The founder of the world’s largest online poker site PokerStars, Isai Scheinberg, has finally surrendered to US authorities, almost a decade after being charged with money laundering, bank fraud, and illegal gambling, stemming from 2011’s Black Friday.
Sheinberg arrived in New York on January 17 and was taken into custody by federal agents. On that same day, he was brought before a court in Manhattan where he pleaded not guilty to all the illegal gambling and financial crimes charged against him.
He was released on a $1 million bond and agreed not to move outside the New York and Washington DC areas while proceedings continue. The Israeli-Canadian businessman also surrendered his passports in accordance with his release conditions.
According to reports, the 73-year-old decided to submit himself to US law enforcement following an extradition request issued by federal prosecutors a few months ago while he was on a trip to Switzerland.
Case Background
Isai alongside his son Mark, founded PokerStars back in 2001 with the initial headquarters being located in Costa Rica. After Chris Moneymaker’s revolutionary WSOP Main Event victory in 2003, which he was able to achieve after securing a seat via an online tournament at PokerStars, online poker’s popularity skyrocketed, and the company’s customer base rapidly grew.
In 2005, PokerStars moved its offices to the Isle of Man as it continued to host tons of daily online tournaments and cash games. Other online poker rooms like partypoker, Absolute Poker and Full Tilt Poker also enjoyed massive success, despite operating in a legally gray area due to the absence of specific laws relating to the game during that time.
That changed in 2006 when the US government successfully passed the Unlawful Internet Gambling Enforcement Act (UIGEA), prohibiting offshore poker sites from serving US customers. Partypoker was among the first operators to exit the country following the passage of the Act, but PokerStars, along with several other poker rooms refused to leave and continued to accept deposits from American players.
In April 2011, US authorities conducted an intense crackdown on unauthorized gambling sites, seizing their domains and freezing player balances. Among the sites ordered to shut down were PokerStars, its main rival Full Tilt Poker, as well as Absolute Poker which ran as part of the Cereus Poker Network. Scheinberg, alongside the top executives and key employees of the two other sites were indicted for multiple charges including money laundering and bank fraud.
The US Department of Justice ordered the companies to repay their players, but PokerStars was the only operator to successfully comply with the order. It was later discovered that Full Tilt and Absolute Poker had mixed player funds with their operating costs, resulting in their failure to repay hundreds of millions of player deposits they owed to their customers.
Full Tilt Poker in particular became the subject of a massive scandal after its executives, including six-time WSOP bracelet winner Chris Ferguson, was accused of running a Ponzi scheme using players’ money.
Scheinberg Avoided US Authorities
While his fellow indictees owned up to the crimes, Scheinberg denied the allegations against him and did not enter the U.S since his indictment. However, he did agree with the DOJ to a $731 million settlement, allowing PokerStars to acquire Full Tilt and repay the latter’s financial obligations to its players.
Scheinberg continued to evade law enforcement and let go of any management position he had at the company. His son Mark took over and later sold PokerStars to David Baazov, a fellow Israeli-Canadian business magnate, owner of The Stars Group (formerly Amaya Gaming).
The $4.9 billion deal in 2014 allowed PokerStars to make a return to the regulated poker industry in the US. The company serves as the online poker arm of The Stars Group which also runs a number of major gambling brands such as Australia’s BetEasy as well as Sky Betting and Gaming. PokerStars is currently serving players in New Jersey, and has become the first company to offer online poker services in the newly-regulated gaming market in Pennsylvania.
Prison Time Unlikely
Scheinberg’s voluntary surrender has placed an end to one of online poker’s longest legal sagas. It seems highly unlikely that the businessman will end up in jail, with federal prosecutor Olga Zverovich indicating that an agreement in principle regarding the basic terms is currently in place.