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Poker prohibition in the US

There’s been so much written by people more qualified than I am since the news about Full Tilt and PokerStars (I would particularly recommend Nelson Rose’s comments on it, here), but if you’ve missed it, have a look at this site that has sprung up since the indictments. It shows just how quickly people react to take advantage of opportunities on the web, and in doing so underlines the futility of attempts to prohibit what so many people see as being a perfectly acceptable leisure pursuit.

Meanwhile, I was sent this article, which I thought was fascinating:

IN ANOTHER era, Daniel Tzvetkoff would have been whacked – shot or garroted, buried in a shallow grave or sent to sleep with the fishes. The world’s two biggest online gambling companies, Full Tilt Poker and PokerStars, which want the $US100 million they believe the former Gold Coast high-flyer took from them, don’t work that way.

They send their lawyers. Or they just wait. But Tzvetkoff, incredibly, has used his position from inside a US jail to, first, free himself, and then go on the offensive against the very people who are chasing him.

The Queensland internet entrepreneur, 28, was mysteriously bailed from a US federal prison last August. He has rolled to save his neck.

US federal prosecutors are using Tzvetkoff’s unique inside knowledge of how big online gambling companies shift money out of the US in exchange for a sweet deal.

He is living in a gilded cage in a secret location in New York City. It is believed his partner, Nicole Crisp, who twice failed to appear at a Brisbane hearing into the collapse of Tzvetkoff’s collapsed Australian company, is with him along with their two young children.
It is a world away from the modest Queenslander where he grew up in the south Brisbane suburb of Camp Hill, attending Villanova College.

Tzvetkoff was a boy wonder.

While claiming to be an average student, at 13 Tzvetkoff began a company with school mates to do 3D and cartoon animation and web design.
By 16, he had won a contract to animate cartoons for The New York Times’ website, which kickstarted his foray into online commerce in the US.
He soon had it all. He owned a Bentley, two Lamborghinis, a Ferrari, a classic Ford GT40 and several older Mustangs, and paid a record-setting $28 million for a Mermaid Beach property.

All that’s gone now. But he’s still got his genius.

Tzvetkoff’s knowledge of the online gambling industry is said to be so profound that he is one of the few people able to unravel the complex links between online gambling companies and the money they are accused of illegally shifting around the US.

Tzvetkoff was arrested in Las Vegas on April 16 last year, charged with money laundering, bank fraud and conspiracy for processing $543 million in illegal internet gambling earnings through his British Virgin Islands corporation, Intabill, the trading arm of his now liquidated Brisbane company, BT Projects.

US federal prosecutor Arlo Devlin-Brown told a judge that Tzvetkoff was a serious flight risk who might have millions stashed in Switzerland, Nevis or St Kitts. Tzvetkoff was known to use private jets and had no reason to hang about waiting for his trial.

The judge said they might gamble in Vegas but not New York. He denied bail.

Then in August, Devlin-Brown and Tzvetkoff’s lawyers went back to court for a secret hearing. It is believed the prosecutors told a story of Tzvetkoff’s newfound spirit of co-operation. He was bailed. The result of his work assisting federal lawyers in the powerful Southern District of New York – the same team which prosecutes mob bosses, and travels abroad to drag terror and narcotics suspects back to New York to face trial – is now becoming apparent.

There have been a number of recent prosecutions emerging from the Southern District office relating to online gambling. Sources attribute this as the work of their trophy, Daniel Tzvetkoff.

“He knows how to reverse-engineer transactions to determine its original source,” says a former acquaintance.

“Technically, he’s quite brilliant. He’s learnt it since he was a kid. You can’t get taught this stuff.
“He’s got immense knowledge, the most knowledgeable guy on the planet, and PokerStars and Full Tilt have under-estimated that. You can’t buy that sort of knowledge. He learnt it online.

“He was making money at 16 online, pressing transactions, dealing with online providers.”

Tzvetkoff handled all the US-based winnings of the big online gambling companies by setting up hundreds of shelf companies, which existed only to put a protective shield between the companies and their money.

