PokerStars Founder Isai Scheinberg Pleads Guilty To Federal Online Gambling Charge

PokerStars founder Isai Scheinberg has pled guilty to a federal online gambling charge in New York. The 73-year-old, beloved by much of the poker community, faces a maximum of five years in prison for directing an illegal gambling business in the US.

News of the plea came Wednesday in the form of a press release issued by the US Attorney’s Office in the Southern District of New York.

Here’s Manhattan U.S. Attorney Geoffrey S. Berman:

“Ten years ago, this Office charged 11 defendants who operated, or provided fraudulent payment processing services to, three of the largest online poker companies then operating in the United States – PokerStars, Full Tilt Poker, and Absolute Poker – with operating illegal gambling businesses and other crimes. As Isai Scheinberg’s guilty plea today shows, the passage of time will not undermine this Office’s commitment to holding accountable individuals who violate U.S. law.”

Scheinberg initially surrendered to federal authorities in January following extradition from Switzerland. He is the last of the 11 Black Friday defendants to face his charges in the US.

Arrested in Switzerland, extradited to the US

The announcement from the Attorney’s office also sheds some light on the events that brought Scheinberg to the US. As a federal fugitive, he certainly had no intentions of coming to New York voluntarily.

Scheinberg did travel to Switzerland in June 2019, though, an apparent misstep in his long-suffering effort to evade the law.

Aware of the US criminal charges against him, Swiss officials arrested Scheinberg on their soil last year. The country’s Office of Justice ordered him extradited to the US in October, a decision he initially appealed.

On Jan. 17, however, Scheinberg dropped his appeal, flew to New York, and surrendered to federal agents. He initially pled not guilty and was released on a $1 million bond, but not before surrendering his passports and agreeing to restrict his movements.

In the time since, Scheinberg has mostly been holed up at a luxury hotel in Manhattan.

Closing the book on Black Friday

It’s been almost nine years since the Black Friday on which the federal government cracked down on offshore online poker sites.

PokerStars was one of the largest by that time but by no means the only one serving US customers. Executives from Full Tilt Poker and Absolute Poker were also among those charged with federal gambling crimes.

The statute that caught Scheinberg out is 18 U.S. § 1955, a simple prohibition against “illegal gambling businesses.”

Although these poker sites operated in a legal gray area for a number of years, Congress expressly criminalized their underlying financial mechanisms with the Unlawful Internet Gambling Enforcement Act of 2006.

Thereafter, the legality of real-money online poker in the US became a matter of black and white. And PokerStars became, at least in the eyes of prosecutors, a criminal enterprise.

A dark day for online poker

US officials ultimately seized a number of online poker domains (including PokerStars) on April 15, 2011 and levied fines and federal charges against executives and payment processors. Some, like SunFirst Bank Vice Chairman John Campos, were responsible for masking the transactions that kept these sites in business.

Here’s the full list:

• PokerStars: Isai Scheinberg (founder), Paul Tate (Director of Payments)
• Full Tilt Poker: Ray Bitar (founder), Nelson Burtwick (Director of Payments)
• Absolute Poker: Scott Tom (part owner), Brent Beckley (Director of Payments)
• Payments: Ryan Lang, Ira Rubin, Bradley Franzen, Chad Elie, John Campos

As the last of the 11 to face his charges, Scheinberg’s plea essentially closes the book on an utterly fascinating first chapter in the online poker history books.

A representative provided the following statement to OPR regarding his plea:

“Mr. Scheinberg is pleased to put this matter behind him and that all charges other than violating the 1971 Gambling Act have been dropped. Notably, all PokerStars players were paid back immediately and Mr. Scheinberg played an important role in ensuring that all of the players from other sites were repaid as well.”

PokerStars revisits US online gambling post-Isai

Today, neither PokerStars nor the US gambling landscape bear much resemblance to their early-2000s selves on the surface.

Regarding PokerStars, its parent company The Stars Group is one of the largest online gambling companies in the world — a far cry from the startup poker site Scheinberg and his son Mark founded nearly 20 years ago. The two exited the company as billionaires in 2014.

The Stars Group (formerly Amaya) has since re-entered the US market, taking full advantage of the expansion of online gambling. PokerStars is live in New Jersey and Pennsylvania, most notably, but the company is also establishing a prominent role in the young US sports betting industry via a top-tier media partnership and a new Fox Bet brand.

The founders’ criminal history, however, still makes Stars a tainted asset in the eyes of some state regulators — including those in Nevada. Neither PokerStars nor Fox Bet are authorized to operate in the Silver State.

Given the legal and practical developments in the time since, it’d be hard to argue that the decade-long effort to bring Scheinberg before a magistrate in Manhattan fixed any of the problems facing the industry.

If anything, the continued prominence of offshore poker sites and sportsbooks in 2020 underscores how little has really changed in the last decade.