Unites States v. Pokerstars, et al
Filing
50
MEMORANDUM OF LAW in Support re: 48 MOTION for Leave to File Amended Complaint.. Document filed by United States Of America. (Cowley, Jason)
PREET BHARARA
United States Attorney for the
Southern District of New York
By: SHARON COHEN LEVIN
MICHAEL D. LOCKARD
JASON H. COWLEY
Assistant United States Attorneys
One St. Andrew’s Plaza
New York, New York 10007
Telephone: (212) 637-1060/2193/2479
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - -x
UNITED STATES OF AMERICA,
:
Plaintiff,
:
11 Civ. 2564 (LBS)
- v. -
:
POKERSTARS, FULL TILT POKER,
ABSOLUTE POKER, ULTIMATE BET, et
al.,
Defendants;
:
:
:
ALL RIGHT, TITLE AND INTEREST IN
THE ASSETS OF POKERSTARS, FULL
TILT POKER, ABSOLUTE POKER,
ULTIMATE BET, et al.,
:
:
:
Defendants-in-rem.
:
- - - - - - - - - - - - - - - - - -x
GOVERNMENT’S MEMORANDUM OF LAW IN SUPPORT OF ITS
MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT
The Government respectfully submits this Memorandum of
Law in support of its motion, pursuant to Rule 15 of the Federal
Rules of Civil Procedure, for leave to file the First Amended
Verified Complaint, attached to the accompanying Declaration of
Michael D. Lockard (“Lockard Decl.”) as Exhibit A (the “Amended
Complaint” or “Am. Compl.”).
The Amended Complaint adds
additional allegations, claims, and defendants concerning a
fraudulent scheme by Full Tilt Poker and its Board of Directors
concerning the misuse of players’ funds.
(Am. Compl. ¶¶ 5-8, 99-
120).
BACKGROUND
This action was commenced on April 14, 2011, with the
filing of a sealed verified Complaint (“the complaint” or
“Compl.”) seeking the forfeiture of all assets of PokerStars,
Full Tilt Poker, Absolute Poker, and Ultimate Bet (together with
their respective operating companies, the “Poker Companies,” and
their assets, the “Poker Company Properties”) as well as various
accounts held by the Poker Companies’ payment processors and
funds traceable thereto (the “Poker Processors,” and their
accounts, the “Processor Properties”) pursuant to Title 18,
United States Code, Sections 981(a)(1)(A) and (a)(1)(C) and
1955(d).
(Compl. ¶¶ 1-4, 7, 98-118).
The complaint also seeks
civil money laundering penalties against the Poker Companies
pursuant to Title 18, United States Code, Section 1955(b).
(Compl. ¶¶ 6, 8, 119-121).
The complaint alleges that, from at least in or about
November 2006 through in or about April 2011, the Poker Companies
and their principals operated unlawful online gambling businesses
in the United States using servers and personnel located
overseas, conspired with Poker Processors to defraud United
2
States banks into processing payments in connection with unlawful
online gambling, and conspired to launder these funds.
(Compl.
¶¶ 1-4, 24-42).
The complaint was unsealed on April 15, 2011, the same
date that an Indictment charging various principles and founders
of the Poker Companies, Poker Processors, and the president of a
bank with wire fraud, bank fraud, and unlawful gambling offenses
was unsealed, along with a temporary restraining order against
various bank accounts for the Poker Companies and Poker
Processors.
(Am. Compl. ¶¶ 9, 12, 14).
An Arrest Warrant In Rem
was also issued for the domain names used by the Poker Companies.
(Id. ¶ 13).
Pursuant to the procedures set out in Rule 4 of the
Federal Rules of Civil Procedure, the in personam defendants have
waived service of the complaint (see docket entries 42, 43, 44);
and notice of the complaint has been provided to potential
claimants and has been published on the government forfeiture
website, www.forfeiture.gov, pursuant to Rule G of the
Supplemental Rules for Certain Admiralty and Maritime Claims.
Certain claims have been filed (docket entries 15, 19,
20, 37) and the time for other potential claimants to file a
claim and to respond to the complaint has been extended by Court
order until September 30, 2011.
39, 45, 46, 47).
(see docket entries 26, 27, 28,
One answer has been filed in this action, by
Adam Webb, who claims to have funds on deposit in online gambling
3
accounts with Full Tilt Poker and Absolute Poker.
(Docket
entries 37 & 41).
