Isai Scheinberg, founder of online poker operator PokerStars, pled guilty to one count of operating an illegal gambling business on Wednesday, according to a press release from the US Attorney’s Office in the Southern District of New York.
Scheinberg faces up to five years in prison, though he is still awaiting sentencing.
Scheinberg Built PokerStars Into Industry Leader
The 73-year-old Scheinberg founded PokerStars in 2001, first offering play money games before moving to real money poker later that year. After originally establishing the company in Costa Rica, PokerStars moved to the Isle of Man, where it maintains its headquarters to this day.
PokerStars quickly became a major player in online poker. In 2006, it overtook Partypoker as the world’s largest online poker site after the United States passed the Unlawful Internet Gambling Enforcement Act (UIGEA). Partypoker and many other operators left the American market in the face of the UIGEA; PokerStars was one of the few major poker sites that stuck around.
For years, that decision paid off as PokerStars became synonymous with online poker in the United States and worldwide. But on April 15, 2011 – a day known as Black Friday in the poker community – the US Department of Justice cracked down on PokerStars, Full Tilt Poker, and Absolute Poker, seizing their domains and naming 11 criminal defendants. Those individuals included Scheinberg and other poker site executives, along with some executives at banks and payment processors.
In the years since, the 10 other defendants each pled guilty and were sentenced for their crimes. Scheinberg was the final criminal prosecution outstanding in the aptly named case United States v. Scheinberg.
“Ten years ago, this Office charged 11 defendants who operated, or provided fraudulent payment processing services to, three of the largest online poker companies then operating in the United States – PokerStars, Full Tilt Poker, and Absolute Poker – with operating illegal gambling businesses and other crimes,” Manhattan US Attorney Geoffrey S. Berman said in a press release. “As Isai Scheinberg’s guilty plea today shows, the passage of time will not undermine this Office’s commitment to holding accountable individuals who violate US law.”
As part of his plea, Scheinberg admitted that he continued to offer PokerStars to Americans despite knowing that operating an internet poker site in New York violated state law, and likely, federal law as well.
PokerStars Recovers After Black Friday Settlement
Along with the criminal prosecutions, the US Department of Justice also sought civil actions against the poker sites themselves.
PokerStars came out of those proceedings with its reputation intact – if not improved – in the eyes of the poker world. The company not only managed to return account balances to American users almost immediately, but then agreed to purchase and take on the global liabilities of Full Tilt Poker as part of a $731 million settlement with the Department of Justice.