GPWA Times Magazine - Issue 1 - May 2007

19 The NETeller investigation began in the summer of 2006 and was led by FBI Special Agent Maryann Goldman. Her investigation found NETeller used a combination of payment and shell companies to process U.S. Automatic Clearinghouse transactions (ACH), thus hiding the nature of payments made to U.S. customers. The complaints also details how NETeller used payment service companies based in the U.S. to receive funds on its behalf. These companies would then transfer the money to Canadian accounts. “NETeller conceals the nature of these financial transactions,” Goldman said in the complaint. “The Payment Company receives funds in the United States on behalf of NETeller, and then transfers the funds out of the United States to accounts controlled by NETeller in Canada.” Goldman says at least $148 million was transferred this way. Most of the investigation centered on sports betting, a type of online gambling that violates the Wire Act. In mid-August, Goldman watched as a cooperating witness “electronically transferred $400 from a bank account in Miami, Florida, into a Neteller Account.” About 10 days later, the witness opened a wagering account with an Antigua-based business, Goldman said. She then watched as the witness placed three bets over the next month on National Football League games withdrew his winnings back into NETeller. In December, Goldman logged onto to the same NETeller account used by the witness and transferred $25 each to three different online gaming businesses. The investigation led to the arrests in mid- January. Soon after the arrests, NETeller shocked the online gambling world by withdrawing from their most profitable market. The Impact NETeller used to be the most popular third- party payment processor in online gaming. The company processed more than $7 billion in financial transactions annually according to the company’s interim report for 2006. The same report indicated that 95 percent of NETeller’s income came from online gambling. Approximately 85% of that revenue originated from the North America with the U.S. representing 75% of that figure. The immediate result of the withdrawal was a dip in online play. Participation in large Sunday poker tournaments, one gauge of the vitality of online poker Web sites, saw a quick decline. PokerStars’ Sunday participation dropped 12% and Full Tilt Poker failed to meet its guarantee for the first time since the 2006 World Series of Poker in the two weeks following the arrests. Some of the decline was attributed to the National Football League’s playoff schedule, but the NETeller withdrawal was definitely a contributing factor, according to the statistics. Sunday tournament numbers continued to be down 10-12% at PokerStars and Full Tilt until the middle of February, but then trended upwards again when new e-wallets began to market their sites. ePassporte, once a small player in the financial world, quickly became a widely-offered solution for Internet poker rooms. Several gambling sites, looking to keep their players bases, started new payment processing systems. Bodog launched NuCharge and Full Tilt Poker introduced MyWebATM, both viable depositing options. MoneyGram-wire deposits, available at nearly every Walmart, became popular at Poker Stars. Details on how to use pre-paid gift cards appeared in countless online gambling forums after NETeller withdrew. Giftcards. com received much attention as its “Virtual Visa” worked as a depositing option. But soon after it was discovered and publicized, the company stopped accepting online gambling transactions. Other pre-paid cards, like Green Dot Mastercardhavealsostoppedacceptingtransactions involving online gaming. No clear financial solution has surfaced for U.S. gamblers. Still, with millions of players looking to deposit, new options are discovered weekly and will continue to appear. Jan 16 NETeller co- founders charged with money laundering after details of an FBI financial probe reveal ties to online sports book betting. Jan 17 NETeller stops service to U.S. customers. Feb 7 Casino City confirms that the FBI has frozen up to $55 million from U.S. NETeller customer accounts. Feb 16 NETeller plans to layoff 250 workers — mostly Canadian employees — as a result of the U.S. withdrawal. Mar 21 NETeller signs an agreement with the Department of Justice and corporate financial assistance firm Navigant to develop a plan within 75 days to return U.S. money. Mar 26 NETeller stops service to Canadian and Turkish markets. First week of June 75-day deadline… What will the fate of the U.S. money be? Isaac Haxton won $861,789 at the PokerStars Caribbean Adventure. Most of his winnings are now tied up in NETeller. PokerStars GPWA TIMES | NETELLER