Tuesday, October 27, 2020

PokerStars founder Isai Scheinberg facing financial crimes surrenders to U.S Fed

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As Forbes first reported, the founder of PokerStars surrendered to federal authorities upon entering the country from Switzerland a week ago Friday.

Scheinberg, 73, stands charged with a number of gambling and financial crimes including money laundering and bank fraud.

The defendant pleaded not guilty in a Manhattan court on Jan. 17 and was released from custody after posting a $1 million bond. Scheinberg additionally surrendered his passports and agreed to limit his movements to the NY and Washington D.C. areas.

PokerStars founder Isai Scheinberg facing financial crimes surrenders to U.S Fed 1

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The arrest marks both the end of a remarkable saga and the resumption of criminal proceedings initiated almost nine years ago.

PokerStars founder to face charges

The Scheinberg story begins well before Black Friday, the day in 2011 the US government seized the PokerStars domain.

Along with son Mark, Isai founded what has today become the world’s largest online poker site in 2001. The duo initially ran their company out of Costa Rica before moving to a new longterm headquarters on the Isle of Man.

Everything was going just fine until a new federal gambling law hit the books in 2006. Congress that year passed the Unlawful Internet Gambling Enforcement Act (UIGEA), expressly criminalizing offshore poker sites.

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PokerStars refused to exit the US, so the federal government showed it the door. On Apr. 15, 2011, prosecutors in New York indicted the elder Scheinberg and temporarily shut down the site.

“Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like,” said Preet Bharara, the US attorney who initially brought the charges.

Bharara charged a total of 11 men with crimes related to gambling, and Scheinberg is the last of the group to face the music. The others, including the former figureheads of Full Tilt Poker, all pleaded to their own charges.

Scheinberg looks like he’ll follow suit. Assistant US Attorney Olga Zverovich told Forbes that the parties reached “an agreement in principle on the basic terms” — presumably a plea deal.

Acknowledging Isai

Depending on whom you ask, Scheinberg is either an international white-collar criminal or a frontrunner for the poker Hall of Fame.

Regarding the former, Scheinberg obviously committed the crime of offering online poker in the US. While such operations might have existed in a legal gray area for a time, the passage of UIGEA erased any room for interpretation. PokerStars plainly flouted federal law by continuing to serve US customers thereafter.

That said, the poker community holds Scheinberg and his vision for PokerStars on the highest of pedestals.

Perhaps no company apart from the World Series of Poker has done more to grow the game, and Scheinberg deserves a fair share of the credit there. It was during the heyday of “unregulated” online poker that WSOP Main Event attendance grew from less than 700 players to more than 7,000 — largely thanks to qualifiers from PokerStars.

Scheinberg additionally assumed the role of white knight for the US poker economy in the dark period following Black Friday. As part of its settlement with the federal government, PokerStars agreed to repay hundreds of millions of dollars in outstanding balances to Full Tilt customers.

The Scheinbergs eventually sold off their empire in 2014 for nearly $5 billion.

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