April 15th Civil Case Information

August 8, 2011 - 6:43 PM EDT
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Last updated November 3, 2011 at 5:48 PM EDT.

On April 15th, the United States Attorney for the Southern District of New York unsealed the two documents that chased the three largest poker sites out of the United States: the now famous criminal indictment and an accompanying civil complaint. Information about the criminal case can be found here. This page contains information about the civil case.

The civil complaint calls for the forfeiture of over one hundred bank accounts and five domain names: PokerStars.com, FullTiltPoker.com, AbsolutePoker.com, UltimateBet.com, and UB.com. It further requests money laundering civil penalties of at least $3 billion, “representing the amount of property, funds, or monetary instruments involved in the money laundering offenses.” They ask for at least $1.5 billion from PokerStars, at least $1 billion from Full Tilt, and at least $500 million from the Absolute Poker and Ultimate Bet. It is worth noting, however, that the DOJ’s request for such a large amount does not guarantee that it will get it.

In Rem Jurisdiction

The civil complaint is somewhat unique in that it is in two parts. The government is of course suing the many companies that make up Absolute Poker and Ultimate Bet, PokerStars, and Full Tilt Poker directly, in personam. However, the government is also suing “all rights, title and interest in the assets of” all of these companies. In other words, in addition to suing the companies, the government is suing the assets that the companies own. This is what’s known as an in rem proceeding, and this distinction could prove to be quite important to poker players.

The DOJ is suing the assets of the three poker sites directly because it alleges that all of these assets are property used in an illegal business or proceeds of crimes and should therefore become property of the US government through forfeiture. Those crimes include illegal gambling, wire fraud, financial institution fraud, conspiracy to commit those frauds, money laundering, and conspiracy to commit money laundering.

This distinction is important for players. Since the government is suing the assets themselves, anyone who wishes to purchase these assets has to worry that the assets might be subject to forfeiture at a later date. Since Full Tilt Poker is attempting to raise capital, this fact is quite significant. It presumably will lower the value of any assets that Full Tilt wishes to sell, and it also gives the US Department of Justice leverage over any negotiations between Full Tilt and prospective investors. Subject: Poker believes that the DOJ is actively using this leverage to ensure that US players are repaid if Full Tilt acquires the capital to do so.

Criminal vs. Civil Cases

Unlike in a criminal case where the prosecution must prove its case beyond a reasonable doubt, in a civil case, the government need only prove its case by a preponderance of the evidence. So, in this case the governments’ responsibility is only to prove that the property was used in, or was the proceeds of, some specific illegal activity by a preponderance of the evidence.

Furthermore, the indicted principals of the poker sites have strong incentive not to defend a claim against the listed properties in the civil case. If any of them did decide to defend such a claim, they obviously risk being arrested on US soil as they have outstanding criminal warrants. If their claim were filed, they would also run the risk of implicating themselves further in the criminal case by virtue of discovery in the civil case. The government often uses this leverage to its advantage by moving forward with the civil action first.

Claims on Seized Assets

Any person, company, or other entity that believes they are the owner of any of the seized properties must take it upon himself to file a verified claim on that property and then establish that claim in court. To facilitate this, from May 16th to June 15th, the DOJ posted notice on its website about the bank accounts it had seized on April 15th and set a deadline of July 15th for claims. Any such claim must

  1. identify the specific property claimed;
  2. identify the claimant and state the his interest in the property;
  3. be signed by the claimant under penalty of perjury; and
  4. be served on the designated government attorney.

After filing a claim, the claimant has twenty days to file his answer to the civil complaint.1

Since PokerStars repaid players on April 23rd, it appears that no players have filed such a claim for assets frozen from PokerStars. However, one player, Adam Webb, has filed such a claim seeking his Full Tilt Poker account balance of $58,917.90 and his Absolute Poker balance of $36,531.73. Webb claims that these funds were not legally subject to seizure.2 Many players elected not to file such a claim because it is not clear that players are legally eligible to do so, and the law allows the court to fine and/or sanction those who make frivolous claims. And, of course, players may have their own personal reasons not to file as well.3

In late June, the three poker sites all received an extension until September 30th to file their a claim on any property and their answer to the complaint. In early October, the DOJ extended the deadline again, to October 31st. As of the last update of this page, none of the sites have filed either document. The only named defendent to file a claim is Ray Bitar.

