Full Tilt Poker CEO arrested on fraud charges

Legal

Full Tilt Poker founder Raymond Bitar and Nelson Burtnick, head of payment processing, were named in a new indictment alleging they defrauded customers to conceal the firm’s cash-poor condition after charges were filed last year.

Prosecutors said that even after Manhattan U.S. Attorney Preet Bharara unsealed the initial indictment against the two men and nine others in April 2011, Bitar and Burtnick conspired to lie to customers about the security of the funds. The U.S. also filed a related civil suit against the company and other online poker companies as well as payment processors last year.

The revised indictment, unsealed today in federal court in New York, alleges that both men used player funds to finance Full Tilt Poker’s operations and pay its owners. Full Tilt Poker developed a shortfall between the amount of cash in its bank accounts and the money it owed players.

Bitar remained in Ireland and didn’t come to the U.S. to face charges filed more than 15 months ago, prosecutors said.“He was running it, I submit, because by this time, the company was at this point little more than a Ponzi scheme and he had to be there,” Assistant U.S. Attorney Arlo Devlin-Brown said in court day. “He was attempting to keep it from unraveling.”

Money Spent

Both men failed to hold player cash in “segregated”accounts and that they then “concocted a method to temporarily disguise the company’s problems,” the U.S. said.

After Ireland-based Full Tilt Poker was forced to stop operating in the U.S. in April 2011 and internationally in June 2011 following a court order issued by federal judges overseeing related civil and criminal cases in the U.S., prosecutors said the company “was unable to repay players around the world the approximately $350 million it owed them.”

While Full Tilt Poker agreed with the U.S. Justice Department to immediately return all money owed to U.S. players, neither the company nor Bitar and Burtnick repaid customers as the company claimed to have done on its website, prosecutors said.

“In truth and in fact, however, Full Tilt Poker could not return player money because, as Bitar knew, the player money had been spent by the company and distributed to its owners,”prosecutors said in the new indictment.

Persisted

Prosecutors said that while the company’s internal financial statements reported that as of March 31, 2011, it owed $390 million to players around the world yet had less than $60 million in its bank accounts,’’ prosecutors alleged.

“Bitar and Full Tilt Poker persisted in soliciting U.S. gamblers long after such conduct was outlawed,” said Janice Fedarcyk, the head of the FBI’s New York office. “Bitar has already been charged with defrauding banks to conceal the illegal gambling. Now he stands accused of defrauding Full Tilt’s customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The online casino become an Internet Ponzi scheme.”

Bitar, 40, who has residences in Ireland and California, was taken into custody earlier today by Federal Bureau of Investigation agents after his plane landed at John F. Kennedy Airport in New York, said Jim Margolin, a spokesman for the FBI’s New York office. Bitar moved the company to Ireland in 2006.

‘Come Back’

Bitar pleaded not guilty to the charges at his arraignment before U.S. Magistrate Judge Debra Freeman. She agreed to release him on $2.5 million personal recognizance bond secured by $1 million in cash or property and the signatures of five financially responsible people.

The judge said Bitar couldn’t be released until he’d met all the conditions she set and told prosecutors that she would grant their request to stay her ruling for 24 hours because it wasn’t likely that Bitar would be able to meet the conditions of his release by the end of business today.

She also directed that he confine his travel to the Southern and Eastern District of New York and the Central District of California, where Bitar has a home and where relatives live. Bitar was directed to surrender his passport.

Freeman rejected a request by prosecutors that he be detained without bail because he posed a flight risk. Devlin-Brown had argued that Bitar had known about the indictment and had failed to appear in the U.S. to face the charges.

“Mr. Bitar was a U.S. citizen who traveled back and forth to the U.S. from Ireland, but knowing he was indicted he decided not to come back,” Devlin-Brown told the judge.

http://www.businessweek.com/news/2012-07-02/full-tilt-poker-s-bitar-charged-in-new-indictment-in-n-dot-y-dot

Online poker CEO arrested for $430 million Ponzi scheme

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NEW YORK (CNNMoney) -- Federal law enforcement officials arrested Raymond Bitar, chief executive officer of online poker site Full Tilt Poker, on Monday in connection with a $430 million Ponzi scheme his site was accused of running last year.

Bitar voluntarily surrendered to authorities at John F. Kennedy International Airport as he returned from Full Tilt's headquarters in Ireland to face punishment for allegedly defrauding poker customers by lying to them about the security of their funds. He was charged with gambling, bank fraud and money laundering offenses.

As of June 2011, Full Tilt owed $300 million to players around the world but had only $6 million with which to pay them, according to the U.S. government. Officials said that he siphoned more than $430 million ingamblers' winnings to board members and owners.

"Bitar and Full Tilt Poker persisted in soliciting U.S. gamblers long after such conduct was outlawed," Janice K. Fedarcyk, assistant director-in-charge at the FBI, said in a statement. "Now he stands accused of defrauding Full Tilt's customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers."

Bitar, 40, who was originally charged on April 15, 2011, appeared before U.S. Magistrate Judge Debra Freeman Monday afternoon. He is the seventh of 11 defendants charged in connection with the initial indictment to have been arrested. The others arrested have each pleaded guilty and await sentencing, with the exception of John Campos, who was sentenced to three months in prison last month.

http://money.cnn.com/2012/07/02/news/companies/poker-ponzi/index.htm