dominique]

Thank you, Michael.

Very useful!!

[vinism]

Update: Here's an updated version of the story. It includes several details from the actual complaints. We're still reading through the documentation, so we'll update it as we find more pertinent details.

NETeller founders Stephen Lawrence and John Lefebvre were arrested Monday and are being charged with laundering billions of dollars of Internet gambling proceeds, U.S. Attorney Michael Garcia announced today.

"Stephen Eric Lawrence and JOHN DAVID Lefebvre knew when they took their company public that its activities, as well as those of the internet gambling companies it assisted, were illegal in the United States," Garcia said. "Blatant violations of U.S. law are not a mere 'risk' to be disclosed to prospective investors. Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States."

NETeller is a popular third-party payment processor used by many to transfer money into online gaming accounts. The Isle of Man-based company processes more than $7 billion in financial transactions annually according to the company's interim report for 2006.

Lawrence, 46, was arrested yesterday in the United States Virgin Islands. He will be presented in federal court in St. Thomas by tomorrow. Lefebvre, 55, was arrested yesterday in Malibu, California and will be presented in Los Angeles federal court later today. Lawrence currently resides in Paradise Island, Bahamas. Both are Canadian citizens.

Lawrence and Lefebvre are still NETeller shareholders, but have no other current connections with company, according to a statement released by the third-party payment processor today. NETeller suspended trading on the London AIM after the arrests.

Lawrence and Lefebvre made more than $427 million when they sold just over half of their holdings in the third-party payment processor popular with Internet gamblers. Reuters reports Lawrence currently owns a 5.91 percent stake in Neteller while Lefebvre holds a 5.54 percent stake.

If convicted, Lawrence and Lefebvre will face a maximum of twenty years in prison.

The arrests are part of continuing U.S. crackdown on Internet gambling. Last summer, former BetOnSports.com CEO David Carruthers was arrested on charges of of racketeering, conspiracy and fraud. Carruthers is still awaiting trial.

And in October, President Bush signed into law the Unlawful Internet Gambling Enforcement Act, which forces U.S. banks and financial institutions to block electronic transactions to Internet gambling businesses. NETeller had yet to make a decision on whether it would comply with the new regulations.

"Neteller was pretty open about the fact that they were holding out on making a decision about compliance with the act and no longer taking U.S. play based on the 270-day rule-making process," said online gaming expert Sue Schneider. "They were one of the few processors left that was still doing something, so this is a pretty direct shot at the payment side of things."

NETeller said they received no warnings or communications from the U.S. about possible arrests.

[Dominique]

It is interesting to note that one arrest occurred just before G2E/CAC conferences, and this one just before ICE/CAPEURO.

[vinism]

Update: Here's the latest update. This version has a pretty detailed look at the government's investigation.

NETeller founders Stephen Lawrence and John Lefebvre were arrested Monday and are being charged with laundering billions of dollars of Internet gambling proceeds, U.S. Attorney Michael Garcia announced today.

"Stephen Eric Lawrence and John David Lefebvre knew when they took their company public that its activities, as well as those of the internet gambling companies it assisted, were illegal in the United States," Garcia said. "Blatant violations of U.S. law are not a mere 'risk' to be disclosed to prospective investors. Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States."

NETeller is a popular third-party payment processor used by many to transfer money into online gaming accounts. The Isle of Man-based company processes more than $7 billion in financial transactions annually according to the company's interim report for 2006.

Approximately 75% of NETeller's revenue originates from the United States, said NETeller offcials in a public conference call about the same report.

Lawrence, 46, was arrested yesterday in the United States Virgin Islands. He will be presented in federal court in St. Thomas by tomorrow. Lefebvre, 55, was arrested yesterday in Malibu, California and will be presented in Los Angeles federal court later today. Lawrence currently resides in Paradise Island, Bahamas. Both are Canadian citizens.

Lawrence and Lefebvre are still NETeller shareholders, but have no other current connections with company, according to a statement released by the third-party payment processor today. NETeller suspended trading on the London AIM after the arrests.

If convicted, Lawrence and Lefebvre will face a maximum of twenty years in prison.

