By Reginald P. Johnson and Ryan M. Rodenberg
The Illegal Gambling Business Act of 1970 just got a modern, Internet-era facelift.
On April 26, 2011, a Maryland-based federal grand jury returned two indictments that, collectively, charged two entities and three individuals with conducting an illegal gambling business and money laundering. In the first indictment, as announced in a comprehensive May 23, 2011 press release out of the U.S. Attorney’s Office in Maryland, charges were levied against ThrillX Systems, Darren Wright, and David Parchomchuck. ThrillX Systems is described as a company that produces “online sports book and casino software.” Over the course of the past decade, ThrillX Systems has allegedly been able to incorporate the most recent technology in their software solutions.
Wright and Parchomchuck, both of British Columbia, Canada, were charged in connection with ThrillX Systems as being involved in a gambling business in violation of Maryland state law. The second indictment similarly charged BMX Entertainment, a company operating various sports betting websites, and Ann Marie Puig of Costa Rica. BMX Entertainment was founded in 1996 and is based in the Mediterranean country of Cyprus. The company’s websites allegedly allow gamblers to bet on a variety of sports including basketball, hockey, football, tennis, martial arts, boxing, volleyball, horse racing, and soccer. Both indictments call for the forfeiture of related bank accounts and domain names. The indictments also levy criminal charges towards the individuals which carry with them maximum sentences of five years in prison for operating an illegal gambling business and twenty years imprisonment for money laundering.
The indictments appear to be the first specifically directed at online sports books since the widely-publicized seizures of three prominent online poker websites on April 15, 2011. What led to the indictments was a two year multi-agency state and federal investigation that included the opening of “an undercover payment processing business called Linwood Payment Solutions” based in Baltimore, Maryland. Establishing Linwood Payment Solutions allowed “undercover agents to gain person-to-person contact with top managers of gambling organizations.” Through these conversations, agents were able to obtain information pertaining to how the online gambling businesses operate, negotiate contract terms with the online gambling businesses, and handle the “intricate movement and processing of collection and payment data from the gambling organizations to the banks.” Over the course of two years, Linwood Payment Solutions processed 300,000+ transactions worth over $33 million. A portion of the transactions occurred in Maryland. The nexus to Maryland was emphasized in the press release, with U.S. Attorney Rod J. Rosenstein positing that “it is illegal for internet gambling enterprises to do business in Maryland, regardless of where the website operator is located.”
The press release from the U.S. Attorney’s Office also offered details on the undercover operation jointly undertaken with the U.S. Immigration and Customs Enforcement – Homeland Security Investigations, Internal Revenue Service – Criminal Investigations, Anne Arundel County Police, and the Maryland State Police. A Maryland-based online gambler who was cooperating as an informant confirmed that s/he was able to open online gambling accounts and place bets on certain gambling websites implicated in the indictments. BetEd.com, which operated as an online sports book and was the apparent flagship portal of ThrillX Systems, was one of the ten websites seized as a result of the indictments. BetEd.com used Linwood Payment Solutions, the undercover company, to wire transfer $100 in winnings to the informant gambler’s Maryland-based bank account.
In connection with BetEd.com, Linwood Payment Solutions also allegedly processed gambling payments for the online sports book using banks in Guam and North Carolina. Further, for 13 months from 2010 to 2011, the indictment alleges that “BetEd.com directed Linwood to wire transfer over $2.5 million of collected gambling proceeds to a bank account in Panama” according to one indictment.
The 19 page affidavit filed in connection with the indictments reveals intricate aspects of online sports betting and includes a discussion of all relevant treaties and federal statutes that impact the largely illicit industry. Most notably, the affidavit provides a look in to the lifeblood of internet-based sports gambling – payment processing, the exact service provided by covert Linwood Payment Solutions. With fund transfers allegedly taking place in locations such as Panama, Malta, Portugal, and the Netherlands, the importance of intermediaries that move gambling-related funds is obvious. The ten domain names seized, all with sport betting connections and registered domestically and abroad (France and Sweden), include Bookmaker.com, 2Betsdi.com, Funtimebingo.com, Goldenarchcasino.com, Truepoker.com, Betmaker.com, Betgrandesports.com, Betehorse.com, and BetEd.com. Notice of the seizure is now prominently displayed if anyone attempts to access one of the sites. However, alter egos of many of the sites now use a web address with an alternate suffix (e.g. “.ag” for Antigua) that is seemingly less susceptible to seizure by U.S. authorities. As of August 11, 2011, it does not appear that any of the three individuals charged in the indictments have been arrested, extradited, or voluntarily turned themselves in.
Reginald P. Johnson graduated from Florida State University in 2011 with a major in Sports Management and a minor in Business. Ryan M. Rodenberg is an assistant professor of sports law analytics at Florida State University. 2011 © Johnson and Rodenberg.
