Raymond Bitar, Full Tilt Poker CEO, Arrested; Gambling Site Linked To THREE U.S. Banks That Failed, Feds Say; ‘The On-Line Casino Become An Internet Ponzi Scheme,’ Top FBI Official Says

Three vulnerable U.S. banks that processed illegal gambling payments for Full Tilt Poker in exchange for investments in the institutions later failed, federal prosecutors in the Southern District of New York said yesterday. The failures of Sunfirst Bank in St. George, Utah, and All American Bank and New City Bank — both of which were “single-branch” banks in Illinois — allegedly cost the FDIC more than $70 million.

Now, Full Tilt Poker Chief Executive Officer Raymond Bitar has been arrested in New York. The arrest occurred yesterday upon his return from Ireland, and Bitar, 40, was charged in an 11-count, superseding indictment with lying to players about the security of their funds and other crimes. He’d earlier been charged with gambling, bank fraud, and money laundering offenses.

News of Bitar’s arrest occurred on the same day the SEC alleged that a Georgia man effectively had gutted a bank in the state as part of a $40 million investment scheme. That man, Aubrey Lee Price,  now is listed as missing. Fraud schemes have contributed to multiple bank failures in the United States.

In one of three counts that allege Full Tilt’s Bitar committed wire fraud against Full Tilt players, he is accused of lying to participants on an “internet forum” about players’ money being kept separate from corporate funds. Prosecutors said that Full Tilt was using players’ money as its own to sustain the scheme.

At one point, according to prosecutors, Full Tilt owed players $344 million but had only $145 million “in all of its bank accounts.” At another point, Full Tilt owed players $390 million but had only $60 million on-hand.

Among the astonishing allegations by federal prosecutors yesterday in the aftermath of an FBI investigation was that Vitar did not halt the Full Tilt Ponzi scheme after the government brought the initial set of charges in 2011. Instead, he continued to operate it offshore and “lured players to continue gambling with Full Tilt Poker by continuing to promise them that their funds were safe. In actuality, [Bitar] was using new customer deposits to pay off some of the backlog of player requests to withdraw funds and to cover the company’s operating expenses, including salary for [Nelson] Burtnick and himself.  In effect, Full Tilt Poker operated what was, by then, nothing more than a Ponzi scheme. When the scheme finally collapsed, Full Tilt Poker was unable to pay players the approximately $350 million it owed them.”

Nelson Burtnick was the head of Full-Tilt’s payment-processing department. He also was charged yesterday in the superseding indictment.

Prosecutors said Bitar and Burtnick “hired agents to create dozens of phony companies, complete with fake websites, and to open bank accounts using the names of these phony companies as a cover to process payments for Full Tilt Poker.”

The codes of credit-card transactions were altered to circumvent Visa and MasterCard processing regulations and to dupe banks into processing illegal gambling transactions, according to the superseding indictment.

To keep cash flowing to Full Tilt, Bitar and Burtnick also found a way to disguise e-checks that relied on “ACH” transactions routed through an electronic network administered by the Federal Reserve. Dummy companies were used to exploit the network, federal prosecutors charged.

“Bitar and Full Tilt Poker persisted in soliciting U.S. gamblers long after such conduct was outlawed,” said Janice K. Fedarcyk, FBI assistant director-in-charge. “As alleged, Bitar has already been charged with defrauding banks to conceal the illegal gambling. Now he stands accused of defrauding Full Tilt’s customers by concealing its cash-poor condition and paying off early creditors with deposits from later customers. The on-line casino become an Internet Ponzi scheme.”

Losses to customers involved “hundreds of millions of dollars” while Bitar and Full Tilt owners were paid “over $430 million,” said U.S. Attorney Preet Bharara.

With yesterday’s arrest “and the new charges brought against him, Raymond Bitar will now be held criminally responsible for the alleged fraud he perpetrated on his U.S. customers that cost them hundreds of millions of dollars,” said Bharara. “The indictment alleges how Bitar bluffed his player-customers and fixed the game against them as part of an international Ponzi scheme that left players empty-handed.”