Payment Processor for Internet Poker Companies Pleads Guilty in Manhattan Federal Court to Illegal Gambling Conspiracy

Preet Bharara, the United States Attorney for the Southern District of New York, announced that CHAD ELIE, a payment processor who worked with Internet poker companies Pokerstars, Full Tilt Poker, and Absolute Poker (the “Poker Companies”), pled guilty today to conspiring to commit bank fraud and operate illegal gambling businesses in connection with a scheme to deceive banks into processing hundreds of millions of dollars in Internet gambling transactions. ELIE pled guilty today before U.S. District Judge Lewis A. Kaplan.

According to the superseding information filed today in Manhattan federal court, the indictment in which ELIE was initially charged, other documents previously filed in the case, and statements made in court:

In late 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), making it a crime to “knowingly accept” most forms of payment “in connection with the participation of another person in unlawful Internet gambling.” After several Internet gambling businesses withdrew from the U.S. market following the passage of the UIGEA, the Poker Companies became the top three Internet poker operators continuing to do business in the United States. Because United States banks were largely unwilling to process Internet gambling payments, companies turned to third party payment processors, including ELIE, who disguised payments so that they would appear unrelated to online gambling. ELIE and others lied to United States banks by claiming that the financial transactions they were processing were for businesses other than Internet poker companies, and they created phony corporations and websites to disguise payments to the Poker Companies.

ELIE served as a payment processor for each of the three Poker Companies at various times from 2008 through early 2011. For example, in 2008, ELIE opened a bank account that he falsely represented would be used to process payments for “payday loans” in order to disguise his processing of transactions for Pokerstars. In the summer of 2009, he opened an account at another bank, falsely claiming that it would be used to process payments for various Internet membership clubs. He then used it to process millions of dollars in payments for the Poker Companies. When a bank employee questioned ELIE about the transactions, he falsely denied that the transactions had anything to do with Internet gambling. Finally, beginning in fall 2009 and continuing into early 2011, ELIE offered to invest millions of dollars in three failing banks, including SunFirst Bank, in exchange for the banks’ agreements to process Internet poker transactions. All three banks have since been ordered closed by bank regulators.

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ELIE, 32, of Las Vegas, Nevada, faces a maximum sentence of five years in prison. In connection with his guilty plea, ELIE agreed to forfeit his interest in more than $25 million held in various payment processing accounts in the United States and abroad and to pay an additional $500,000 to the United States. The forfeited funds may be made available for remission as necessary and appropriate in order to compensate the fraud victims in U.S. v. Pokerstars, et al. 11 Civ. 2564 (LBS). ELIE will be sentenced by Judge Kaplan on October 6, 2012.

Mr. Bharara praised the FBI for its outstanding work in the investigation, which he noted is ongoing. Mr. Bharara also thanked Immigration and Customs Enforcement’s Homeland Security Investigations New York and New Jersey Offices for their continued assistance in the investigation.

To date, five additional defendants charged with ELIE in the superseding indictment have appeared in the United States—Bradley Franzen, Ira Rubin, Brent Beckley, Ryan Lang, and John Campos. All have pled guilty except Campos, who is scheduled to go to trial on April 9, 2012 before Judge Kaplan. He is presumed innocent unless and until proven guilty.

This matter is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Arlo Devlin-Brown, Andrew Goldstein, Niketh Velamoor, and Nicole Friedlander are in charge of the criminal case, and Assistant U.S. Attorneys Sharon Cohen Levin, Jason Cowley, and Michael Lockard are in charge of related civil money laundering and forfeiture actions.