The two founders of the British “virtual wallet” group Neteller, which
provides gambling accounts to online punters, have been arrested in America
and charged with money laundering offences which carry penalties of up to 20
years in prison. Neteller’s former chairman, Steve Lawrence, 46, was
detained in the US Virgin Islands on Monday and his co-founder, John
Lefebvre, 55, was picked up by the US authorities in the millionaires’
playground of Malibu, California. They join a list of companies and
executives to fall foul of a crackdown on internet gambling, which is
illegal in the US. Congress tightened laws on electronic gaming in October,
plunging the industry into confusion. Some gambling companies, including
PartyGaming and 888, have since withdrawn from the US market but Neteller
has remained. Both men are Canadian citizens but they hold stakes of 5.9%
and 5.5% respectively in Neteller, which is listed on London’s Alternative
Investment Market and incorporated in the Isle of Man. Trading was suspended
in the company’s shares yesterday. The US attorney’s office in New York said
the pair were charged with conspiring to transfer funds with the intent to
promote illegal gambling. They are due to appear in court today. It said the
businessmen were well aware that their operation broke American law, and
that they had even warned investors in a prospectus for the company’s 2004
flotation that prosecution was a risk.
Prosecutor Michael Garcia said: “Blatant violations of US law are not a mere
‘risk’ to be disclosed to prospective investors. Criminal prosecutions
related to online gambling will be pursued even in cases where assets and
defendants are positioned outside of the United States.” Evidence cited by
Mr Garcia includes a September conference call with City analysts at which
Neteller’s chief executive said 85% of the company’s business was in North
America, of which 75% concerned US customers. At the US government’s behest,
a “co-operating witness” in Florida placed a series of bets on American
football matches using Neteller’s system – winning $200 on one wager before
losing $250 on a second.
Neteller’s e-wallets are particularly attractive to US punters because they
allow gamblers to open betting accounts which get around laws barring credit
card companies from dealing with gambling websites. Neteller became the
market leader in gambling e-wallets five years ago when PayPal was forced to
close its gambling payments business under the terms of its takeover by
eBay.
The company has continued to dominate in the US since October, providing
services to punters on sites such as Poker Stars and Bodog, which remain
active. At the time, the company said: “Various provisions of the act,
including the obligations of financial transaction providers such as
Neteller, remain unclear.”
Mr Lawrence invented the payment software behind Neteller in 1999 and teamed
up with Mr Lefebvre, a lawyer, who helped raise funds. The two shared a
£3.6m windfall when the company floated and they have sold more shares
since, enjoying proceeds of more than £60m.
