Isai Scheinberg, the Israeli-Canadian founder and former co-owner of PokerStars, has been sentenced to time served, along with a $30,000 fine for operating an illegal gambling business.
Mr Scheinberg’s sentence brings to an end the knotty saga which became popularly known as ‘Black Friday’ within the online gambling community – one which has been ongoing for nearly ten years.
Mr Scheinberg was one of the 11 persons indicted on charges of illegal gambling, bank fraud and money laundering by the US Department of Justice, on April 15, 2011.
He was arrested in Switzerland in summer 2019, and surrendered to US authorities when he landed in New York in January 2020. He surrendered his passports, posted a $1 million bond, and was released with orders to remain in the New York area.
In March, he pled guilty to the charge of operating an illegal gambling business. He was the last of the Black Friday defendants to face his charges in the US.
What was the story behind online poker’s Black Friday?
The early and mid-2000s saw an explosion in the popularity of online poker, with hundreds of casual players becoming professionals who made their living from playing games from home. But in 2006, the US passed the Unlawful Internet Gambling Enforcement Act (UIGEA), which made most types of online gambling illegal. PartyPoker went bust and was replaced by Full Tilt Poker and Poker Stars, which soon became the biggest poker sites in the US.
How did these two companies get around the UIGEA, which stated that any profits received from gambling after the act was passed would have been illegal? They laundered the profits they made from offering online poker to American players through small banks and payment processors, which were allegedly given significant bribes for their role in the operation. Full Tilt Poker and Poker Stars said that the revenue came from online merchants – which of course, did not exist.
The people behind these websites were indicted on April 15, 2011, which became known as Black Friday. Immediately after the indictment, the poker sites were shut down by the FBI, which left players without access to hundreds of millions of dollars deposited in their accounts. The FBI eventually agreed to let the websites reopen if the companies paid back the money in the accounts.
Online gambling remains illegal in nearly every US state, except for New Jersey, Nevada and Delaware.
Who were the people named in the Black Friday indictment?
- Isai Scheinberg, founder of PokerStars
- Paul Tate, Director of Payments for PokerStars
- Raymond Bitar, CEO of TiltWare – software company for Full Tilt Poker
- Nelson Burtwick, Director of Payments TiltWare, Past Director of Payments for PokerStars
- Scott Tom, part owner of Absolute Poker
- Brent Beckley, Director of Payments and Risk Management at Absolute Poker
- Ryan Lang, payment processor
- Ira Rubin, payment processor
- Bradley Franzen, payment processor
- Chad Elie, payment processor
- John Campos, Vice chairman of the board and part-owner of SunFirst Bank
What happened to PokerStars after Black Friday?
Mr Scheinberg was banned from serving in a managerial or directorial role for the operator as part of the settlement, so his son Mark took over the business. In June 2013, Mark Scheinberg agreed to hand over $50m, to be released from any future claims relating to the Black Friday indictments.
Mark Scheinberg sold PokerStars’ parent company Rational Group to Amaya Gaming Group in June 2014, for $4.9bn. Amaya acquired Sky Betting & Gaming in in April 2018.
In October 2019, Amaya merged with Flutter Entertainment, the operator behind Paddy Power and Betfair, creating a new gaming giant with annual revenue of £3.8bn.