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SETTLED: PokerStars Founder Isai Scheinberg Sentenced to Time Served, $30K Fine

Efforts to prosecute PokerStars founder Isai Scheinberg came to a close on Wednesday. After a 2011 indictment following Black Friday, Scheinberg was sentenced to time served and a $30,000 fine.

The sentence comes after federal prosecutors with the US District Court for the Southern District of New York pursued federal gambling charges for almost a decade.

After years avoiding US prosecutors, Scheinberg surrendered to federal authorities in February following an international extradition request in Switzerland. Along with the fine, Scheinberg is also now a convicted felon.

Pursuing the case against Scheinberg

Scheinberg, who is Israeli but lived for years in Canada as well, pleaded guilty to a single federal gambling charge. He was the last of 11 people indicted following the Black Friday crackdown on online poker.

Isai Scheinberg (right) with his son Mark.
Isai Scheinberg (right) with his son Mark.

Arrested after traveling to Switzerland in June 2019, Scheinberg fought extradition for months. That changed in January 2019 and Swiss authorities transferred him to New York.

Scheinberg originally faced up to five years in prison for directing an illegal gambling business in the US, according to the US Attorney’s Office. His attorneys argued that he deserved a lesser sentence.

A key argument for that included that his lawyers maintained online poker didn’t violate US law. They also noted that attitudes toward online gaming have since changed.

His attorneys also pointed out that PokerStars assumed $304 million of Full Tilt Poker liabilities after that company’s collapse. After Black Friday, Full Tilt financial irregularities came to light and prosecutors even referred to it as a “Ponzi scheme.”

Repaying players recognized by court

PokerStars was able to refund players who lost money at Full Tilt. That appears to be part of the reason for the reduced sentence.

“On balance … the Government believes that the mitigating factors in this case – particularly the defendant’s low likelihood of recidivism, the fact that PokerStars properly segregated player funds, the need to avoid unwarranted sentencing disparities, and the defendant’s good deeds – warrant a sentence below the Stipulated Guidelines Range,” Acting US Attorney Audrey Strauss noted.

Prosecutors and Judge Lewis A. Kaplan agreed to a reduced sentence however and the case now comes to a close.

“I am pleased that Judge Kaplan has determined today not to impose a prison sentence in my case,” Scheinberg told Online Poker Report. “PokerStars played an important role in creating today’s global regulated online poker industry by running an honest and transparent business that always treated its players fairly.

“I am particularly proud that in 2011, when PokerStars exited the United States, all of its American players were made whole immediately. Indeed, PokerStars reimbursed millions of players who were owed funds from other online companies that could not or did not repay those players.”

Growing the world’s biggest online poker site, catering to American players

Founded in 2001, PokerStars would go on to become the largest online poker site in the world. Scheinberg made use of a background in mathematics and programming to create the company’s software.

Players loved the experience the software proved superior to competitors at the time. Buoyed by the poker boom, the company flourished throughout the 2000s.

The site continued accepting American players even after the passing of the Unlawful Internet Gaming Enforcement Act (UIGEA) in 2005.

The law restricted online gaming companies from “knowingly accepting payments in connection with the participation of another person in a bet or wager that involves the use of the Internet and that is unlawful under any federal or state law.”

While some companies fled the American market, PokerStars and Full Tilt Poker continued accepting action from the US. That ultimately led to a crackdown on both companies on April 15, 2011, known in poker as “Black Friday.”

Since then, online gaming has been a state-by-state proposition. PokerStars even returned to the US in the legal jurisdiction of New Jersey in 2016. The company also began operating in Pennsylvania in 2019.

Scheinberg avoided federal prosecutors for years. He and his son Mark Scheinberg sold their share in the company to Amaya Gaming in 2014 for almost $5 billion.

In October 2019, iGaming giant Flutter Entertainment purchased the company for $6 billion. PokerStars remains the largest online poker operator in the world.

Players react to sentencing

During the poker boom, PokerStars became one of the biggest brands in poker. The company gained significant traction after Chris Moneymaker’s unlikely win at the World Series of Poker Main Event in 2003.

Moneymaker qualified via an $86 satellite qualifier before winning poker’s most prestigious event. Coverage on ESPN only added to the publicity poker received in the 2000s.

Televised coverage combined with online poker’s popularity sent poker’s popularity skyrocketing. Many admired the company for its excellent software and attention to players. The company boasted brand ambassadors like Moneymaker and Daniel Negreanu.

News of the Scheinberg sentence drew mixed reactions among players and those in the industry. WSOP broadcaster Norman Chad approached the subject with typical sarcasm.

 

Others offered support for Scheinberg and recognized his contributions to the game.

 

Whatever the view of the case, this brings an end to long and tangled ordeal for poker. PokerStars continues to see massive-field tournaments during the Coronavirus pandemic era. In September alone, the site was guaranteeing $200 million in combined prize pools across all its global platforms.

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