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 Some gambling companies, including PartyGaming and 888, have since withdrawn from the US market but Neteller has remained.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 USD 200 on one wager before losing USD 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 GBP 3.6m windfall when the company floated and they have sold more shares since, enjoying proceeds of more than £60m.