The money-making story
Isai Scheinberg is a remarkable and respectable person. The 1947-born Israeli-Canadian is the founder of the PokerStars online poker site, launched on September 11, 2001, together with his son Mark Scheinberg. PokerStars quckly took over the U.S. market and became the world’s biggest online poker company. The companybehind PokerStars, Rational Enterprises, was originally operated from Costa Rica, Later, the company moved to Onchan, Isle of Man, an offshore British dependency.
By 2010 PokerStars was generating about $500 million in annual profits on $1.4 billion in revenue. In August 2014, Isai’s son Mark Scheinberg sold PokerStars without the then already closed US branch for $4.9 billion to the publicly traded Amaya Gaming. Forbes estimates he is now worth $4.5 billion.
New laws and prosecution
In 2006 the U.S. Congress passed the Unlawful Internet Gambling Enforcement Act. Many online gambling and poker sites terminated business with U.S. gamblers, while others, including PokerStars, did not.
In 2011, Scheinberg was indicted on gambling, bank fraud and money-laundering by U.S. prosecutors. Consequently, he has for two decades steered clear of North America. The prosecutors had charged Scheinberg as part of a crackdown that shut down the U.S.-facing PokerStars platform and its main rival, Full Tilt Poker. Ten other men were also charged, all of who have pleaded guilty in the years since to charges ranging from slap-on-the-wrist misdemeanors to felonies.
On February 10, 2012, PokerStars acquired a European Union license granted by the Malta Lotteries and Gaming Commission and continiued to operate as a European operator. With Mark Scheinberg as its official CEO, PokerStars went on with its business from the Isle of Man, limiting play to non-U.S. gamblers.
Payment Services Provider
Most banks and credit card companies were not willing to process online poker payments, leaving PokerStars and its rivals to rely on small payment-processing firms that were sometimes shady and paid well for their services.Like with the Binary Options a big issue was the miscoding of credit card charges to obscure gambling transactions. To disguise online gambling transactions from the issuing banks, player deposits were coded to look like the money had been spent on other things rather than sent to a poker site. PokerStars always has claimed it never engaged in miscoding.
In 2009 and 2010, U.S. authorities seized tens of millions from companies processing online poker transactions in the U.S., even indicting or arresting some payment processors. “There is a guerrilla war going on,” Ian Imrich, a lawyer for Full Tilt, told Forbes in 2010.
All the defendants in the U.S. government’s online poker case—except for Scheinberg—pleaded guilty to charges ranging from misdemeanors to felony bank fraud conspiracy, with the longest prison sentences going to the payment processors, including one three-year sentence for Ira Rubin who was accused of helping process billions of dollars in payments for illegal online gambling businesses.
The Black Friday
On a Friday in April 2011, U.S. Attorney Preet Bharara dropped an atom bomb on the online gambling industry in what would become known among poker players as Black Friday. He unsealed the indictment of 11 online poker people, including Scheinberg and employees of PokerStars and other brands.
Four men who ran payment processors and a banker were also charged. They were charged with violating the Illegal Gambling Business Act, the newer UIGEA law, and conspiracy to commit bank fraud and money laundering.
The feds seized the U.S. websites of PokerStars, Full Tilt and Absolute Poker.
While PokerStars’ competitor Full Tilt collapsed as a resultScheinberg had kept PokerStar players’ funds operationally separate and repaid U.S. players all the $150 million they held. PokerStars would go on to enter into the $731 million civil lawsuit settlement with U.S. prosecutors and did not admit to any wrongdoing. As part of the deal Scheinberg agreed to no longer have a formal management position at PokerStars.
In 2019, U.S. prosecutors launched extradition proceedings during a visit Scheinberg made to Switzerland. Scheinberg initially contested the extradition effort, but later decided to voluntarily travel to the U.S. to face the charges.
On February 21, 2020, he appeared in U.S. District Court for the Southern District of New York. The mood there was was “strangely cordial,” Matthew Russell Lee of InnerCityPress reported. His appearance before New York Courts is the endgame of a high-stakes corporate and legal drama involving billions of dollars, Forbes noted in an article worthwile reading.
Scheinberg was released on bail of $1 million and has surrendered his passports. In the court hearing U.S. prosecutor Olga Zverovich said the government and Scheinberg had been negotiating a deal and were far along in those negotiations.
Isai Scheinberg, the 73-year-old cofounder of PokerStars, the world’s biggest online poker company,