Former PokerStars Employees Pleads Guilty to Charges in Black Friday Case

Paul Tate, a former PokerStars employee, pleaded guilty to operating an illegal gambling business on Monday. In doing so, Mr. Tate was fined for his roll in the Black Friday scandal, but avoided a potential 5 years in federal prison.

Paul Tate, a 43-year old UK citizen, oversaw payment processing at PokerStars during the years it violated a US federal anti-online gambling law by accepting real money play from American gamblers. The Unlawful Internet Gambling Enforcement Act (UIGEA) made it illegal to process payments of gambling activity which was banned under the 1961 Wire Act.

At the time Paul Tate was the head of payment processing for the world’s top poker site, the U.S. Department of Justice deemed all major forms of online gambling illegal: online casinos, sportsbooks, and poker sites.

Judge Kaplan Praises Paul Tate

The Manhattan-based judge in the case, U.S. District Judge Lewis Kaplan, did not sentencen Paul Tate to a potential 5 years in prison. Instead, Mr. Tate was ordered to forfeit $119,000 in fines.

When Judge Kaplan handed down his decision, he told Paul Tate, “Given that you couldn’t be extradited for this, you deserve a world of credit for coming to face the music.”

Could Have Avoided Extradition

The judge referred to the fact that Tate could have remained in the Isle of Man, where he lives, and avoided extradition. Therefore, Judge Kaplan praised Paul Tate for coming to America in order to face the charges.

In reply to the judge, Paul Tate said: “I very much regret the choices I have made.”

It was a remarkable moment in the Black Friday case, because those higher-up the executive ladder did not appear in court to face charges. It is hard to know what motivated Paul Tate, but he might have wanted to travel the world without fear of being arrested and indicted for crimes by US authorities, who have shown the ability to arrest online gambling executives on foreign flights before.

In the absence of evidence to the contrary, it is probably best to take Paul Tate at his word and assume he regretted his role in Black Friday and wanted a clean slate for the sake of conscience.

Violation of the UIGEA

When the UIGEA went into effect on December 31, 2006, many of the top online gaming sites left the United States gaming market. So did software development companies (Playtech, Microgaming) and payment processing services, because their support of the online gambling industry could be deemed as illegal by US authorities.

Some of the top competitors remained. In the online poker industry, the top companies which continued to accept US players included Full Tilt Poker, Absolute Poker and PokerStars. They were the Top 3 online poker sites remaining in the United States. Often, the decision to flout US law depended on whether the company was publicly-traded, because sites like PokerStars were based in locations beyond US authority.

Black Friday Investigation

Or so it seemed. On April 15, 2011, the U.S. Justice Department unsealed charges against 11 different executives working for Full Tilt Poker, Absolute Poker, and PokerStars. Paul Tate was one of those individuals.

The DoJ case included the seizure of those poker sites domain names and the freezing of their assets, a set of actions referred to be the online poker community as Black Friday. PokerStars and its fellow cardrooms were charged with illegal gambling. They also faced a number of charges stemming from payment processing, because they had to use inventive means to give and receive payments. PokerStars was accused of conspiring with smaller US banks to disguise the fact they were making payments based on gambling.

Fallout from Black Friday

Eventually, PokerStars paid over $700 million to the US government in order to have charges dropped against the company, but indictments remained on the top officials. That caused PokerStars’ previous owners to sell the business, because it was worth more to an ownership group which might be able to return to the US legal gaming industry. Executives like Paul Tate have tried to make their own arrangements, though most have tried to avoid extradition.

Nine other individuals have pleaded guilty in the case, which is filed under the name U.S. v. Tzvetkoff et al, U.S. District Court, Southern District of New York. Of the 11 originally indicted, that leaves only one other individual with charges still remaining: Isai Scheinberg. Mr. Scheinberg founded PokerStars, but his sell of the company he founded means he might never seek accomodation with US authorities.