Then, it is alleged, Tzvetkoff got greedy. He started helping himself to their money. After Full Tilt began proceedings against Tzvetkoff, and he failed to come good on his debts to PokerStars, he was blasé enough to walk back into an online gambling conference in Las Vegas, Nevada, as though taunting the same people to whom he owed millions.

It is widely believed in gambling circles that they tipped off federal agents that Tzvetkoff was in town, staying in a $3000-a-night suite at the over-the-top Wynn hotel. But now the big gamblers might be wishing they had cut their losses and kept their mouths shut. The hunted is now helping the hunters.

The US has “speedy” trial laws, which require prosecutors to be ready for trial within several months or the case will be dismissed. Neither the federal prosecutors nor Tzvetkoff’s Boston law firm have been in any hurry to get Tzvetkoff before a jury. A deal has been done, but Tzvetkoff’s lawyers and federal prosecutors refuse to discuss his case.

All recent documents relating to his case are sealed in the US Federal Court and strictly off-limits. Some lawyers familiar with the case speculate that Tzvetkoff has already made his plea and will walk, without serving time, once he has exhausted his usefulness to the southern district attorneys.

For Tzvetkoff, who last year was looking at a maximum 75-year sentence, things no longer look quite so dire.

Federal prosecutors have had their sights on online gambling for several years. Though it seems inevitable that online gambling will become legal in the US, the big companies frustrate the government: they have their headquarters offshore and pay no tax in the US.

The federal prosecutors believe that online gambling companies act illegally by offering US citizens seats at virtual gambling tables, but they have not taken the companies on in court.

The companies, and powerful lobby groups, argue that online poker, roulette or blackjack are games of skill, not chance, so are not technically “gambling”.

Rather than risk losing such a case, the prosecutors instead chase the proceeds of gambling, and prosecute related cases of bank fraud, illegal money transmission and money laundering.

With companies unwilling to risk prosecution by collecting their winnings, they choose to use intermediaries such as Tzvetkoff to process their winnings.

The gambling companies gave Tzvetkoff complete access to their US-based winnings, which he processed and deposited in offshore bank accounts but only after disguising its origins by sending it down a twisted, densely overgrown path.

Tzvetkoff first needed to persuade US banks to temporarily house the funds before sending them to offshore accounts.

Prosecutors said Tzvetkoff did this by employing US operators to approach banks and set up accounts under false and misleading pretences, by not declaring the money came from gambling.

He then used the banks to provide access to the Automated Clearinghouse (ACH) – a bank-to-bank electronic transfer system, run by the US Federal Reserve to shift money.

Tzvetkoff used the ACH to “pull” money from gamblers’ debit accounts (US banks won’t allow customers to use credit cards to gamble) or, indeed, to “push”, by paying out winnings. By using payment-processing intermediaries such as Tzvetkoff, the gambling companies could rightly argue it was the processor, not them, that made false representations to various banks or committed fraud.

One of Tzvetkoff’s operatives, Andrew Thornhill, of Chicago, is so far the only one of his accomplices to be jailed. Thornhill, who processed hundreds of millions of dollars in gambling transactions while working for Tzvetkoff, pleaded guilty to conspiring and making false representations to a bank in order to obtain an account.

Last year, Thornhill served three months in prison. He sounds bitter. It is possible that he was betrayed by Tzvetkoff; or perhaps he’s heard that Tzvetkoff may do no jail time at all.

“I don’t want to talk about him,” Thornhill said. “He turned my whole life upside down.”

Tzvetkoff was not a guy who could light up a room. He was introverted and no great talker. But his abilities told the story.
And the Cristal champagne and the hotel suites proved to his new US colleagues he was worth sticking around.

Supposedly, as far as most US banks knew, Tzvetkoff and his agents were just processing general e-commerce payments anything from weight-loss programs to dating or travel agencies. It was made to look that way.

The Courier-Mail has learnt that Tzvetkoff created hundreds of shelf companies with “skin” names that didn’t appear related to gambling. Some existed for only days, if not minutes, for specific transactions.

They were called things such as,,,, and

Tzvetkoff spent most of 2008 in the US and during this time appeared to have gone rogue from his head company in Brisbane, BT Projects.
In mid-2008, according the prosecutors, one of Tzvetkoff’s unnamed US co-conspirators emailed him saying he had hired four computer programmers to develop a whole series of phony websites.

