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Neteller Arrests Analysis : Investigating the Investigation

The arrests of the two founders of Neteller is sending chills through the spines of the millions who play a part in the online gambling industry.

In the lengthy arrest report released earlier today we feel it necessary to point out a couple sections of particular interest and then analyze them. (Notice, this is not a legal assessment, just opinion based on observations.)

8. As part of the investigation, law enforcement officers and a cooperating witness posed as gambling customers and conducted online monetary transactions with numerous online gambling businesses using online payment processing services provided by Neteller PLC. The following are examples of some of the transactions that I have either participated in or learned about:

a. On or about August 12, 2006, a cooperating witness (the "CW"), who at the time was located in Miami, Florida, used a computer to open an account on Neteller.com (the "Neteller Account"), and the CW electronically transferred $400 from a bank account in Miami, Florida, into the Neteller Account. On or about August 22, 2006, the CW, who at the time was located in Miami, Florida, used a computer to open a wagering account with an online gambling business based in Antigua ("Online Gambling Business #1), by electronically transferring $400 from the Neteller Account to Online Gambling Business #1. On or about August 24, 2006, the CW, who at the time was located in Miami, Florida, used a computer to access Online Gambling Business #1's website, and the CW then wagered $250 on a National Football League ("NFL") football game and won approximately $200. On or about September 7, 2006, the CW, who at the time was located in Miami, Florida, used a computer to access Online Gambling Business #1's website, and the CW then wagered $250 on an NFL football game and lost $250.

b. On or about September 26, 2006, I was present with the CW at a public library located in Westchester County, New York. At that time, I observed the CW access the Internet using a public computer at the library. The CW then used the computer to access Online Gambling Business #1's website, and the CW then withdrew $200 from his wagering account with Online Gambling Business #1 and transferred it electronically to the Neteller Account. Thereafter, the CW then placed a $50 wager on an NFL football game on Online Gambling Business #1's website using money that had previously been deposited with Online Gambling Business #1 using the Neteller Account.

c. On or about December 29, 2006, in Westchester County, New York, I used a computer to access the Neteller Account by logging on to Neteller.com. At that time, the balance in the account was $100. I then transferred $25 from the Neteller Account to a wagering account with an online gambling business based in Costa Rica ("Online Gambling Business #2"). I then transferred $25 from the Neteller account to a wagering account with another online gambling business based in Costa Rica ("Online Gambling Business #3"). Then, I logged on to Online Gambling Business #1's website and used a link to Neteller.com to transfer $25 from the Neteller Account to the wagering account with Online Gambling Business #1 that previously had been opened by the CW."


What is important to notice about these passages?

a. - b. A Neteller account was opened in Miami, which is legal. Money was transferred to a Neteller account from a bank account in Miami, which is legal. The money was not transferred from the Neteller account to an offshore gambling operation until the person was physically present in New York, where there are specific laws against online gambling.

The gambling was only stated to be on football, which is and has been proven to be illegal in the United States, therefore this part of the investigation occurring before the passing of the Unlawful Internet Gambling Enforcement Act in October is of little importance.

c. In December, money was transferred from a Neteller account to two other forms of gambling entertainment sites, which are not stated, but may include online poker sites and/or online casinos. In December the UIGEA had already been passed, which makes these transactions illegal. The gray area is that the UIGEA states that the FRC has to define regulations for banks to follow within 270 days, that has not happened yet.

Of course, Neteller has stated outright to their share holders that over 85% of their business is brought in from United States clients. That was stated, and then it was proven through a.-c. above that the money Neteller makes is exported to offshore gambling operations.

Again, this is not legal analysis, just some observations. Also note, this is a major issue and we have four staffers who are heavily investigating all areas surrounding these arrests. We will report when we believe that we have an intelligent and unique point of view.

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