Case Chronology

  • April 15, 2011
    Unsealing of civil complaint.
  • April 20, 2011 
    Full Tilt Poker signs domain name agreement with the DOJ. Full Tilt agrees to prevent US players from playing or depositing on the site, preserve its records, and allow a monitor to confirm that it is obeying the agreement. In exchange, the DOJ returns Full Tilt’s domain name and makes clear that US player withdrawals are allowed.
  • April 20, 2011
    PokerStars signs domain name agreement with the DOJ. Stttars agrees to prevent US players from playing or depositing on the site, preserve its records, and allow a monitor to confirm that it is obeying the agreement. In exchange, the DOJ returns Stars’s domain name and makes clear that US player withdrawals are allowed. The agreement is identical to Full Tilt’s
  • May 11, 2011
    Absolute Poker signs agreement with the DOJ. AP agrees to prevent US players from playing or depositing on the site, preserve its records, and allow a monitor to confirm that it is obeying the agreement. Absolute Poker does not get its domain names back, the DOJ does agree to provide assurances to any payment processors that the withdrawal of funds from Absolute Poker is allowed for US players.
  • June 15, 2011
    Notice of verified claim from payment processor and criminal defendant Chad Elie against in rem property.
  • June 16, 2011
    Payment processor LST Financial claims innocent owner defense and lack of probable cause.
  • June 21, 2011
    Payment processor MAS claims right, title, and interest to the defendant in rem as the holder of the subject bank account and funds.
  • June 21, 2011
    Payment processor Ultra Safe Pay claims right, title and interest to the defendant in rem as the holder of the subject bank account and funds.
  • June 29, 2011
    Full Tilt receives an extension to file claim and answer the complaint until September 30th.
  • June 29, 2011
    Absolute Poker receives an extension to file claim and answer the complaint until September 30th.
  • June 30, 2011
    PokerStars receives extension to file claim until September 30th.
  • July 15, 2011
    Full Tilt and Absolute Poker customer Adam Webb claims funds not subject to seizure under 18 USC 981.18, USC 1955, 18 USC 1956, or any other US statute or regulation. Webb says the property is not the proceeds of any illegal activity and claimant did not use the property for any illegal activity. He further claims that any forfeiture would be grossly disproportionate to the alleged illicit activity and would be barred under the Excessive Fines Clause of the Eighth Amendment. Webb has claimed interest in $58,917.90 from his Full Tilt account balance and $36,531.73 from his Absolute Poker account balance.
  • July 13, 2011
    MAS and Ultra Safe Pay receive an extension to file an answer to the complaint.
  • July 13, 2011
    Elie receives an extension to file an answer to the complaint.
  • July 15, 2011
    An appearance was filed by an attorney ex rel, on behalf of the Commonwealth of Kentucky, and there is an order to accept same. The motion for an extension or the actual claim itself have not been entered yet. For the last few years, Kentucky has been attempting to seize domain names of US-facing online gambling sites, claiming that the money spent by its residents took away from monies that those same residents would have spent in state sponsored gambling. Kentucky had further goals to seek all monies lost by its residents on such sites. While no detailed claim is yet visible on this docket, this is likely a similar claim.
  • August 4, 2011
    Verified answer and counterclaim filed by Adam Webb.
  • August 18, 2011
    Commonwealth of Kentucky receives extension until September 30 to file claims or answers.
  • September 2, 2011
    DOJ agrees to release all but $5.5 million to PokerStars in the Luxembourg bank accounts on the original seizure list in the name of Sphene International.
  • September 6, 2011
    Autoscribe receives a delay to file claim or answers until September 30.
  • September 20, 2011
