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Neteller operating in New Jersey has some online gamblers fuming




Online casinos in New Jersey now can accept deposits using what at one time was the largest payment processor for the online gambling industry, Neteller, despite indictments, fines and plea bargins made in the late 2000s by the company.

I recently received emails from two New Jersey gamblers who were quite irate that Harrah's and 888poker are allowing Neteller payments at their New Jersey online casinos. While currently Neteller can only be used for deposits it's expected that the e-wallet will be available for withdrawals at some point as well in New Jersey. There is also a belief by many in the industry that Neteller will become a major payment option for other states once they allow online gambling as well.

John from Trenton was furious when he found out that Neteller was a processor for those casinos remembering his endeavors of the past:
"I can't believe that the U.S. government treated Neteller as vultures and made us who gambled offshore jump through hoops to get our money back that they seized. And now they are welcoming them with open arms? That's total B.S."

For those unfamiliar with the history of Neteller, the company was once the largest payment processor for online gambling. Offshore gamblers loved Neteller because they could deposit and withdraw without fees, they could easily transfer funds from one online website to another instantaneously and usually with low or no fees and they could even transfer money to another person with only a 1.9% processing fee. As a result to many gamblers Neteller was effectively their online gambling bank. While the website urged customers to follow the laws of the land they were operating in it was expected that very few gamblers actually reported offshore winnings on their tax returns since Neteller ensured that winnings were untraceable. The company likely caught the attention of the U.S. government first at an early 2000s GIGSE conference when Neteller, which had moved its operations to the Isle of Man bought a large booth at the exposition and were featured prominently at the conference. When the discussion of payment processing came up at one of the sessions someone in the DoJ, who was a speaker at that session but knew nothing about Neteller stated "so there's a huge pot of money that is untraceable and can be passed around to websites and other people without detection? That's certainly something we'll be interested in."

The company nevertheless continued to grow until the passing of the UIGEA in 2006 when the law made it illegal for banks to process transactions for online gambling. Neteller, which had most of its operations catered to U.S. citizens stated that they would comply with the new law at some point but needed time to ensure that everyone is paid out properly and that they could continue offering their product to the rest of the world. The U.S. government wasn't prepared to give them the time so in January 2007 the DoJ arrested two of Neteller's founders, Stephen Lawrence and David Lefebvre, in the U.S. Virgin Islands and Malibu, California respectively and charged them with money laundering. Immediately U.S banks were ordered not to process transactions for Neteller and in the end the company announced that approximately $55 million in payments to U.S. customers were seized in transit (although other sources claim it was closer to $94 million). Neteller issued a statement that U.S. customers could no longer make gambling transactions with the company and while many large and shrewd gamblers were able to get most of their money out from Neteller before the doors were closed on them the majority of smaller gamblers were left without any way of receiving their funds. And not surprisingly the U.S. was in no hurry to get money back to the gamblers, particularly since the money was considered evidence in the case against Lefebvre and Lawrence. Around 6 months later players were refunded the money they were owed by Neteller (although the government kept the seized funds) but players were put through an arduous task to receive their money by way of a government appointed accounting firm, leading many to forego the money owed to them for fear they would end up on a list by the Treasury and DoJ. Many decided the risk just wasn't worth the reward.

In the meantime Neteller paid other fines to the U.S. government and agreed to many demands including closing accounts to Canadians (a decision many believe was due to pressure by the U.S. government who found that Canadians processed withdrawals for American friends before the accounts were closed) and in return they were allowed to continue operating in the Eastern Hemisphere. Neteller, which acquired a UK license has been quite successful since and is a preferred method of payments for many players in Europe and Asia.

So it's not surprising that some American customers are angry. John admitted that he only noticed Neteller as a payment option recently when he set up an account at Harrahscasino.com but when he saw them on the payment screen he was furious.

"I lost over $800 at Neteller. I don't trust our government and there was no way I was giving them personal information in order to get my money back. I talked it over with my friends and we agreed that the risk of an IRS audit for a few hundred bucks just wasn't worth it."

John later got angrier in his email saying "imagine having an account with a bookmaker who you win with but won't pay you your winnings. He later turns himself into police and you find out that he's turning over the names of his clients, the amounts they wagered and won and so forth and you're left biting your nails just wondering if the police are going to show up at your door. And then a few years later when you're finally over it you find out that the same bookmaker who screwed you and a lot of other bettors has been welcomed by your local government to take wagers. That's pretty much how I feel about Neteller. They are slime balls and always will be."

Henry, who also emailed me from Jersey City was less upset about Neteller's past than he was about the hypocrisy of the state government in treating "bad actors."

"I love PokerStars, I miss PokerStars and I've won a lot over the years at PokerStars. So I was thrilled when I found out PokerStars was going to be returning to the U.S. with a website in New Jersey. Then I found out that the government was banning PokerStars from New Jersey due to past wrongs yet they welcome Neteller? How hypocritical is that? I believe PokerStars paid the government a lot more money than Neteller ever did also. If you're going to ban one group then either ban them all or let bygones be bygones."

Henry is correct. Both companies operated in the U.S. after the passing of the UIGEA and PokerStars made an agreement worth over $700 million which included the purchase of Full Tilt, the return of funds to players in the U.S. and worldwide and a hefty fine to the DoJ. But as one person from the New Jersey government stated to me "it's bad actors, not bad companies." In better words the government's complaint with Neteller was against the founders and its managers not against the company itself that currently operates under a UK license and has not catered to the Western Hemisphere in over 7 years. And for PokerStars, the complaint was always against Isai Scheinberg and the management that were operating as of Black Friday. The sale of PokerStars to Amaya should eliminate that concern and allow PokerStars to operate in New Jersey if Amaya chooses to do.

It should be noted that Neteller has been operating in New Jersey since March but seems to have come under notice only recently given the emails I received. While I don't live in New Jersey so have no reason to know why gamblers in New Jersey are only tuning into the fact that Neteller is available now, there's a good chance that the finals of the World Series of Poker, which starts today, could have led some people to the WSOP website which is owned by Harrah's and has a link to the New Jersey and Nevada products. Obviously when checking out Harrahscasino.com Neteller is prominently featured on the home page which likely could have incensed those with an account in the past. In addition, Neteller also provides a payout option for the Borgata's online casino, borgatacasino.com, which is the highest grossing and most popular online casino in New Jersey.

If there's any consolation to John and Henry it is the fact that Neteller doesn't appear to have had much impact yet in New Jersey according to people I've spoken to. Residents can wager with credit cards and ACH payments so the advantages of Neteller's product in the early 2000s for offshore gamblers just don't exist in New Jersey today. Optimal Payments (the owners of Neteller) saw their stock rise sharply on UK markets after they were permitted to operate in New Jersey but the stock price has since leveled off since.

But if one thing is clear to me - scorned gamblers have a long memory.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!