PokerStars' Isai Scheinberg Yields, Faces 3 Charges

Isai Scheinberg, the 73-year-old who co-founded the largest online poker site in the world, PokerStars, chose to give himself up to US authorities recently. Boarding a flight toward New York City from Switzerland, where he had been residing, Scheinberg voluntarily submitted himself to being taken into custody by federal agents on Friday, Jan. 17.

The charges brought against him? Illegal gambling, bank fraud and money laundering – all charges that were first filed in 2011. Scheinberg had avoided setting foot on U.S. soil for about 20 years, but now he’s back to face the music.

It All Comes Down to Black Friday

It’s perhaps relevant to look into why Scheinberg had outstanding charges against him in the first place. As it happens, they actually stem from way back in April 2011 when the US poker world witnessed what became known as “Black Friday.” That phrase is usually associated with Christmas shoppers going mad in various stores as discounts are applied to items that they can grab at bargain prices. Yet, with regard to the poker scene, Black Friday was something much worse.

On April 15, 2011, three online poker sites were targeted by US authorities and subsequently shut down in an instant. PokerStars was one of those online poker rooms, alongside Full Tilt Poker and Absolute/UltimateBet. Of those three companies, PokerStars was the only one to remain in operation while the other two closed down altogether. Still, PokerStars did cease to accept American customers at its platform following the events of Black Friday.

In the process of seizing the domain names of the three sites, the United States government also took their funds. It was at this time that Full Tilt Poker was discovered to be insolvent, so it wasn’t able to repay its players. And even though Scheinberg worked alongside the Department of Justice so as to come to a deal that would allow his company to purchase Full Tilt and pay back those U.S. residents, he remained outside the country’s borders.

However, as part of the indictment against those three seized domains, Scheinberg remained as one of 11 individuals that the US was looking to prosecute for violating the Unlawful Internet Gambling Enforcement Act (UIGEA), which came into effect in 2006. Prosecutors sought for jail sentences to be handed out to executives of the companies as well as $3 billion to be seized from the poker brands themselves.

Scheinberg Pleads ‘Not Guilty’ to All Charges

It was during a visit to Switzerland just a few months ago that the U.S. authorities started up extradition proceedings with the Swiss government regarding Isai Scheinberg. Scheinberg, obviously not looking to yield to the United States, resisted the process initially. However, after negotiating, he took the decision to travel to American shores once more and face the three charges brought against him head-on. He pleaded not guilty to all three crimes the same day that he arrived in New York City.

PokerStars Founder Isai Scheinberg

Even though Scheinberg entered into the custody of the Department of Justice, the likelihood is that a prison sentence won’t be handed out to him. Federal prosecutor Olga Zverovich said during a hearing that talks have been taking place between the government and Scheinberg for some time already. Speaking of the situation, Zverovich said that the two parties had come to “an agreement in principle on the basic terms.”

Scheinberg is the very last individual to be indicted in the crackdown against U.S.-serving iGaming sites in 2011. Yet, the difference is that all other individuals eventually pleaded guilty to at least some of the charges brought against them while Scheinberg has taken a stance of going in the complete opposite direction. After his plea of ‘not guilty,’ the co-founder of PokerStars was released on $1 million bail although he did have to surrender his passport too.

Significant Arrests & Convictions Previously Made

U.S. authorities weren’t only seeking executives of the online poker rooms in their indictments but also associates of the platforms, such as payment processors, for their part in the violations. This led to John Campos (Vice chairman of the board and part-owner of SunFirst Bank) and Chad Elie (payment processor) being arrested on Black Friday itself.

Campos appeared in court on Monday, April 18, 2011 although he did not enter a plea at first. He would be released on $25,000 bond and was ordered to surrender his passport. Campos pleaded guilty to a misdemeanor bank gambling charge, rather than any of the felonies he was accused of, in March 2012 and was sentenced to three months in prison.

Elie, meanwhile, made his first court appearance in Manhattan on Tuesday, April 19, 2011 before being released on $250,000 bail. In October 2012, he received a sentence of five months' prison time after pleading guilty to conspiracy to commit bank fraud and running an illegal gambling enterprise.

Bradley Franzen, also a payment processor, appeared in a Manhattan court on April 18 as well, entering a plea of ‘not guilty’ to the nine counts that were listed on his indictment. They included bank fraud and money laundering charges. His parents’ house was used as collateral for the $200,000 bail that was set against him.

On May 23, 2011, Franzen pleaded guilty in a New York court although he struck a deal. As part of this, he agreed to cooperate with further probes into the situation, and prosecutors would, in turn, be lenient.

Some of the other defendants were outside the United States and thus not subject to detention by federal officials although Ira Rubin, who was also indicted on illegal gambling, fraud, and money laundering charges, would be arrested in Guatemala on Monday, April 25 of the same year after allegedly attempting to flee Costa Rica where he resided at the time. Another payment processor, Rubin made his initial court appearance in Miami on April 27.

He entered a plea agreement on Jan. 17, 2012. As part of this, he agreed to plead guilty to three of nine counts of conspiracy to commit bank fraud. This led to a three-year prison sentence, which Judge Kaplan said was “a significant sentence” for Rubin, in order “to protect the community.”

Full Tilt Poker Villain Ray Bitar

Lastly, Raymond Bitar, the CEO of TiltWare, which provided the software to Full Tilt Poker, surrendered to US authorities on July 2, 2012. It was discovered that Bitar had actually been using players’ money from their poker accounts to pay his investors and professional poker players that worked for him. At the same time, he had set aside $24 million of Full Tilt players’ funds in a foreign bank account. This would allow him to throw a large number of luxurious parties; yet, it also led to the discovery of Full Tilt’s insolvency.

After he gave himself up, he initially faced the possibility of 50+ years in prison. However, a plea bargain significantly lessened that sentence, and he was released in 2013 when he agreed to pay $40 million. According to some sources, Bitar had developed a rare heart condition and needed a transplant, which led to the judge being so lenient with him.

PokerStars Since Black Friday

Following the 2011 charges that were brought against PokerStars, Scheinberg allowed his son Mark to take over the company. It was just three years later that he went on to sell the brand to Amaya for a total of $4.9 billion. Amaya has since changed its name to The Stars Group.

It was a couple of years later that PokerStars made its return to US shores – although this time in a legally licensed capacity. Once online poker became a legal entity in New Jersey, the company united with the Resorts Casino Hotel to provide its services to residents of The Garden State in March 2016.

Furthermore, PokerStars is the only operator to be active within Pennsylvania, following the soft-launch of online poker in November 2019. That proved to be quite the success within the state with revenue figures for slightly less than one month far out-stripping those of a longer time period within New Jersey.

Poker Remains Active in the United States

While Nevada and Delaware also provide state-regulated online poker, PokerStars is not active within either of these locations. And even though there is a tri-state compact between them and New Jersey, the only beneficiary of this has been the 888 brand, which is active in all three and allows player pools to be combined. PokerStars is currently blocked out of the Delaware market thanks to the fact that the state lottery selected 888 for its poker software while Nevada has "bad actor" clauses in place against the company.

PokerStars may not be available in every state though there are still options for players to access alternatives easily enough. These offshore sites are still completely legal, and there are several of them that we recommend. Why not check through our full guide to playing internet poker in the US and see which one of the recommended card rooms takes your fancy? They all offer legal online poker and are reputable organizations.