The Financial Probe

The investigation into NETeller, which began in the summer of 2006, was led by FBI Special Agent Maryann Goldman. Goldman delved into both how NETeller processed payments and how it helped facilitate sports bets.

The complaint unsealed Tuesday accuses NETeller of using a combination of payment and shell companies to process U.S. Automatic Clearinghouse transactions (ACH), thus hiding the nature of payments made to U.S. customers.

In order to get money out of the U.S., NETeller would have a payment service company recieve funds on its behalf. Then the payment company would transfer money first to an account in either the name of JSL Systems Inc. or Carload Inc. Both accounts, based in Alberta, are directly connected to NETeller, the complaint alleges.

"NETeller conceals the nature of these financial transactions," Goldman said. "The Payment Company receives funds in the United States on behalf of NETeller, and then transfers the funds out of the United States to accounts controlled by Neteller in Canada."

Goldman says at least $148 million was transferred this way. And that both Lawrence and Lefebvre are partners in JSL Systems Inc.

The Betting Probe

In mid-August, Goldman watched as a cooperating witness "electronically transferred $400 from a bank account in Miami, Florida, into a Neteller Account." About 10 days later, the witness opened a wagering account with an Antigua-based business, Goldman said.

She then watched as the witness placed three bets on National Football League games over next month and withdrew money back to NETeller.

In December, Goldman logged onto to the same NETeller account used by the witness and transferred $25 each to three different online gaming businesses.

Cracking down on gambling

The arrests are part of continuing U.S. crackdown on Internet gambling.

Last summer, former BetOnSports.com CEO David Carruthers was arrested on charges of of racketeering, conspiracy and fraud. Carruthers is still awaiting trial.

In October, President Bush signed into law the Unlawful Internet Gambling Enforcement Act, which forces U.S. banks and financial institutions to block electronic transactions to Internet gambling businesses. NETeller has yet to make a decision on whether it would comply with the new regulations.

"Neteller was pretty open about the fact that they were holding out on making a decision about compliance with the act and have continued taking U.S. play based on the 270-day rule-making process," said online gaming expert Sue Schneider. "They were one of the few processors left that was still doing something, so this is a pretty direct shot at the payment side of things."

NETeller said they received no warnings or communications from the U.S. about possible arrests.

[SlyCin56]

These guys are not US citizens - they're Canadian citizens.

They're not US residents - they're residents of other countries.

They ran a company in Canada, not breaking any Canadian laws (an assumption).

I'm shocked & amazed at the audacity of the US Gov't. who apparently believes their laws apply to every person in the world, and who apparently believes they're going to be able to control & legislate the internet for the entire world. What is the US trying to become???

Is Canada going to try to protect their citizens? If they do, what's that going to do to US/CA relations?

[daweller]

These guys are not US citizens - they're Canadian citizens.

They're not US residents - they're residents of other countries.

They ran a company in Canada, not breaking any Canadian laws (an assumption).

I'm shocked & amazed at the audacity of the US Gov't. who apparently believes their laws apply to every person in the world, and who apparently believes they're going to be able to control & legislate the internet for the entire world. What is the US trying to become???

Is Canada going to try to protect their citizens? If they do, what's that going to do to US/CA relations?

Stephen Harper will probably just bow down to George Dubya, like the good little lapdog that he is.

[MichaelCorfman]

This is a serious situation both for Neteller and for the two founders of Neteller who were arrested.

It is serious for the two founders because money laundering is a serious offense, and there are reasonable grounds to say they violated money laundering laws. The US considers it a crime if you send money through intermediate banks and bank accounts for the purpose of hiding the source or destination of the funds being transfered. The government will argue that is exactly what the founders of Neteller have done. I don't know whether the governement will be successful. But I wouldn't give them good odds for being released from US custody in the near future. The transactions cited in their arrest warrants tied neteller back directly to providing funds to sportsbooks, and the US DOJ is on uncomfortably solid ground in its assertion that internet sports bets are illegal, and thus that the founders of neteller were knowingly providing money laundering services for the purpose of supporting illegal sports betting by US citizens. It does not matter that much that they are not US citizens themselves. Foreigners that commit crimes and then are present in the US are subject to arrest by US law enforcement just like David Carruthers.