The sites were designed to look different, with different toll-free numbers. They were, in fact, all Tzvetkoff’s, but by creating a baffling number of websites he was able to spread money about and avoid unwanted attention.

Only an investigator with Tzvetkoff’s intimate and innate knowledge could link them and start seeing the big picture; they were also handy to throw off the gambling houses, should they wish to be nosey about what Tzvetkoff was doing with their money.

Between February 2008 and March 2009, Tzvetkoff used the ACH to process $543 million on behalf of big gambling companies, sending most of the money to various tax-haven islands, where the companies could collect their winnings. Or, as it turned out, the portion of their winnings that Tzvetkoff was prepared to give them.

It was during this period that Tzvetkoff was riding high, buying the Mermaid Beach property, cars and yachts, playing a dangerous game with the gambling companies but believing himself bulletproof.

The volumes of money Tzvetkoff was handling for the gambling companies proved irresistible to him.

Though he earned huge commissions – one company is rumoured to have paid him $150,000 a day – by March 2009 the companies accused Tzvetkoff of helping himself to $100 million of their money.

Tzvetkoff’s former business partner, lawyer Sam Sciacca, learnt what Tzvetkoff had been doing and tried to make arrangements to repay the money. The debts were too onerous.

Tzvetkoff’s name was mud in the international gambling community and his ability to continue making money processing gambling winnings was lost.
BT Projects, which traded as Intabill, collapsed in July 2009 owing about $180 million.

Why Tzvetkoff thought he could turn up the Las Vegas internet billing conference in April 2010 without attracting derision is anyone’s guess.
Although, as one former friend said: “Daniel just doesn’t get it. He doesn’t see that he’s done anything wrong.”

Since Tzvetkoff’s arrest, there have been a string of prosecutions emerging from the office of the Southern District prosecutors, which legal sources suspect is evidence of Tzvetkoff warming up and showing his loyalty to the prosecutors as they prepare to go after the big boys.

In September, 2009, UK operator Sportingbet forfeited, without prosecution, $33 million in gambling proceeds; in June 2009, US federal prosecutors seized $13 million from Ahmad Khawaja, whose Allied Wallet and Allied Systems was accused of processing money for PokerStars (the matter was settled without criminal charges); in May last year, Douglas Rennick pleaded guilty to processing $350 million in online gambling money, and got a non-custodial sentence.

There have been other gambling prosecutions since Tzvetkoff’s arrest, but all have one common thread: the prosecutor is Arlo Devlin-Brown.
He is the man who has been “handling” Tzvetkoff from the beginning (Devlin-Brown said he was not permitted to speak to The Courier-Mail).
The other common feature is that none of those charged have received any serious jail time. The prosecutors seem more interested in going after the money than the man.

But Tzvetkoff wasn’t to know that. From where he was sitting, in a New York jail, with people talking about lifelong sentences, his prospects looked dark indeed.

Now that he’s singing for his supper, his prospects are excellent. It remains to be seen what sort of damage he’ll do to PokerStars and Full Tilt, if any. But he will at least have shown the US authorities how to track a dollar through an e-maze.

Back in Australia, there’s an anxious conga line of creditors – banks, lawyers, the Australian Taxation Office, former partner Sam Sciacca, Full Tilt Poker – who are chasing more than $150 million they claim Tzvetkoff owes them. Some believe the bankrupted Tzvetkoff is broke, but there’s an alternative theory.

If Tzvetkoff did have some serious money stashed away, he may have handed it to the US authorities, thus sending it into the US general revenue, rather than the pockets of his Australian creditors.

It is widely expected that Tzvetkoff would face investigation for fraud and falsification of books if he stepped back into Australia.
For the 100-plus staff at Brisbane’s BT Projects, the real killer was that the company, which Tzvetkoff and Sciacca (who has been absolved of any blame) started 10 years ago to process internet payments, was already highly profitable before Tzvetkoff dragged it down with his solo US dealings.

Daniel’s parents Kim and Julie – now living at a west Brisbane property bought from their son in 2009 – told The Courier-Mail they couldn’t comment on the case or Daniel’s whereabouts.

Posted in Betting industry, Regulation, United States.

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