The Amended Complaint alleges that one of the Poker
Companies, Full Tilt Poker, not only engaged in the operation of
an unlawful gambling business, bank fraud, wire fraud, and money
laundering as alleged in the Complaint, but also defrauded its
poker players by misrepresenting to players that funds deposited
into their online player accounts were secure and segregated from
operating funds, while at the same time using player funds to pay
out hundreds of millions of dollars to Full Tilt Poker owners.
Full Tilt Poker was able to accomplish this massive fraud, in
part, because it illegally conducted business in the United
States but maintained its personnel, operations, assets, and
accounts principally overseas.
(Am. Compl. ¶ 5).
The Amended Complaint further alleges that, in or about
the summer of 2010, Full Tilt Poker’s payment processing channels
were so disrupted that the company faced increasing difficulty
attempting to collect funds from players in the United States.
Rather than disclose this fact, Full Tilt Poker simply credited
players’ online gambling accounts with money that had never
actually been collected from the players’ bank accounts.
Full
Tilt Poker allowed players to gamble with -- and lose to other
players -- this phantom money that Full Tilt Poker never actually
collected or possessed.
When other players won these phantom
4
funds, their accounts were credited with money that Full Tilt
Poker did not actually possess, but now nevertheless owed to
these players.
As a result, Full Tilt Poker soon developed a
massive shortfall between the money owed to United States players
and the money actually collected from United States players, with
Full Tilt Poker having credited approximately $130 million in
phantom money to U.S. players’ online accounts that was never
actually collected from players’ bank accounts.
never disclosed this shortfall to the public.
Full Tilt Poker
(Am. Compl. ¶ 6).
The Amended Complaint further alleges that, as of March
31, 2011, Full Tilt Poker owed approximately $390 million to
players around the world, including approximately $150 million
owed to players in the United States.
At that time Full Tilt
Poker had only approximately $60 million on deposit in its bank
accounts.
As of the filing of this Amended Complaint, Full Tilt
Poker still owes players over $300 million.
(Am. Compl. ¶ 7).
The Amended Complaint alleges that, meanwhile, from
approximately April 2007 until April 2011, Full Tilt Poker, and
its Board of Directors, Bitar, Howard Lederer (“Lederer”),
Christopher Ferguson, a/k/a “Jesus” (“Ferguson”), and Rafael
Furst (“Furst”), all owners of Full Tilt Poker, distributed
approximately $443,860,529.89 to themselves and other owners of
the company.
Payments to the Full Tilt Poker owners stopped only
after April 15, 2011.
(Am. Compl. ¶ 8; see also id. ¶¶ 99-120).
5
The Amended Complaint seeks civil money laundering
penalties against Bitar, Lederer, Ferguson, and Furst, as well as
the forfeiture of funds paid to those individuals from Full Tilt
Poker.
(Am. Compl. ¶¶ 151-157, 161).
DISCUSSION
Rule 15 of the Federal Rules of Civil Procedure
provides that, after 21 days have passed from the filing of a
responsive pleading, a party may amend its pleading with written
consent of the opposing party or with the Court’s leave.
Civ. P. 15(a)(1)(B), (a)(2).
Fed. R.
The Rule provides that “The court
should freely give leave when justice so requires.”
Id.
Unless
there has been “undue delay, fad faith or dilatory motive on the
part of the movant, undue prejudice to the opposing party, or
futility,” leave to amend should be granted.
Monahan v. N.Y.
City Dept. Corrections, 214 F.3d 275, 285 (2d Cir. 2000).
Leave for the Government to file the Amended Complaint
should be granted.
But for a single answer, filed by an online
poker player, no other party has answered or otherwise responded
to the Complaint.
The time for other potential claimants,
including the Poker Companies, to file claims and to respond to
the Complaint has not yet run, no discovery has been conducted,
and this motion and proposed Amended Complaint are being brought
within a few months of the unsealing of the original complaint
and the related Indictment.
Accordingly, leave to amend should
6
be granted.
A proposed order is attached as Exhibit B to the
Lockard Declaration for the Court’s consideration.
CONCLUSION
For the reasons set forth above, the Court should enter
an order granting the United States leave to file the First
Amended Verified Complaint.
Dated:
New York, New York
September 19, 2011
Respectfully submitted,
PREET BHARARA
United States Attorney for the
Southern District of New York
Attorney for the Plaintiff
United States of America
By:
/s/
Sharon Cohen Levin
Michael D. Lockard
Jason H. Cowley
Assistant United States Attorneys
Telephone: (212) 637-1060/2193/2479
7
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?