Jan. 16 (Bloomberg) -- Two founders of NETeller Plc, a payment processor for gambling Web sites, were arrested on U.S. charges that they transferred billions of dollars from American citizens to overseas companies.

Stephen Lawrence and John Lefebvre, ex-directors of the Isle of Man-based company, were arrested yesterday in the U.S. on charges of conspiring to illegally transfer funds. NETeller shares have lost 79 percent of their value in the past year.

Lawrence and 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,'' U.S. Attorney Michael Garcia in New York said in a statement. ``Blatant violations of U.S. law are not a mere `risk' to be disclosed to prospective investors.''

The arrests are part of a U.S. crackdown on Internet gambling. Prosecutors previously charged online bookmaker Betonsports Plc and seven people associated with the London- based company, including founder Gary Kaplan and former Chief Executive Officer David Carruthers. Louisiana authorities in September charged Sportingbet Plc's then-Chairman Peter Dicks with violating Internet-gambling laws.

Lawrence, 46, was arrested in the U.S. Virgin Islands, and Lefebvre, 55, was arrested in Malibu, California, U.S. officials said. Both are Canadian citizens. Lawrence's lawyer, Peter Neiman, declined to comment and Lefebvre's lawyer, Vincent Marella, didn't immediately return a call.

No Connection

``There is no connection at present between NETeller and the charges against the directors,'' external spokesman George Cazenove said by telephone in London. The two men no longer have any connection to NETeller, the firm said in a statement.

NETeller said Oct. 31 that a law that aims to shut down online gaming in the U.S. by criminalizing transfers of funds would change the company's direction ``fundamentally.'' NETeller processed more than $7.3 billion in 2005, mostly from North American gambling transactions, prosecutors said.

``This muddies the water in the industry again somewhat but the reaction in the market has been somewhat muted,'' Tejinder Randhawa, an analyst at Evolution Securities, said today. Evolution is reviewing its recommendation on NETeller stock.

The shares, which were suspended today in London, closed yesterday at 176 pence, valuing the company at 211.1 million pounds ($414 million).

80 Percent

Lawrence, NETeller's former chairman, resigned as a non- executive director on Oct. 13. Lefebvre, the former president, stepped down as a non-executive director in December 2005, according to a filing.

NETeller provided payment services to more than 80 percent of worldwide gaming merchants by 2005, prosecutors said. Lawrence and Lefebvre are two of the three largest shareholders, with respective stakes of 5.9 percent and 5.5 percent.

Running an Internet gambling operation and transferring proceeds overseas are illegal, prosecutors said. Lawrence and Lefebvre both face up to 20 years in jail.

The case is U.S. v. Lawrence, 07-00012, U.S. District Court for the Southern District of New York (Manhattan).

To contact the reporter on this story: David Glovin in Manhattan federal court at dglovin@bloomberg.net and; Victoria Richards in London at vrichards@bloomberg.net

Last Updated: January 16, 2007 15:47 EST