Gambling Compliance Quotes Jeff Ifrah on Outcome of Calvin Ayre’s US Criminal Case

Aug 3, 2017

Gambling Compliance Quotes Jeff Ifrah on Outcome of Calvin Ayre’s US Criminal Case

Bodog, ‘Black Friday’ Cases Winding Down With A Whimper

The conclusion of Bodog founder Calvin Ayre’s U.S. criminal case may strengthen the hand of PokerStars founder Isai Scheinberg in
New York, but is not necessarily indicative of a more relaxed stance on offshore gambling at the U.S. Department of Justice, according
to legal experts.

The Bodog founder resolved his five-year-old case before the U.S. District of Maryland last month when a federal judge in Baltimore
accepted a sentence of 12 months of unsupervised probation, based on a single misdemeanor offence of Ayre being an accessory to
illegal betting.

Original felony charges of operating an illegal gambling business and money laundering were dismissed.

The eye-catching agreement came just a few weeks after Scott Tom, founder of now-defunct Absolute Poker and Ultimate Bet, also
agreed to plead guilty to the same misdemeanor charge in the separate criminal case brought against him and ten others by federal
prosecutors from the Southern District of New York on online poker’s “Black Friday”, April 15, 2011.

Ayre and Tom were central figures in two of the most high-profile cases in a crackdown by U.S. law enforcement on offshore
gambling that began in the early 2000s and gathered steam over the course of more than a decade.

Yet it now appears those cases are winding down to a timid conclusion, rather than ending with a bang.
“Ayre’s case is interesting in that it does seem to indicate a waning appetite on the part of the government to pursue these older
cases of past wrongdoing,” said Behnam Dayanim, a partner with law firm Paul Hastings, who represented PartyGaming in its nonprosecution
agreement struck with the U.S. Department of Justice in 2009.

It is not altogether unusual for criminal cases to play out this way, according to Dayanim and other attorneys with experience in
internet gambling.

For one thing, individual prosecutors leading cases on behalf of the U.S. government are frequently reassigned or move into private
practice — particularly after a change in administration — with their replacements less invested in the older cases they inherit and
perhaps keener to wrap them up and move on.

In addition, internet gambling presents challenges from a jurisdictional perspective.

With countries including Canada, Costa Rica, the UK and the Isle of Man unwilling to extradite individuals charged with gambling
offences, prosecutors can be left with cases that may never be concluded unless the defendants voluntarily agree to travel to the U.S.
to face the charges or negotiate a mutually acceptable resolution from outside the country.
Still, there is a further school of thought that Ayre and Tom being able to avoid felony charges reflects the shifting attitudes towards
online gambling in America.

In court filings seeking a judge’s approval of Ayre’s plea agreement, lawyers acting on the Bodog founder’s behalf said the fact that
online gambling has since been regulated in New Jersey, Nevada and Delaware means the activity “no longer carries the same kind of
opprobrium in the United States that existed at the time of his indictment”.

The same filing also pointed to the separate federal criminal case brought in Oklahoma against various individuals associated with
Panama-based Legendz Sports.

Earlier this year, an Oklahoma federal judge imposed a probationary sentence on Legendz’ founder and CEO Bartice “Luke” King,
rejecting a push by prosecutors for King to be sent to jail after his conviction on charges of illegal gambling and money laundering

“The criminal enforcement landscape has definitely changed significantly over the last decade,” said Barry Boss, a partner at law firm
Cozen O’Connor who served as counsel to Calvin Ayre in Maryland and also represented Full Tilt Poker in its Black Friday civil case
before the Southern District of New York.

I think that the reduced penalties that you are seeing reflect a greater social and moral acceptance of online
gambling,” added Barry Boss, a partner and co-chair of law firm Cozen O’Connor’s criminal defense practice.

The conclusion of Ayre’s case raises inevitable questions as to its significance for Isai Scheinberg, the PokerStars founder and now the
only one of the eleven Black Friday defendants who is yet to resolve his case.

