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Payment Processor Arrested, Violated United States’ UIGEA

The United States arrested an Australian man Friday on charges of bank fraud, money laundering and processing illegal internet gambling transactions. It is believed to be the first case in which the Unlawful Internet Gambling Enforcement Act was cited in an arrest.

Daniel Tzvetkoff was picked up by authorities in Las Vegas. The founder of online processors Intabill and Automated Clearing House could face up to 75 years in prison on a variety of charges, including ones related to violating the UIGEA. The UIGEA a law which tells financial institutions not to conduct business related to online gambling, directing banks to screen new commercial customers and reject applicants who plan to operate as an “illegal gambling entity.” Financial institutions in the United States have until June 1 of this year to come into compliance with the rules of the UIGEA, which went on the books in 2006.

According to a release from the United States Attorney Southern District of New York Tzvetkoff is charged with assisting “illegal internet gambling companies by processing approximately $500 million in transactions between U.S. gamblers and internet gambling websites and disguising the transactions to the banks so that they would appear unrelated to gambling.”

ACH and Intabill were processors used by clients to get money to and from online gambling Web sites. Tzvetkoff’s businesses completed transactions with most of the major online poker rooms, including PokerStars, Full Tilt, Ultimate Bet, and so on. However, the companies apparently stopped processing transactions in 2009, as many of the poker sites accused the companies of owing them millions of dollars.

Here’s some of what the prosecutors in the case had to say via press release:

TZVETKOFF and his co-conspirators induced U.S. banks to provide ACH services to internet gambling companies by disguising the transactions so that they would not appear to be gambling related. To accomplish this, TZVETKOFF and his co-conspirators created dozens of shell companies with names unrelated to gambling — complete with phony web sites that made the companies seem legitimate — and represented to banks that the ACH transactions were on behalf of these companies. On May 3, 2008,
one of TZVETKOFF’s co-conspirators in an email told TZVETKOFF that he had hired programmers to develop “unique” websites for the shell companies so that if someone was “checking the companies out there is absolutely no way to tie the companies together.” TZVETKOFF responded: “This is all perfect!”

Tzvetkoff gained a reputation for a luxurious lifestyle in Australia, owning high-end cars and huge mansions.

While this is the first case in which the UIGEA has been invoked, it is hard to say how much to read into this arrest. It’s unknown if other third-party processors are being targeted by the U.S. government, or if this is one individual being targeted for what appears to be a litany of wrongdoings. We’ll report more as events warrant.

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