Tony Chau, who marketed an online betting system to people throughout the United States, has pleaded guilty to hiding more than $1.5 million in taxes from the IRS. Mr. Chau also pleaded guilty to running an illegal gambling operation.
Sports Betting Champ Website
Chau, the 31-year old owner of the defunct sportsbettingchamp.com, sent players to gamble at offshore online sportsbooks in Panama and Costa Rica. Chau did not have a gaming license in Nevada, according to a previous plea agreement which was unsealed on Thursday. According to those documents, Chau received a commission on the gambling losses incurred by players he sent to those sportsbooks.
He established a significant customer base by selling a wagering system, which he claimed would help gamblers beat the sportsbooks. Once they were on his site, Tony Chau would direct the sports betters to the offshore online bookmakers via an affiliate link.
Pleaded Guilty to 3 Charges
Tony Chau pleaded guilty to three charges in a federal court this week: money laundering, running an illegal gambling operation, and making a false statement on a tax return. He is set to return to the courtroom of U.S. District Judge Richard Boulware on August 5 to be sentenced for his crimes.
An exerpt from the plea agreement said that Tony Chau wired funds to a third-party bank "with the intent to promote the carrying on of the illegal gambling business and to conceal and disguise the nature, location, source, ownership and control of the proceeds."
False Statements on His Tax Returns
The IRS found that Tony Chau had filed false statements on his tax returns from 2008 to 2011. He hid the proceeds he collected from the sportsbooks, which kept the federal government from collecting $567,571 in income taxes from him, according to the plea agreement.
As part of his plea deal, Chau has agreed to pay the U.S. Treasury in restitution. The government is also seeking the forfeiture of $1.4 million in property and cash.
History of Chau's Betting Service
The court records show that Tony Chau began his sports betting website service in 2007, when he still lived in Massachusetts. When he moved to Las Vegas in 2008, he continued and even expanded his activities. By that time, he had a dedicated customer base who trusted his gambling systems.
Beating the Vig Is Hard
While smart oddsmakers have been known to beat the Las Vegas sportsbooks and illegal bookmakers, betting successfully on sporting events is not an easy task. The bookmakers make a living at their jobs and devise elaborate systems to weight the betting, using statistics, up-to-the-minute information, and proven metrics. While an individual sports gambler can theoretically use the same information, they also have to win more than 50% of the time, because any sportsbook is going to have a vigorish, also known as the "vig" or the juice. This is a fee for placing bets.
The juice at Las Vegas sportsbooks is around 10%. With illegal bookmakers, it's often closer to 15% or 20%. Online sportsbooks have a wide range of fees, depending on their legitimacy. In the end, most gamblers are not going to have the knowledge and time to make better decisions than the bookmakers--especially given that they are betting at a statistical disadvantage.
How Tout Services Work
For that reason, many gamblers turn to tout services and sports betting experts. The problem is, many of these people are charlatans who don't know any more than the gambler does. For instance, one common tactic is to take two sides of a Monday Night Football game (Giants/Eagles) and provide a free pick to new customers. Half of the customers receive the Eagles at the pick, while half of the customers receive the Giants as a pick. Those customers who win their bets are automatically signed up for the tout service and the so-called expert looks like they know what they're doing. In fact, they put no time or thought into making the pick whatsoever.
In the end, most tout services and people who sell picks to customers turn out to be shams. The case of Tony Chau is a bit more extreme than most, since he was sending his trusting customers to sportsbooks which gave him a fee when his customers lost. He was taking money from both sides, then hiding it from the government. In the end, Tony Chau was incentivized to give his customers bad advice, because it meant more money in his pocket.
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