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IRS seizes more than $24 million from payment processors after two-year Bodog probe31 July 2008
A two-year IRS investigation into Bodog has resulted in the seizure of more than 24 million dollars from two payment processors.
On January 24 and February 19, 2008, the IRS siezed about $14.2 million from JBL Services, according to court documents filed in federal court in Baltimore. And on July 2, it seized about $9.87 million from ZipPayments. The money seized from JBL Services was being held in bank accounts at Wachovia Bank, Regions Bank, Bank of America and Sun Trust Bank. The ZipPayments money was in Nevada State Bank accounts. Both companies are accused of processing payments for Bodog.
Bodog says the seizures haven't affected business for the popular online gambling site.
"Not one single player failed to get paid when this processor (JBL Services) was disrupted," Alwyn Morris, chief exectuive officer of Morris Mohawk Gaming Group, which assumed ownership and operation of Bodog in North America in mid-2007.
"Customer deposits are safe and every player has and will always be paid," Morris added, while acknowledging the challenges that working in the American market presents. "All operators outsource payment processing functions to third parties and these payment processors are subject to regulatory constraints wherever they operate, and, occasionally in the U.S., are subject to legal action because of the uncertain legal environment there."
According to court documents, Bodog first appeared on the IRS' radar in 2003, when the IRS Criminal Investigation division "conducted interviews" regarding Bodog founder Calvin Ayre. But a formal investigation into Bodog didn't begin until 2006.
During the course of the investigation, IRS Special Agent Randall Carrow became intimately familiar with the ways the online casinos handled paying their customers.
"Because of various developments (Department of Justice prosecutions and new federal legislation), it has become more and more difficult for Internet gambling web site operators to move money into and out of the United States," Carrow said in an affidavit supporting the seizures.
"To continue to make 'payouts' to gamblers, some Internet gambling operators have begun using money processing businesses in the United States," Carrow explained. "Based on my training and experience, I know that, typically, the gambling web site operator will send a U.S. processor a check or wire transfer of a relatively large sum of money, usually hundreds of thousands or million of dollars. The processor then distributes the money to individuals, either by check or electronic transfer of some type. None of the transfers identify the money involved as gambling proceeds.
"Bodog, through various entities, has been sending money to various processors in the United States, using several different business names, including MPS Processing Ltd., Direct Channel LLC, JBL Services, EGALO and ZAFTIG Instantly Processed Payments Corp., dba ZipPayments.com."
Carrow's investigation really began to pick up steam toward the end of 2006. After an informant helped link a payment processor owned by Bodog founder Calvin Ayre to Bodog's deposit system, and establishing the different Bodog owned and/or affiliated companies used for payments, including credit card transaction, the IRS used an undercover agent to places bets at Bodog.
The undercover agent opened an account on Dec. 21, 2006, and placed bets on two football games. By January of 2008, the undercover player had placed more than 40 bets, and wagered more than $3,500.
In February of 2007, the undercover agent requested a payout of $1,500. In March, he received a check drawn from a Direct Channel bank account with Mercantile Bank and signed by M.G. Scott. The check bounced, and in April, Bodog sent a replacement check.
According to Carrow's affadavit, through a combination of more withdrawal checks, forensic accounting and "cooperating individuals," the IRS tracked a payment chain back to Bodog and companies owned by Ayre or Bodog, and then back down to other payment processors including JBL Services.
Another "cooperating individual" at JBL Services admitted all of JBL's money came from Bodog, and the IRS moved in.
Carrow later discovered that a state gambling control board was also investigating Bodog. Carrow found a similar accounting chain when an undercover agent requested a payout from Bodog in April of 2008. The check from Zip Payments arrived in May, and Carrow traced the chain back to Bodog.
Bodog denies that all the ZipPayments money seized belongs to them. "This is simply false," Bodog said in a statement.
IRS seizes more than $24 million from payment processors after two-year Bodog probe is republished from Online.CasinoCity.com.
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