Unites States v. Pokerstars, et al

Filing 200

MEMORANDUM OF LAW in Support re: 199 MOTION to Strike Document No. 68 (Claim of Robb Evans).. Document filed by United States Of America. (Attachments: # 1 Exhibit A)(Cowley, Jason)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - x
UNITED STATES OF AMERICA,
:
Plaintiff,

:
11 Civ. 2564 (LBS)

- v. -

:

POKERSTARS, et al.

:

Defendants;

:

ALL RIGHT, TITLE AND INTEREST IN THE
ASSETS OF POKERSTARS, et al.;

:
:

Defendants-in-rem.
:
- - - - - - - - - - - - - - - - - - - x

MEMORANDUM OF LAW IN SUPPORT OF THE GOVERNMENT’S MOTION TO STRIKE
THE CLAIM OF ROBB EVANS OF ROBB EVANS & ASSOCIATES LLC, RECEIVER

PREET BHARARA,
United States Attorney for the
Southern District of New York

Sharon Cohen Levin
Jason H. Cowley
Michael D. Lockard
Assistant United States Attorneys
- of counsel -

Table of Contents
PRELIMINARY STATEMENT.. . . . . . . . . . . . . . . . . . . . . 1
BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A.

The Criminal Indictment of Isai Scheinberg and
Others for Various Gambling, Fraud, and Money
Laundering Offenses . . . . . . . . . . . . . . . . . 2

B.

The In Rem Forfeiture and Civil Money Laundering
Complaint.. . . . . . . . . . . . . . . . . . . . . . 5

C.

Robb Evans’s Claim and Answer.. . . . . . . . . . . . 6

ARGUMENT

. . . . . . . . . . . . . . . . . . . . . . . . . . . 8

ROBB EVANS LACKS STANDING TO FILE A CLAIM
A.

Relevant Law. . . . . . . . . . . . . . . . . . . . . 8

B.

Discussion. . . . . . . . . . . . . . . . . . . . .

10

CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . .

13

PRELIMINARY STATEMENT
The Government respectfully submits this memorandum of
law in support of its motion, pursuant to Rule 12(b) and (c) of
the Federal Rules of Civil Procedure and Rule G(8)(c) of the
Supplemental Rules for Admiralty and Maritime Claims, to strike
the claim filed in this in rem forfeiture action by Robb Evans of
Robb Evans & Associates LLC, Receiver (“Robb Evans” or “Receiver”
or “Claimant”).

The defendants-in-rem in this matter include,

among others, all right title and interest in the funds
previously held in certain accounts at Sunfirst Bank in Utah.
Because the Claimant lacks standing to assert a claim for the
assets in those accounts, his claim should be stricken.
Robb Evans filed a claim on October 5, 2011, contesting
the forfeiture of certain funds in which he claims an ownership
interest in his capacity as Receiver in an unrelated action
pending in United States District Court for the District of
Nevada, Federal Trade Commission v. Jeremy Johnson, Case No.
2:10-cv-02203-RLH-GWF (the “FTC Action”).

The FTC Action

concerns an individual named Jeremy Johnson and various corporate
entities through which he and others allegedly perpetrated
consumer fraud involving, inter alia, repeating unauthorized
charges to unwitting consumers’ credit cards.

(See, generally,

Complaint in FTC Action, a copy of which is attached hereto as
Exhibit A).

Robb Evans was appointed Permanent Receiver for the

corporate defendants and the assets of Jeremy Johnson (the

“Receivership Estate”) on or about February 10, 2011.

On

November 28, 2011, Robb Evans filed an answer to the in rem
portion of the Complaint in this matter.
Robb Evans’s claim should be stricken because he lacks
standing to assert a claim for the defendants-in-rem in this
action.

None of the assets in which the Receiver asserts an

ownership interest in his Claim were among the corporate assets
covered by the preliminary injunction entered in the FTC Action.
His verified claim fails to show any legal interest in or control
over the accounts to which he asserts a claim.
BACKGROUND
A.

