The chief executive of Full Tilt Poker, the beleaguered one-time Web poker giant, was arrested Monday on a plane that had just landed at John F. Kennedy International Airport as the government unveiled new criminal charges against him related to an alleged Ponzi scheme.
Ray Bitar, 40 years old, is the most significant person yet to turn himself into the Justice Department's 15-month-long effort to prosecute the three one-time leading online poker companies in the U.S. He pleaded not guilty in a hearing in Manhattan federal court Monday, and will be able to be out on bail after posting a $2.5 million bond, a judge ruled.
The government first unsealed criminal indictments against Mr. Bitar, who is from Los Angeles but was residing in Ireland, and 10 others in April 2011 that charged the group with money laundering, bank fraud and illegal gambling. Six members of the group have pleaded guilty to some charges, while five, including Mr. Bitar, remained outside the country and hadn't yet entered pleas. One person among the group — a bank executive — has been sentenced to three months in prison.
Mr. Bitar had remained in Ireland in order to try to negotiate a possible resolution for his company and decided to return now to face charges because his part in that effort is now complete, his attorneys said in court Monday. The company is expected to finalize a deal for a one-time rival, PokerStars, to acquire its assets shortly, a person familiar with the matter said.
A representative for PokerStars said he had no comment on talks involving PokerStars and Full Tilt.
In the indictment unsealed Monday, the government added the allegation that Mr. Bitar and an employee had committed wire fraud by misrepresenting to potential customers that their funds would be safe in order to convince them to transfer money to the company.
The company also used a Ponzi scheme to enrich Full Tilt owners — mainly a group of professional poker players — while covering up financial problems at the company, the government alleged.
A perpetrator of a Ponzi scheme illegally uses money from one group of people to pay off another group.
The alleged schemes, first mentioned by the government in connection with a civil complaint last year, is part of what led the company to fail to pay back poker players credited with $350 million in their player accounts, the government says. Full Tilt has denied it operated a Ponzi scheme.
"I know that a lot of people are very angry at me," Mr. Bitar said in an emailed statement from his lawyers' office earlier Monday. "I understand why. Full Tilt should never have gotten into a position where it could not repay player funds."
John Baughman, an attorney for Mr. Bitar attorney, said, "We hope that we will be able to resolve Mr. Bitar's remaining legal issues in a way that is satisfying to all parties."
The charges last year involving Full Tilt Poker and PokerStars, which were both civil and criminal, have upended the online poker industry in the U.S., which in 2010 represented around $18 billion in wagers from around 1.9 million customers, according to market watcher H2 Gambling Capital. Online poker wagers in the U.S. have plummeted 83% since then. In April 2011 the U.S. Attorney for the Southern District of New York blocked Full Tilt and PokerStars in the U.S.
Executives at PokerStars have denied the charges against them and the company.
Full Tilt was started around 10 years ago in Los Angeles by Mr. Bitar, a stock trader, and Chris Ferguson, a successful professional poker player. The company moved to Ireland as the U.S. government increasingly clamped down on online gambling companies.
In the indictment unsealed Monday the government portrayed Mr. Bitar as the director of an increasingly out-of-control scheme between 2008 and 2011 to keep profits flowing to himself and the sites owners and continued to do so even as a government investigation and other factors were increasingly causing the site to become depleted of funds.
The site's users, thousands of individual poker players, had set up accounts with Full Tilt in order to have money to wager with, the government says. Yet toward the end of 2010, it became increasingly difficult for Full Tilt to transfer money due to the government's crackdown on payment processing for poker. Full Tilt all but ran out of funds after money was seized by the government, stolen by payment processing companies or never collected from players yet credited to their accounts, the government says, yet portrayed to players that their funds were safe.
At the time of the government crackdown in April 2011, Full Tilt had just $60 million left, the government says. Only then the company stopped making monthly $10 million profit-sharing payments to owners, according to the government and people with knowledge of the situation.
"For the last 15 months, I have worked hard on possible solutions to get the players repaid," Mr. Bitar said in the statement Monday. "Returning today is part of that process. I believe we are near the end of a very long road, and I will continue to do whatever is required to get the players repaid, and I hope that it will happen soon."