Malta-based companies implicated in illegal betting distributions

United States federal prosecutors this week seized a leading sports gambling website and indicted its billionaire founder for illegal gambling after a long-running investigation that had uncovered the use of Malta as a payment distribution base for the multi-billion dollar Bodog gambling empire.

With internet gambling illegal in the US, Bodog, according to US investigators, allegedly found a way to circumvent regulations to make payouts to American winners, who make up the bulk of the operation’s customer base. Bodog had already seen US$24 million seized from US banks back in 2008 in the wake of an Internal Revenue Service investigation into the operation.

According to charges first filed in 2008, the scheme involved a foreign payment processor wiring funds for US winnings to an American money processor, which, in turn, distributed winnings by cheque or electronic payment to winners with no indication that the money involved was the proceeds of internet gambling.

Court documents presented as part of the IRS investigation into the Bodog internet gambling empire, which takes in some US$6 billion in bets a year, show that at least one Malta-based company played a central role in processing such illegal gambling payouts.

This week, the Bodog website was seized and was shut down and Ayres and three other Canadians were indicted for illegal gambling that generated more than $100 million in winnings illegally distributed to US punters.

The four Canadians face up to five years in prison for conducting an illegal gambling business and 20 years for money laundering, while Bodog.com faces a fine of up to US$500,000 for gambling and money laundering.

US gamblers were sent a least US$100 million by wire and cheque from 2005 to 2012, the US Attorney’s office said on Tuesday, and Maltese, or at least Malta-based, companies have been implicated in the illegal wire and cheque distributions to winners. Companies in Switzerland, England and Canada have also been implicated in this week’s latest round of charges from an investigation that began as far back as 2005.

One such company is the Malta-based Stratham Finance, of which the Canadian internet gambling tycoon Calvin Ayres is still both a director and sole shareholder. Among a raft of evidence presented by the IRS, an unnamed ‘cooperating individual’ – a certain highly placed person at MPS Processing Ltd located in the United Kingdom – gave evidence to the effect that the company he worked for was processing payouts on behalf of Bodog, and that Stratham Finance was the financing company for Bodog.

Moreover, the individual revealed that MPS Processing had received funds from the Malta-based Stratham Finance, which would then be transferred to an American money processing company. The US company would then, according to court filings, print and mail payout cheques as directed by invoice from Stratham.

When the story that the US authorities had clamped down on Bodog broke at the end of summer 2008, and when the Malta-based Stratham Finance had been clearly implicated in the scheme, the Malta Lotteries and Gaming Authority had issued a public notice simply stating that neither Bodog nor Stratham were in possession of any licence, permit or any other form of approval from the authority to “operate, promote or abet gaming services in Malta or from Malta”.

But while the processing of illegal payments destined for US winners clearly constitutes abetting, so could the fact that the Bodog websites are also registered to companies in Malta.

While the Bodog operation’s bases are on the Caribbean island of Antigua and Costa Rica, it operates under the jurisdiction of the Kahnawake Mohawk Reserve in Canada and its finances were, at least at the time, thought to have been largely run from Malta.

Moreover, Bodog’s former gaming websites – bodoglife.com and newbodog.com – belonged to two companies registered at the same Ta’ Xbiex address as Stratham Finance.

Also registered at the same address are, in addition to Stratham Finance and the companies that hosted the websites, 11 other financing companies. A company called Bodog Music (Europe) Limited is also registered at the same address.

While it is not clear if the other companies at the address formed part of the illegal payout puzzle, all the directorships and shareholders are either Ayres himself, his partner James Philip or can be traced to the Bodog operation.