The Criminal Indictment of Isai Scheinberg and Others for
Various Gambling, Fraud, and Money Laundering Offenses
On or about March 10, 2011, a superseding indictment,

S3 10 Cr. 336 (LAK) (the “Indictment”) was filed under seal in
the Southern District of New York, charging Isai Scheinberg,
Raymond Bitar, Scott Tom, Brent Beckley, Nelson Burtnick, Paul
Tate, Ryan Lang, Bradley Franzen, Ira Rubin, Chad Elie, and Jason
Campos with conspiring to violate the Unlawful Internet Gambling
Enforcement Act (“UIGEA”), 31 U.S.C. § 5363, in violation of
Title 18, United States Code, 371; violating the UIGEA; operating
illegal gambling businesses, in violation of Title 18, United
States Code, Sections 1955 and 2; conspiring to commit wire fraud
and bank fraud, in violation of Title 18, United States Code,
Section 1349; and conspiring to launder money, in violation of
2

Title 18, United States Code, Section 1956(h).
As set forth in the Indictment, from at least in or
about November 2006, the three leading internet poker companies
doing business in the United States were PokerStars, Full Tilt
Poker, and Absolute Poker/Ultimate Bet (collectively, “the Poker
Companies”).

(Ind. ¶ 1).

PokerStars, headquartered in the Isle

of Man, provided real-money gambling through its website,
pokerstars.com, to United States customers.

PokerStars did

business through several privately held corporations and other
entities.

(Ind. ¶ 4).

Full Tilt Poker, headquartered in

Ireland, provided real-money gambling through its website,
fulltiltpoker.com, to United States customers.

Full Tilt Poker

did business through several privately held corporations and
other entities.

(Ind. ¶ 5).

Absolute Poker, headquartered in

Costa Rica, provided real-money gambling through its websites,
absolutepoker.com and ultimatebet.com, to United States
customers.

Absolute Poker did business through several privately

held corporations and other entities.

(Ind. ¶ 6).

As described in the Indictment, because internet
gambling businesses such as those operated by the Poker Companies
were illegal under United States law, internet gambling
companies, including the Poker Companies, were not permitted by
United States banks to open bank accounts in the United States to
receive proceeds from United States gamblers.

3

Instead, the

principals of the Poker Companies operated through various
deceptive means designed to trick United States banks and
financial institutions into processing gambling transactions on
the Poker Companies’ behalf.

(Ind. ¶ 16).

For example, as described more fully in the Indictment,
the defendants, and others, worked with and directed others to
deceive credit card issuers and to disguise poker payments made
using credit cards so that the issuing banks would process the
payments.

(Ind. ¶¶ 17-18).

These deceptive and fraudulent

practices included, for example, creating phony non-gambling
companies that the Poker Companies used to initiate the credit
card charges (Ind. ¶ 19), and creating pre-paid cards designed
for United States gamblers to use to transfer funds to the Poker
Companies and other gambling companies, with the purpose of the
cards disguised by fake internet web sites and phony consumer
“reviews” of the cards making it appear that the cards had some
other, legitimate, purpose.

(Ind. ¶ 20).

In addition, as described more fully in the Indictment,
the defendants, and others, worked with and directed others to
develop another method of deceiving United States banks and
financial institutions into processing their respective Poker
Companies’ internet gambling transactions through fraudulent echeck processing.

(Ind. ¶ 21).

The Poker Companies used poker

processors to establish payment processing accounts at various

4

United States banks and disguised from the banks the fact that
the accounts would be used to process payments for internet poker
transactions by making the transactions appear to relate to phony
internet merchants.
B.

(Ind. ¶¶ 22-26).

The In Rem Forfeiture and Civil Money Laundering Complaint
On or about April 14, 2011, this action was commenced

by the filing of a sealed in rem forfeiture and civil money
laundering complaint (the “Complaint”).

The Complaint sought the

forfeiture of all right, title and interest in the assets of the
Poker Companies, including but not limited to certain specific
properties set forth in the Complaint.

As alleged in the

Complaint, the defendants-in-rem are subject to forfeiture
(1) pursuant to Title 18, United States Code, Section 1955(d), as
properties used in violation of the provisions of Section 1955;
(2) pursuant to Title 18, United States Code, Section
981(a)(1)(C), as properties constituting or derived from proceeds
traceable to violations of Section 1955; (3) pursuant to Title
18, United States Code, Section 981(a)(1)(C), as properties
constituting or derived from proceeds traceable to a conspiracy
to commit wire fraud and bank fraud; and (4) pursuant to Title
18, United States Code, Section 981(a)(1)(A), as properties
involved in transactions and attempted transactions in violation
of Sections 1956 and 1957, or property traceable to such
property.

The Complaint also sought civil monetary penalties for

5

money laundering against the Poker Companies and the entities
that operated those companies for the conduct laid out above.
On or about September 21, 2011, the United States filed
an Amended Complaint in this action, adding additional fraud
allegations against Full Tilt Poker and the members of its Board
of Directors, and naming certain assets of those defendantdirectors.
C.

Robb Evans’s Claim and Answer
On or about October 5, 2011, Robb Evans filed a claim

with respect to certain of the Defendant Property (the “Claim”).
(Docket Entry 68).

