PokerStars’ Scheinberg Becomes Billionaire on Sale to Amaya

Gambling executive Mark Scheinberg, whose father is under indictment in the U.S., emerged as one of the world’s youngest billionaires yesterday after agreeing to sell PokerStars for $4.9 billion in cash.

The Isle of Man-based business, which operates under the name Rational Group Ltd., announced it would be acquired by Canada’s Amaya Gaming Group Inc. (AYA) Scheinberg serves as Rational’s chief executive officer and owns 75 percent of the business, according to a person familiar with the company, who asked not to be identified because the information is private.

Under terms of the agreement, Amaya will pay Rational shareholders $4.5 billion at the closing of the transaction, and a deferred payment of $400 million within the next three years if certain benchmarks are met. Scheinberg, who stands to collect more than $3.6 billion, will leave Rational when the deal is completed, according to a joint press release from Amaya and Rational.

Scheinberg, 40, and his father, Isai, pioneered the business of online wagering. PokerStars began offering online gambling in 2001, according to its website. The business today has more 85 million registered users around the world.

Rational had $420 million in adjusted earnings before interest, taxes, depreciation and amortization on revenue of $1.1 billion last year, according to the release.

Charges Settled

“I am incredibly proud of the business Isai and I have built over the last 14 years, creating the world’s biggest poker company and a leader in the iGaming space,” Scheinberg said in a statement. “Our achievements and this transaction are an affirmation of the hard work, expertise and dedication of our staff, which I am confident will continue to drive the company’s success.”

PokerStars was one of several online gambling companies taking bets from U.S. consumers while the interpretation of the country’s betting laws was being tested in courts.

In April 2011, Preet Bharara, the U.S. Attorney for the Southern District of New York, charged Isai Scheinberg and 10 other principals at three online gambling companies with bank fraud, money laundering and illegal gambling. Bharara cited the Unlawful Internet Gambling Enforcement Act of 2006, which prohibits companies from accepting payments for online bets where they are not legal.

PokerStars agreed in 2012 to pay $731 million to settle the charges with the Justice Department, without admitting wrongdoing. Isai Scheinberg remains under indictment in the U.S., according to Betsy Feuerstein, a spokeswoman for Bharara.

Legalized Betting

“The company has denied the charges on Isai’s behalf,” Rational spokesman Eric Hollreiser said in an e-mailed response to a request for comment.

Since the settlement Nevada, Delaware and New Jersey have legalized online betting. So-called “bad actor” clauses in states, however, exclude companies that took bets in the U.S. after the enactment of the 2006 law. The New Jersey Division of Gaming Enforcement last year suspended a PokerStars application for a license for two years.

David Baazov, chairman and chief executive officer of Amaya, based in the Montreal suburb of Pointe-Claire, Quebec, said in a telephone interview that he is confident U.S. regulators will consider PokerStars differently under new ownership.

“Amaya is licensed in many jurisdictions, over 80 worldwide,” he said. “This will be worked out on a state-by-state basis.”

To contact the reporter on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net Peter Newcomb, Matthew G. Miller

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