It is serious for Neteller itself for a variety of reasons, starting with the fact that two important shareholders are in jail, and other directors and officers have some obvious cause for concern. But the biggest issue is that even without further government actions, banks may take proactive steps to stop funds transfers between themselves and Neteller. It is simply going to become harder for Neteller to provide the services it currently provides to the online gaming industry even if it should decide it wants to ignore the arrest of the two founders.

While the arrest of the Neteller founders was not a result of the unlawful internet gambling enforcement act, the consequences will likely be more severe given that the act is in place. Banks are naturally conservative, and generally don't like to engage in activities that may get them into trouble. The publicity surrounding the arrest of the Neteller founders together with the conservative nature of bank officers, will mean the effect will be more far reaching than would otherwise be the case.

Today was definitely not a good day for the industry. And it will not be the last bad day we will see.

Michael

[pgaming]

Not a good day in the slightest. I am growing very tired of the ethnocentric attitude of the U.S administration. What else will they be pushing on the rest of the World? Perhaps slap a embargo on every country the doesn't agree with their policies.

The Grumbling Elephant a former Prime Minister of Canada called the U.S government. The world's biggest democracy I don't think so. Maybe before Bush.

greek39

[Ziggy]

Michael:

I agree with your statement about the conservative nature of banks.

Since banks cannot always determine where these funds actually are coming from through Neteller, then, are you saying that the banks will somehow prevent Neteller access entirely from the U.S. (or maybe by the government by blocking access to Neteller)?

[SlyCin56]

Ok, I'm having a hard time getting my head around the "money laundering" application in this situation - maybe you can help me, Michael?

As I understand it, when the "money laundering" law was first created it applied to "dirty" money being made "clean"; i.e., the money the anyone made with their illegal activities (drugs, illegal gambling, etc) was "dirty" so it was funnelled thru their legal activities (businesses) to make it "clean", therefore making it spendable (and taxable) without anyone (the govt.) wondering where the person's money was coming from. Correct?

But now they seem to be applying these "money laundering" charges to a much wider range of activities, a whole lot of which seem to me to be "stretching" the law.

What I really don't understand is how it applies to the money NT was transferring around. It wasn't their money, so it wasn't their income to be made from "dirty" to "clean" - so how are they being charged with that?

I know you're not an attorney, Michael (and I'm assuming you can't read the minds of the US Attys ) but maybe you understand this better than I do & have a simple way of explaining this to me/us?

[Dominique]

Apparently Neteller has already blocked instacash tansactions from US residents.

Years ago the credit cards started not allowing deposits to online gambling institutions. The industry suffered but got over it.

I should hope the casinos have been aware that current depositing methods would suffer after the recent law and haven't been sitting idle!

[pgaming]

Thank you Michael, GPWA and other contributors for keeping us well informed. Without this information I would be lost.

greek39

[mojo]

If neteller is unable to hang in there, I have already received casino mails (as a player) suggesting alternate payment methods such as Click2Pay and PaySpark. I will need to research these as I havnt used them. I am also unsure if whoever steps in to fill the void will be under close scrutiny by the DOJ as well or if Neteller made bad judgements with sportsbetting?

Thanks for the updates and keeping us informed.

Mojo

[casinoranking]

Payspark is based in Lebanon so there is no way they are going to comply with the wishes of this corrupt government. But since payspark is owned by microgaming you can guess what casinos they service.

As for the other payment processors I have no idea how widespread they are or the market penetration they have.

By the way Slycin your understanding of money laundering mirrors mine. But lately this term has been abused and is used pretty much to do with anything that involves financial transactions.

This could be especially serious for affiliates. Since US affiliates are earning money from offshore casinos which could be considered dirty money and they are bringing that money in the country, they are paying tax on the proceeds of these illegal activities. They could then hit you for money laundering. But if you dont pay tax its then tax evasion. Its a catch 22 and I dont think anyone can win. This is all going to depend on how much information neteller gives away. I just hope that not too much was based out of Calgary Alberta as these financial records will be available on demand.