Specifically, the Claimant asserts an

ownership interest in all funds held in, and traceable to, the
eight accounts listed in Schedule B of the Complaint as “The
Sunfirst Bank Accounts and Related Accounts.”

Those accounts

are:
1.

account numbered 121015408 held at Sunfirst Bank,
St. George, Utah, in the name of Triple Seven LP
d/b/a Netwebfunds.com, and all funds traceable
thereto;

2.

account numbered 121015390 held at Sunfirst Bank,
St. George, Utah, in the name of Triple Seven LP
d/b/a A WEB DEBIT, and all funds traceable
thereto;

3.

account numbered 27351910081015 held at Societé
Generale Cyprus LTD, Cyprus, in the name of Golden
Shores Properties Limited, and all funds traceable
thereto;

4.

account numbered CY1211501001065983USDCACC002 held
at FBME Bank LTD, Cyprus, in the name of Triple
Seven Inc., and all funds traceable thereto;
6

5.

account numbered 5510045221 held at Wells Fargo,
N.A., in the name of Triple Seven L.P., and all
funds traceable thereto;

6.

account numbered 7478010312 held at Wells Fargo,
N.A., in the name of Kombi Capital, and all funds
traceable thereto;

7.

account numbered 12900584 held at Sunfirst Bank,
St. George, Utah, formerly in the name of Sunfirst
Bank ITF Powder Monkeys/Full Tilt, now in the name
of Sunfirst Bank, and all funds traceable thereto;

8.

account numbered 129000576 on deposit at Sunfirst
Bank, St. George, Utah, formerly in the name of
Sunfirst Bank ITF Mastery Merchant/Psars, now in
the name of Sunfirst Bank, and all funds traceable
thereto;

(hereinafter, the “Claimed Accounts”).

The Receiver further

claims:
right, title and interest in the aboveidentified in rem assets, funds and property,
all or a portion of which are claimed to be
property of the receivership estate
established in the FTC Action pursuant to the
Preliminary Injunction Order.
(Claim p. 2).
As discussed more fully below, the Preliminary
Injunction Order in the FTC Case (the “Injunction”), a copy of
which was attached to the Claim, does not on its face cover any
of the Claimed Accounts.
On or about November 28, 2011, Robb Evans filed an
answer to the Complaint (the “Answer”).

7

(Docket Entry 125).

ARGUMENT
I.

THE RECEIVER LACKS STANDING TO FILE A CLAIM
A.

The Law
“In order to contest a governmental forfeiture action,

claimants must have both standing under the statute or statutes
governing their claims and standing under Article III of the
Constitution as required for any action brought in federal
court.”

United States v. Cambio Exacto, S.A., 166 F.3d 522, 526

(2d Cir. 1999).

Standing is a threshold issue.

If the claimant

lacks standing, the court lacks jurisdiction to consider his
challenge of the forfeiture.

The burden of proof to establish

sufficient standing rests with the claimant.

Mercado v. U.S.

Customs Service, 873 F.2d 641, 644 (2d Cir. 1989); United States
v. One 1986 Volvo 750T, 765 F. Supp. 90, 91 (S.D.N.Y. 1991);
United States v. One 1982 Porsche 928, 732 F. Supp. 447, 451
(S.D.N.Y. 1990) (abbreviated title).

Where the claimant’s own

allegations are insufficient to demonstrate standing, a motion to
strike his claim should be granted.

See United States v. $38,570

U.S. Currency, 950 F.2d 1108, 1111-13 (5th Cir. 1992) (“Unless
claimant can first establish his standing he has no right to put
the government to its proof”).
To have statutory standing, a claimant in a civil
forfeiture proceeding must comply with the procedures laid out in
Supplemental Rule G.

To have constitutional standing, however, a
8

claimant must demonstrate an “ownership or possessory interest in
the seized or forfeited property.”

United States v. Pokerstars,

No. 11 Civ. 2564 (LBS), 2012 WL 1659177, at *2 (S.D.N.Y. May 9,
2012) (citing Cambio Exacto, S.A., 166 F.3d at 527). “If the
claimant cannot show a sufficient interest in the property to
give him Article III standing there is no case or controversy, in
the constitutional sense, capable of adjudication in the federal
courts.”

United States v. New Silver Palace Restaurant, Inc.,

810 F. Supp. 440, 442 (E.D.N.Y. 1992) (internal quotation marks,
alterations, and citations omitted).

See also United States v.

