July 2 (Bloomberg) -- Full Tilt Poker founder Raymond Bitar and Nelson Burtnick, head of payment processing, were named in a new indictment alleging they defrauded customers to conceal the firm’s cash-poor condition after charges were filed last year.
Prosecutors said that even after Manhattan U.S. Attorney Preet Bharara unsealed the initial indictment against the two men and nine others in April 2011, Bitar and Burtnick conspired to lie to customers about the security of the funds. The U.S. also filed a related civil suit against the company and other online poker companies as well as payment processors last year.
The revised indictment, unsealed today in federal court in New York, alleges that both men used player funds to finance Full Tilt Poker’s operations and pay its owners. Full Tilt Poker developed a shortfall between the amount of cash in its bank accounts and the money it owed players.
Bitar remained in Ireland and didn’t come to the U.S. to face charges filed more than 15 months ago, prosecutors said. “He was running it, I submit, because by this time, the company was at this point little more than a Ponzi scheme and he had to be there,” Assistant U.S. Attorney Arlo Devlin-Brown said in court day. “He was attempting to keep it from unraveling.”
Both men failed to hold player cash in “segregated” accounts and that they then “concocted a method to temporarily disguise the company’s problems,” the U.S. said.
After Ireland-based Full Tilt Poker was forced to stop operating in the U.S. in April 2011 and internationally in June 2011 following a court order issued by federal judges overseeing related civil and criminal cases in the U.S., prosecutors said the company “was unable to repay players around the world the approximately $350 million it owed them.”
While Full Tilt Poker agreed with the U.S. Justice Department to immediately return all money owed to U.S. players, neither the company nor Bitar and Burtnick repaid customers as the company claimed to have done on its website, prosecutors said.
“In truth and in fact, however, Full Tilt Poker could not return player money because, as Bitar knew, the player money had been spent by the company and distributed to its owners,” prosecutors said in the new indictment.
Prosecutors said that while the company’s internal financial statements reported that as of March 31, 2011, it owed $390 million to players around the world yet had less than $60 million in its bank accounts,’’ prosecutors alleged.
“Bitar and Full Tilt Poker persisted in soliciting U.S. gamblers long after such conduct was outlawed,” said Janice Fedarcyk, the head of the FBI’s New York office. “Bitar has already been charged with defrauding banks to conceal the illegal gambling. Now he stands accused of defrauding Full Tilt’s customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The online casino become an Internet Ponzi scheme.”
Bitar, 40, who has residences in Ireland and California, was taken into custody earlier today by Federal Bureau of Investigation agents after his plane landed at John F. Kennedy Airport in New York, said Jim Margolin, a spokesman for the FBI’s New York office. Bitar moved the company to Ireland in 2006.
Bitar pleaded not guilty to the charges at his arraignment before U.S. Magistrate Judge Debra Freeman. She agreed to release him on $2.5 million personal recognizance bond secured by $1 million in cash or property and the signatures of five financially responsible people.
The judge said Bitar couldn’t be released until he’d met all the conditions she set and told prosecutors that she would grant their request to stay her ruling for 24 hours because it wasn’t likely that Bitar would be able to meet the conditions of his release by the end of business today.
She also directed that he confine his travel to the Southern and Eastern District of New York and the Central District of California, where Bitar has a home and where relatives live. Bitar was directed to surrender his passport.
Freeman rejected a request by prosecutors that he be detained without bail because he posed a flight risk. Devlin-Brown had argued that Bitar had known about the indictment and had failed to appear in the U.S. to face the charges.
“Mr. Bitar was a U.S. citizen who traveled back and forth to the U.S. from Ireland, but knowing he was indicted he decided not to come back,” Devlin-Brown told the judge.
“Today, I returned voluntarily to the U.S. from Full Tilt’s headquarters in Ireland to face the charges against me,” Bitar said in a statement. “I know that a lot of people are very angry at me. I understand why. Full Tilt should never have gotten into a position where it could not repay player funds. For the last 15 months, I have worked hard on possible solutions to get the players repaid. Returning today is part of that process,” he said.
“I will continue to do whatever is required to get the players repaid and I hope that it will happen soon,” he said.
John Baughman and Roberto Finzi, defense lawyers for Bitar, told Freeman today that their client hadn’t attempted to evade prosecution and that he’d been had been in Ireland where he has continued to act as Full Tilt’s chief executive officer, attempting to help authorities locate funds.
“When Full Tilt Poker’s operations were shut down last year, it was not able to refund money it was holding in players’ accounts,” Baughman said. “We hope that we will be able to resolve Mr. Bitar’s remaining legal issues in a way that is satisfying to all parties,” he said in a statement.
Around the Clock
Finzi told the judge his client has been working around the clock since the charges were filed in April 2011 to get Full Tilt’s players repaid.
“Arranging for those repayments has been and remains his top priority,” he said.
Bitar and Burtnick were originally charged in an indictment unsealed in April 2011 that accused the two as well as the founders of three of the largest Internet poker companies with bank fraud, money laundering and illegal gambling.
The revised indictment against both men adds two new charges, one of money laundering and a second charge of operation of an illegal Internet gambling business. The most serious charge of bank fraud conspiracy, carries a term of as long as 30 years in prison, prosecutors said.
Both Baughman and Finzi declined to comment after court.
The case is U.S. v. Bitar, 10-cr-336, U.S. District Court, Southern District of New York (Manhattan).
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