If you’re a marketer or advertiser running business within the US but operating outside of the United States and you conduct in illegal activity or violate US law, don’t think for a second that outside residency expels you from being held liable. As an Entrepreneur for over half a decade, I’ve seen many inexperienced people debate this topic back and forth. Having many clients outside of the US and handling their Advertising budgets has even brought me into situations where I can tell you right now – that’s extremely flawed thinking.
If someone such as the FTC comes at you and you think they don’t have the authority to hold you liable, you need a reality check. I assure you the Federal Trade Commission has MANY friends and allies – one of them being the Department of Justice.
Today, I’ll give you a shining example.
Yesterday, Manhattan U.S. Attorney Preet Bharara announced that PokerStars has agreed to pony up over $547 million to the U.S. and to reimburse about $184 million owed by Full Tilt to foreign players. Under the unique arrangement, PokerStars acquired Full Tilt–along with the company’s debt.
If you remember or are unaware – In 2006, the government enacted the Unlawful Internet Gambling Enforcement Act, which made any type of online gambling within the United States illegal. In response, many online gambling sites simply moved offshore–some, including PokerStars, to the Isle of Man in the British Isles, where online gambling is legal and taxes are less of a consideration.
Welcome to the biggest mistake you ever made. Because the 2006 law made it too risky for banks and U.S. credit card issuers to knowingly process transactions from Americans. So in order for the poker companies to receive money from players, they devised elaborate–and often illegal–schemes to reroute payments.
Straight from the Department Of Justice:
For example, the Poker Companies arranged for the money received from U.S. gamblers to be disguised as payments to hundreds of non-existent online merchants purporting to sell merchandise such as jewelry and golf balls. Of the billions of dollars in payment transactions that the Poker Companies deceived U.S. banks into processing, approximately one-third or more of the funds went directly to the Poker Companies as revenue through the “rake” charged to players on almost every poker hand played online.
To accomplish their fraud, the Poker Companies worked with an array of highly compensated “payment processors” who obtained accounts at U.S. banks for the Poker Companies. The payment processors lied to banks about the nature of the financial transactions they were processing, and covered up those lies, by, among other things, creating phony corporations and websites to disguise payments to the Poker Companies.
Here’s how it all worked out for them – The settlement includes several layers. First, PokerStars will pay the government $225 million for Full Tilt’s assets. Then, the company will fill a separate bank account with $184 million to pay back Full Tilt customers. Finally, PokerStars will pay the remaining $547 million to the government, who will dispense the money to players whose accounts were frozen over the next three years. The former CEO of Full Tilt, Raymond Bitar, was arrested in July 2012 at the JFK airport returning from his company’s headquarters in Irleand. The government alleges Bitar operated Full Tilt as a Ponzi scheme, and is preparing to prosecute. After his arrest, Bitar posted $2.5 million bail, and is now awaiting trial in his home in Glendora, California.