Full Tilt, the world's second largest poker site, is being investigated by a federal grand jury in Manhattan on money laundering charges, according to a report Monday in the Financial Times.
Howard Lederer and Chris "Jesus" Ferguson, two players closely associated with Full Tilt Poker, are also being investigated, according to the report. Both Lederer and Ferguson were named as having an ownership stake in Full Tilt in a civil suit filed last year.
The Financial Times says money-laundering charges could be attractive for the government because "they would compel cooperation from authorities even in countries where gambling is legal."
In a conversation with Casino City, Buffalo State Business Law Professor Joe Kelly said that successfully prosecuting money laundering charges in these types of cases can be difficult.
"In the past, the government has been unsuccessful prosecuting under the Illegal Gambling Business Act (IGBA), which is why they always use the Wire Act," Kelly said. "But if there's no sports betting, they'll likely have to use IGBA."
"And under IGBA, there must be a violation of state law before (federal prosecution) comes into play," Kelly added. "So the question is 'Is poker in violation of the New York State law?'"
The answer to that question isn't straightforward. Prior to 1965, the New York test for whether something was gambling was chance had to be the predominant factor. In 1965, New York amended its gambling laws so chance only had to be a material element. But according to an analysis by Bennett Liebman, a professor at Albany Law School, New York courts have still been using a dominating element test since 1965, so it could be difficult to prove online poker is illegal in New York.
Eric Jackson, an attorney representing Lederer, Ferguson and a software company with ties to Full Tilt, told the Financial Times that his clients were not aware of any grand jury investigation and did not have any comment.
The U.S. Attorney in New York refused comment, according to the Financial Times.
Full Tilt has had its fair share of legal battles in the U.S. in the past year. Poker professional Clonie Gowen filed a $40 million lawsuit against the card room and a number of well-known Full Tilt pros in November 2008, claiming a breach of contract. That lawsuit was dismissed in February.
Authorities in Maryland have also attempted to seize funds destined for online poker players. They said Full Tilt, PokerStars, Bodog and Absolute Poker have "engaged in betting or wagering in violation of Maryland law."