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NETeller founders charged with money laundering16 January 2007
NETeller founders Stephen Lawrence and John Lefebvre were arrested Monday and are being charged with laundering billions of dollars of Internet gambling proceeds, U.S. Attorney Michael Garcia announced today.
"Stephen Eric Lawrence and John David Lefebvre knew when they took their company public that its activities, as well as those of the internet gambling companies it assisted, were illegal in the United States," Garcia said. "Blatant violations of U.S. law are not a mere 'risk' to be disclosed to prospective investors. Criminal prosecutions related to online gambling will be pursued even in cases where assets and defendants are positioned outside of the United States."
NETeller is a popular third-party payment processor used by many to transfer money into online gaming accounts. The Isle of Man-based company processes more than $7 billion in financial transactions annually according to the company's interim report for 2006.
Approximately 75% of NETeller's revenue originates from the United States, said NETeller offcials in a public conference call about the same report.
Lawrence, 46, was arrested yesterday in the United States Virgin Islands. He will be presented in federal court in St. Thomas by tomorrow. Lefebvre, 55, was arrested yesterday in Malibu, California and will be presented in Los Angeles federal court later today. Lawrence currently resides in Paradise Island, Bahamas. Both are Canadian citizens.
Lawrence and Lefebvre are still NETeller shareholders, but have no other current connections with company, according to a statement released by the third-party payment processor today. NETeller suspended trading on the London AIM after the arrests.
If convicted, Lawrence and Lefebvre will face a maximum of twenty years in prison.
The Financial Probe
The investigation into NETeller, which began in the summer of 2006, was led by FBI Special Agent Maryann Goldman. Goldman delved into both how NETeller processed payments and how it helped facilitate sports bets.
The complaint unsealed Tuesday accuses NETeller of using a combination of payment and shell companies to process U.S. Automatic Clearinghouse transactions (ACH), thus hiding the nature of payments made to U.S. customers.
In order to get money out of the U.S., NETeller would have a payment service company recieve funds on its behalf. Then the payment company would transfer money first to an account in either the name of JSL Systems Inc. or Carload Inc.
Both accounts, based in Alberta, are directly connected to NETeller, the complaint alleges.
"NETeller conceals the nature of these financial transactions," Goldman said. "The Payment Company receives funds in the United States on behalf of NETeller, and then transfers the funds out of the United States to accounts controlled by Neteller in Canada."
Goldman says at least $148 million was transferred this way. And that both Lawrence and Lefebvre are partners in JSL Systems Inc.
The Betting Probe
In mid-August, Goldman watched as a cooperating witness "electronically transferred $400 from a bank account in Miami, Florida, into a Neteller Account." About 10 days later, the witness opened a wagering account with an Antigua-based business, Goldman said.
She then watched as the witness placed three bets on National Football League games over next month and withdrew money back to NETeller.
In December, Goldman logged onto to the same NETeller account used by the witness and transferred $25 each to three different online gaming businesses.
Cracking down on gambling
The arrests are part of continuing U.S. crackdown on Internet gambling.
Last summer, former BetOnSports.com CEO David Carruthers was arrested on charges of of racketeering, conspiracy and fraud. Carruthers is still awaiting trial.
In October, President Bush signed into law the Unlawful Internet Gambling Enforcement Act, which forces U.S. banks and financial institutions to block electronic transactions to Internet gambling businesses. NETeller has yet to make a decision on whether it would comply with the new regulations.
"Neteller was pretty open about the fact that they were holding out on making a decision about compliance with the act and have continued taking U.S. play based on the 270-day rule-making process," said online gaming expert Sue Schneider. "They were one of the few processors left that was still doing something, so this is a pretty direct shot at the payment side of things."
NETeller said they received no warnings or communications from the U.S. about possible arrests.
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