U.S. Currency, $81,000.00, 189 F.3d 28, 35 (1st Cir. 1999);
United States v. $9,041,598.68, 163 F.3d 238, 244-45 (5th Cir.
1998); United States v. Contents of Accounts (Friko Corporation),
971 F.2d 974, 985 (3d Cir. 1992).
Thus, “[t]o establish standing, ‘the claimant must
demonstrate that he has a colorable ownership, possessory or
security interest in at least a portion of the defendant
property.’”

United States v. One Silicon Valley Bank Account, 05

Civ. 295, 2007 WL 1594484, at *2 (W.D. Mich. June 1, 2007)
(quoting United States v. $38,852.00, 328 F. Supp. 2d 768, 769
(N.D. Ohio 2004)); see also United States v. Contents of Account
Numbers 208-06070 and 208-06068-1-2, 847 F. Supp. 329, 333
(S.D.N.Y. 1994); One 1982 Porsche 928, 732 F. Supp. at 451.
unsecured creditor does not have a legal interest in any

9

An

particular property owned by the debtor, and does not have
standing to contest the forfeiture of the debtor’s property.
Cambio Exacto, S.A., 166 F.3d at 529 (person to whom a money
transmitter owes money lacks standing as a general creditor to
contest forfeiture of money transmitter’s account).
B.

Discussion
Under these established legal principles, the

Receiver’s allegations are insufficient on their face to
demonstrate standing in this matter.

Notwithstanding the

Receiver’s assertion that the Receivership Estate has an
ownership interest in the Claimed Accounts, an examination of the
plain language of the Injunction demonstrates that none of the
Claimed Accounts are covered therein.
The Claimed Accounts consist of eight bank accounts
(out of 70 bank accounts) set forth in Schedule B of the
Complaint in this action.

The eight Claimed Accounts were held,

respectively, in the names of the following entities:
1.

Triple Seven LP d/b/a Netwebfunds.com

2.

Triple Seven LP d/b/a A WEB DEBIT

3.

Golden Shores Properties Limited

4.

Triple Seven Inc.

5.

Triple Seven L.P.

6.

Kombi Capital

7.

Powder Monkeys/Full Tilt

10

8.

Mastery Merchant/Psars

(Complaint, Schedule B, ¶¶ 1-8).
The Receiver’s Claim to any right, title and interest
in the Claimed Accounts is based on the Receivership Estate
established in the Injunction in the FTC Action. (Claim p. 2).
The plain language of the Injunction authorizes both “the
appointment of a Permanent Receiver for the Corporate Defendants
and the assets of Jeremy Johnson,” and “the freezing of the
assets of Jeremy Johnson and the Corporate Defendants.”
(Injunction, p. 4, ¶ 7).

But, the definition of “Corporate

Defendants” — and therefore the scope of interest the Receiver
may have in the Claimed Accounts — does not include any of the
corporate entities listed in paragraphs one through eight of
Schedule B to the Complaint.

Compare Injunction pp. 6-7, ¶ 8

(defining “Corporate Defendants” as numerous specific companies)
with Complaint, Schedule B, ¶¶ 1-8 (the Claimed Accounts).
Moreover, none of the accounts set forth in Schedule B
of the Complaint were held in the name of Jeremy Johnson.

To the

extent that the Receiver claims an interest in the Claimed
Accounts through Jeremy Johnson or the Corporate Defendants in
the FTC Action, the Claim identifies no connection.

And, while

not necessarily pertinent to the standing inquiry, there is no
apparent connection between the Claimed Accounts and the alleged
conduct that gave rise to the receivership, that is, consumer

11

fraud involving unauthorized charges to unwitting consumers’
credit cards.

The Claimed Accounts, rather, were used to process

payments in connection with unlawful internet gambling by the
Poker Companies.
The Claim fails to establish any authority over, or
interest in, the Claimed Accounts by the Receiver.

In the

absence of demonstrating an “ownership or possessory interest in
the seized or forfeited property,”

United States v. Pokerstars,

2012 WL 1659177, at *2, the Receiver cannot establish Article III
standing.

Consequently, the Claim should be dismissed on its

face for lack of standing, based on its failure to establish any
interest that the Receiver may have in the Claimed Accounts.

12

CONCLUSION
For the foregoing reasons, the Government respectfully
requests that the Court enter an order striking the claim of Robb
Evans of Robb Evans & Associates LLP, Receiver, for lack of
standing.
Dated:

New York, New York
July 9, 2012
Respectfully submitted,
PREET BHARARA
United States Attorney for the
Southern District of New York
By: :

/s/
Sharon Cohen Levin
Jason H. Cowley
Michael D. Lockard
Assistant United States Attorney
[phone]/2479/2193

13