News analysis: DOJ has online poker figured out

Within the online gambling industry, one of the prevailing beliefs was that the U.S. Department of Justice couldn't keep up with payment processors. As fast the DOJ shut them down, new ones would spring up to replace them, and online poker rooms would continue to operate in the U.S. despite these "minor annoyances."

The FBI and the U.S. Attorney's Office for the Southern District of New York (SDNY) effectively shattered that myth Friday when it unsealed an indictment that charged the founders of PokerStars, Full Tilt Poker and Absolute Poker and seven others with bank fraud, money laundering, illegal gambling offenses and violating the Unlawful Internet Gambling Enforcement Act (UIGEA).

What makes this indictment different is this is not just the simple seizure of accounts dealing with payment processing. The DOJ has successfully peeled back the many layers involved in processing online poker payments for American customers, and they've moved to seize not just the payment processor accounts in the U.S., but bank accounts much higher up the food chain.

The District Court in New York has issued restraining orders against accounts in 14 different countries, including the U.S., Switzerland, Denmark, Luxembourg, Panama, England, Canada, Germany, and Ireland. The names associated with the accounts under the restraining orders are directly connected to the online poker companies.

The accounts of Pocket Kings, an Irish company that provides technology and marketing services for Full Tilt, are named for forfeiture in the indictment. So are the bank accounts of Full Tilt founder Raymond Bitar, the bank accounts of Full Tilt parent company Kolyma Corp. and the bank accounts of former Absolute Poker parent company Tokwiro Enterprises.

In all, the forfeitures the DOJ is seeking from PokerStars, Full Tilt, and Absolute on all counts could exceed the $7 billion. Prosecutors are also seeking at least $3 billion in civil money laundering penalties in addition to the forfeitures, according to the statement issued today by U.S. Attorney Preet Bharara.

That's $10 billion that could end up in the hands of the U.S. government. That's real money.

There are legitimate questions as to whether the U.S. will actually be able to freeze (or seize) the funds that are in foreign accounts. Casino City asked the U.S. Attorney's Office for SDNY late Friday whether the accounts cited in the indictment have been frozen, and they said they would check for us. (We'll follow up with them on Monday after they've had a chance to look into it.)

But one thing is clear, the DOJ and the FBI have no problems following the money. And that shouldn't come as a shock. The government can track down the money financing terrorism -- and that's a lot more complicated than figuring out online poker payments.

If you don't believe it, read the indictment. The first 24 pages not only accurately detail how payment processing has evolved in online poker from credit cards to where we are today. It discusses the various methods used to miscode credit card transactions. It looks at the use of pre-paid credit cards and "stored value cards" like phone cards. It looks at fraudulent e-check processing. And it alleges the defendants tried all of these methods to the beat the UIGEA.

The online poker rooms could try and beat these charges in court. In fact, legal experts say they have a case against the illegal gambling business and UIGEA charges.

But odds are they'll settle, just like NETeller and PartyGaming did before them. And while the negotiations and court battles rage on, other online poker operators may try to pick up where Full Tilt and PokerStars left off. Only now, it's operator beware. The DOJ knows how you operate. And they could come after you next.