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Govt charges gambling site tied to CU with money laundering
WASHINGTON (9/27/11)--The Department of Justice has charged the owners and executives of an online gambling site, which deposited funds into a now-defunct Arizona-based credit union, with paying themselves $444 million since 2007 while defrauding players in what the government alleges was a massive Ponzi scheme. The department filed an amended complaint Sept. 20, according to The Wall Street Journal (Sept. 26). It had filed civil allegations against the site, Full Tilt Poker, as well as other online poker sites and executives at relatedl companies in April, accusing them of money laundering, bank fraud, and illegal gambling. Full Tilt alleges the government crippled its ability to collect money from players in the U.S. because the government maintained online gambling is illegal. However, the government alleges the site allowed players to bet with funds it never collected, creating $130 million in phantom funds, and then used other players' money to pay both players cashing out and the site's owners (The Journal and Forbes Aug. 30). The government closed the site in April and the company could not pay $300 million the Justice Department said it owed players. The situation that "tipped the balance" involved Vensure FCU, a small credit union in Mesa, Ariz., which allegedly deposited poker-related funds and was placed into conservatorship by federal regulators in April, said the Journal. NCUA placed the credit union into conservatorship on April 15 (News Now April 15). When it finally shuttered the credit union in July, NCUA said the 140 member, $8.1 million asset credit union was insolvent and had failed to properly diversify its business (News Now July 13). The agency had recommended the credit union build a loan program but found it relied on income from processing online gambling transactions to survive. The credit union challenged the conservatorship, but in late June a U.S. District Court rejected its challenge. In its complaint, the credit union admitted it had taken part in poker-related fund transactions, which increased its asset size but did not permanently intent to depend on those revenues. In 2006, the U.S. made it illegal to process funds related to online gambling. Poker sites started using companies to act as middlemen but the companies were closed off by the government, said the Journal. The sites allegedly turned to 16 small banks and credit institutions to process their transactions. Regulations allow a bank or credit union to process transactions if it can get a reasoned legal opinion that the transactions are legal, said the Journal.


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