Inside the Indictments

May 23, 2011 - 11:00 PM EDT

I have only had a brief time to look at the indictments, and I intend to offer a more thorough analysis of each indictment, as well as the affidavit, in the coming days as we learn more. Here are my early thoughts, though:

The first indictment is against K23 Group Financial Services, doing business as BMX Entertainment, and Ann Marie Puig. The second indictment alleges charges against Thrillix Systems, Ltd, doing business as, Darren Wright, and David Parchomchuk. Both indictments, seem to contain the same interesting language.

Count One – Conducting Illegal Gambling Business

This count (with emphasis, spacing, and numbering added for clarity) alleges that the defendants

did knowingly and unlawfully conduct, finance, manage, supervise, direct and own all or part of an illegal gambling business, to wit, a gambling business involving online sportsbetting, which gambling business was in violation of the laws of the State of Maryland… and which involved five or more persons who:

  1. conducted, financed, managed, supervised, directed and owned all or part of
  2. said illegal gambling business, and which
  3. has remained in substantially continuous operation for a period in excess of thirty days.

18 U.S.C. §§1955 and 2.

These references federal statute 18 U.S.C. §1955, which is not the UIGEA. This is a pre-existing federal statute. In laying out the details above, the government is attempting to meet all the required prima facie elements of the statute. On December 16, 2010, in connection with another case, the government provided a memorandum interpreting 18 U.S.C. §§1955 and Maryland Law as follows:

As is set forth above, Texas Hold ‘Em poker, when played on the Internet meets the requirements of prohibited gambling under Maryland law, because the game involves paying consideration for a chance to win a reward. Therefore, payment processors who receive, become the depository of, record, register, and forward, money to be gambled must be in violation of section 12-102 of the Maryland Criminal Code. Consequently, such a payment processor that works for an internet poker site that has five or more people that conduct its business and operates on a substantially continuous basis or has a gross revenue of $2,000 in a single day, is an illegal gambling business under 18 U.S.C. section 1955. This conclusion is supported by the Maryland Code, a liberal construction of its gaming provisions, Maryland, federal, and other state judicial opinions.

Maryland Criminal Code §12-102 reads as follows:

(a) A person may not:

(1) bet, wager, or gamble;

(2) make or sell a book or pool on the result of a race, contest, or contingency;

(3) establish, keep, rent, use, or occupy, or knowingly allow to be established, kept, rented, used, or occupied, all or a part of a building, vessel, or place, on land or water, within the State, for the purpose of:

(i) betting, wagering, or gambling; or

(ii) making, selling, or buying books or pools on the result of a race, contest, or contingency; or

(4) receive, become the depository of, record, register, or forward, or propose, agree, or pretend to forward, money or any other thing or consideration of value, to be bet, wagered, or gambled on the result of a race, contest, or contingency.

As the US Attorney develops in the memorandum cited above, persuasive jurisdiction seems to indicate that poker would fall under the elements of that statute. Pennsylvania and North Carolina appellate and high courts have found that poker is gambling under those various state statutes, which read similarly to the Maryland statute.1 While there is an element of skill in the game, luck being an inherent or possibly predominant factor is the controlling legal guideline in the PA and NC cases. Maryland’s courts are likely, though not guaranteed, to take a similar approach to poker. Pro-poker attorneys have found it difficult to secure a court ruling saying clearly otherwise. (There is some authority, though, on the wire act and how it would apply to parts of gambling which are not sports betting, but that does not seem to be relevant here.)

However, it is interesting that the indictment specifies sports betting. This is likely because, while an argument can possibly be made that poker is not gambling, an argument over sports betting is essentially dead in the water. Much court precedent establishes sports betting as gambling, and arguing otherwise would likely be futile.

Count Two – Money Laundering

This count is simpler. It establishes that in moving funds in connection with the operating of an illegal gambling business, they violated federal statutes prohibiting such conduct and establishing it as money laundering.

In doing research and talking to those involved in the industry in the coming days, I hope to get a clearer picture of what this indictment means and hopefully form a prediction about the impact it will have on the online poker industry pressing on. If anyone reading has an intimate knowledge of Maryland, its approach to gambling and the associated statutes, (including the federal statute), feel free to contact me to talk about it.


  1. Commonwealth v. Dent, 992 A.2d 190, 197 (2010 PA) and Joker Club LLC v. Hardin, 643 S.E.2d 626, 630 (2007 NC)

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