The chill spreads
Pinnacle, a "sportsbook" that offers lines on US politics among other things, has shut out the US market in response to the NETeller arrests. People smarter than me are saying that Pinnacle called it quits (or was planning to call it quits) on the US market before the NETeller incident. Oh well.
Maybe they read some tea leaves and saw it coming.
Things aren't looking much better on TS.
From the Tradesports forums:
Focus: United States
The Times January 17, 2007
Neteller founders charged after sting operation by FBI
James Doran in New York
Stephen Lawrence and John Lefebvre, founders of Neteller, the UK-listed online payments company, were last night charged with conspiracy in connection with a multibillion-dollar money laundering scheme linked to internet gambling. ["a multibillion-dollar money laundering scheme"... no f***ing shame]
The pair were arrested on Monday after an FBI sting operation discovered that Neteller was being used to allow Americans to place illegal bets on sporting events via internet gambling companies based in foreign countries. [NETeller facilitated payments to online sportsbooks among other perfectly legitimate destinations of electronic cash transfer.]
*
Mr Lawrence, 46, who lives in a luxury home on Paradise Island in The Bahamas, was arrested in the United States Virgin Islands and has been ordered to appear later today in the federal court of St Thomas.
Mr Lefebvre, 55, was arrested at the same time in Malibu, California, and was expected to appear in Los Angeles federal Court last night. [You were about to feel sorry for them, too, weren't you? Too bad, cause they're rich.]
Neither Mr Lawrence nor Mr Lefebvre were available to comment in response to the allegations made in the indictment. If found guilty, the pair face 20 years in jail.
The seven-page indictment, filed in New York last night, claims that the pair set up Neteller in 1999 with the express purpose of providing online payment services to gambling companies. The indictment also claims that between 2000 and 2003 Neteller Inc, a Canadian corporation, offered payment services to various internet gambling companies so that they could illegally access customers in the United States.
From 2004 to the present day, the same operation was conducted by Neteller plc, an Isle of Man-based company which in April 2004 raised some $70 million via a listing on London’s AIM. An agent with the FBI named in the indictment claims she used Neteller as a middle man between her US-based bank account and an offshore internet gambling company.
Shares of Neteller were suspended on AIM yesterday before the indictment was released as the company was seeking clarification of its status with US authorities.
A spokesman for Neteller stressed that the founders were no longer employees or directors of the company. “Because of that, this arrest has nothing to do with the company,” he added.
Mr Lawrence resigned as a non-executive director of the company on October 13, having stepped down as non-executive chairman last May. Mr Lefebvre resigned as a non-executive director on December 15, 2005. However, the pair still own large stakes of Neteller. Mr Lawrence holds 5.91 per cent of the company, while Mr Lefebvre owns 5.54 per cent.
Neteller claims to operate the largest independent online money transfer business in the world with 3 million customers in 160 countries and over $7 billion in annual transactions.
It specialises in providing instant payment services where money transfer is difficult or risky because of issues of identity, trust, currency exchange, or distance. In the past, it handled funds for online gamblers in the US but it is said to have stopped the practice when tough new laws banned internet gambling in America last October.
Last year authorities arrested a number of prominent executives for breaching US gambling laws, including two from Britain. David Carruthers, the former chief executive of BetOnSports, was arrested in July while Peter Dicks, former non-executive chairman of Sportingbet, was arrested in September.
Other arrests
July 2006 David Carruthers, chief executive of BetOnSports, the AIM-listed bookmaker, is arrested in Dallas
Sept 2006 Peter Dicks, then Sportingbet chairman, is arrested at JFK airport in New York, on request of Louisiana state authorities
Sept 2006 Manfred Bodner and Norbert Teufelberger, joint chief executives of Bwin, the Austrian internet betting group, are detained in Monaco on charges of violating France’s internet gaming laws
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It's unbelievable, the low prices at which people will mortgage their credibility. I mean, hell, if you're going to do it, at least do it for something that seems worthy, or noble, or something. Like Iraq. But this? Didn't casinos (and their sellout crony James Chanos, he the Enron-slaying short-seller] get enough of a bite after they short-sold the entire online gaming industry, for gargantuan returns??
"A multi-billion dollar money laundering scheme." god. (that's with an intended small g)
The real jury is the FBI, and they have rendered their verdict.
Perhaps, after millions of dollars' legal expenses and a couple of shattered reputations, a court will throw out the indictment. But the damage will be done, and the signal will have been sent:
Addendum: From those same TS forums (not to mention personal experience), liquidity is decreasing, as well. This is not necessarily TS/Intrade's fault, but it is still a damn shame.
I hope Paul Tetlock, Justin Wolfers, and other academics who have made mini-careers out of certifying the results of online prediction markets are equally fine with the decimation of said markets. (Perhaps Wolfers will entertain the fiction that play money markets are equally effective forecasters, so the ban won't affect him. Ha!) Even if that was only a secondary effect of the NETeller ban (the primary effect of which was to land a second, decisive blow to offshore gambling enterprises), it is an effect all the same. Tradesports/Intrade must either issue a statement soon about its intentions (business as usual? fight to the bitter end?), or close up shop to US investors before they walk out on their own accord.
Not being able to travel in the United States is a major cost. Tradesports has already paid a $150,000 fine to make nice with the CFTC, but you never pay somebody off once. You either pay them off until they choke you, pay them off until you reach a trust-based understanding, or you shrug them off.