    Amended complaint filed by DOJ naming the board of directors of FTP, Chris Ferguson, Howard Lederer, and Rafe Furst, in addition to Ray Bitar. The amendment cites new money laundering allegations. Included in those allegations were dollar amounts that those board members had collected from FTP during their tenure in the form of distribution payments and profit sharing: From April 2007 to April 1, 2011, the DOJ alleges that Tiltware LLC’s owners received approximately $443,860,530 in such payments, including at least $41 million to Ray Bitar, at least $42 million to Howard Lederer, and at least $11.7 million to Rafe Furst. Chris Ferguson was allegedly allocated at least $85 million, but reportedly only received $25 million of that, with the rest of the balance listed as owed to him. The remaining balance of the $443,860,530 was disbursed to the other owners.
  • September 20, 2011
    Arrest warrant in rem for funds in five personal bank accounts of Chris Ferguson, Howard Lederer, Rafe Furst, and Ray Bitar as specified in the Amended Complaint .
  • September 28, 2011
    Ray Bitar files claim against seized funds and answers to the original complaint.
  • September 29, 2011
    PokerStars and related companies receive extension until October 31 to file claims or answers in civil complaint.
  • September 29, 2011
    Absolute Poker receives an extension until October 31 to file claims or answers in the civil complaint.
  • September 30, 2011
    Kentucky files claim against seized domain names
  • October 3, 2011
    Cardroom International files claim against seized assets based on prior RICO allegations.
  • October 3, 2011
    Full Tilt Poker receives extension until October 31 to file claim or answers to original complaint.
  • October 4, 2011
    DOJ moves to dismiss Adam Webb claim and countersuit.
  • October 4, 2011
    Chad Elie receives extension to file claim or answers until October 31.
  • October 17, 2011
    Adam Webb answers motion to dismiss his claim and countersuit.
  • October 19, 2011
    Todd Terry class action files claim against seized assets.
  • October 21, 2011
    Kentucky files answers to claim and also files counterclaim.
  • October 24, 2011
    Government requests one week delay to file answer brief to dismiss claim and countersuit of Adam Webb until October 31.
  • October 27, 2011
    Rob Evans (receiver/administrator in a lateral poker case) receives delay until November 28, 2011, to file an answer or otherwise respond to the Amended Complaint
  • October 31, 2011 
    PokerStars receives extension until November 30, 2011, to answer or otherwise respond to the amended civil complaint.
  • October 31, 2011 
    Blanca Games on behalf of Absolute Poker et alfiles claim against seized property: two bank accounts and domain names AbsolutePoker.com, UltimateBet.com, and UB.com.
  • October 31, 2011 
    Corporate Disclosure statement identifying Corporate Parent Oldford Group Ltd. for Rational Entertainment Enterprises LTD., Rational Entertainment Enterprises Ltd., Sphene International Ltd., Sphene International Ltd., Stelekram Ltd., and Stelekram Ltd. All of these companies are associated with PokerStars.
  • October 31, 2011
    Corporate Disclosure Statement: Pyr Software Ltd, a company associated with PokerStars, has no corporate parent.
  • October 31, 2011
    PokerStars et al. files claim for domain names, assets, and bank accounts.4
  • October 31, 2011
    Pyr Software files claim for company assets.
  • October 31, 2011
    Government files legal reasons to strike claim and dismiss countersuit by Adam Webb.
  • November 1, 2011
    Chad Elie has until November 30 to file answer to the amended complaint.
  • November 1, 2011
    MAS and Ultra Safe Pay have until November 30 to file answer to the amended complaint.
  • November 1, 2011
    Autoscribe has until November 30 to file answer to the complaint.
  • November 1, 2011
    Full Tilt Poker has until November 14 to file claims and until November 30 to file answers to the amended complaint.
  • November 1, 2011
    Absolute Poker has until November 30 to file answers to the amended complaint.

The author is not an attorney and no information contained in this article should be construed to be legal advice.

Footnotes

  1. Federal Rules of Civil Procedure Rule G, section 5 (A)(i)(a).
  2. More information about Webb’s case is included in the July 15th entry of the case chronology.
  3. Shortly before the deadline, the PPA released an extensive document discussing this issue in depth.
  4. Subject Poker believes that at least one of the accounts claimed here was the property of Full Tilt Poker, not PokerStars. At this time, there is no evidence to suggest this is other than a clerical error.