A plea agreement like Ayre’s is not in any way binding on other cases, where the specific circumstances may be different, but they can
still be persuasive.

As such, it is conceivable that lawyers for Scheinberg — should he want to strike a settlement — could attempt to argue that a
misdemeanor plea would be appropriate in light of the similarities with Ayre’s case and the fact that PokerStars offered only online
poker, which it believed to be a game of skill, and not sports betting games that were more clearly prohibited by federal laws.
Unlike Tom’s Absolute Poker, meanwhile, PokerStars was also able to immediately pay back its former U.S. customers after the Black
Friday indictments — with no suggestion that player monies had been misused.

On the other hand, lawyers note that Tom was indicted on narrower charges to begin with than Scheinberg and other Black
Friday defendants.

Also, the last of those defendants to reach a plea agreement with Manhattan prosecutors — PokerStars’ former head of payments
processing, Paul Tate — did so to felony charges of illegal gambling, even though Tate’s lawyers argued he was neither a founder nor
served in a strategic leadership position at the company.

Scheinberg was reported several years ago to have hired former U.S. Attorney General Michael Mukasey to represent him in the case
before the Southern District of New York.

When contacted by GamblingCompliance, Mukasey, of counsel with law firm Debevoise & Plimpton, declined to comment.
It would be wrong for people in the gaming industry to take comfort from this and think they can dabble in
online sports betting,” said Arlo Devlin-Brown, partner of law firm Covington & Burling and former prosecutor
in the Black Friday poker cases.

More than five years after Ayre’s indictment, it does appear that the Bodog and Black Friday cases represent the high-water mark of
U.S. enforcement actions on internet gambling.

Certainly no case since then has had the impact of those from 2011 or 2012, nor earlier cases brought against payments processor
Neteller by the Southern District of New York in 2007 or BetOnSports in Missouri a year earlier.

Criminal indictments in online gambling cases have typically been tied to related civil actions targeting the assets of offshore
operators, noted Jeff Ifrah, the founding partner of Ifrah Law in Washington, D.C. who has represented individuals in each of the Black
Friday, Maryland and Legendz Sports cases.

The most prominent enforcement actions of recent years also stemmed from a time when offshore gambling operations were
passing significant sums of money through U.S. bank accounts.

That practice — now far less common — made those funds subject to seizure by federal law enforcement, with the filing of criminal
indictments allowing prosecutors to move forward with asset forfeiture.

“If you look at offshore gambling cases, the sentences have historically been probationary or minimal jail time. The issue’s always
been about getting the money, and never about the sentencing,” Ifrah said.

“In terms of the future, I think if the Southern District of New York or another jurisdiction can’t locate significant amounts of money in
the U.S. or abroad then these cases might dry up — unless there’s a consumer protection reason, if there’s money stolen from
players, cheating or players being deceived.”

Nonetheless, offshore sites should not look at the outcome of Calvin Ayre’s case as a sign that they can act with impunity,
said Arlo Devlin-Brown, a former assistant U.S. Attorney at the Southern District of New York who was responsible for the ‘Black
Friday’ poker indictments.

The resolution of Ayre’s case, “very likely reflects the fact-specific circumstances and cleaning up of an old case rather than the future
enforcement policy of the Department of Justice against gaming companies who are acting illegally,” said Devlin-Brown, now a
partner at law firm Covington & Burling.

“It would be wrong for people in the gaming industry to take comfort from this and think they can dabble in online sports
betting; that would be a mistake.”

Dayanim of Paul Hastings also cautioned against assuming Ayre’s case was indicative of a wider trend.

“The Ayre case was resolved by the United States Attorney in Maryland, not in New York, where many of these gambling cases have
been located, and may not reflect the priorities of that or other offices,” Dayanim said.

“Second, it involved long-past conduct and a defendant of substantial means who was largely out of the govern