Isai Scheinberg’s September sentencing likely ends legal story

It’s been more than nine years since the United States and the online poker world in general were rocked by the US government’s seizure of the largest US-facing international sites, along with the announcement of criminal and civil charges against 11 individual and three corporate defendants. April 2011’s infamous “Black Friday” crackdown quickly severed the US from the global online poker scene, leaving just a few scattered crumbs of what was the most vibrant online-playing country on the planet.

Today, even with a few US states having formally reopened their individual online-poker markets, the US is still just a tiny fraction of what it once was. And through the years, the legal story dragged on. This coming September, about four-and-a-half months hence, PokerStars co-founder Isai Scheinberg will appear in a Manhattan courtroom to hear a federal judge sentence Scheinberg on a single count.

It’s the last open matter on a sprawling legal docket that actually dates back to well before 2011’s Black Friday. The entire case was appended to the USA v Daniel Tzvetkoff case filed exactly a year prior to Black Friday. In that matter, US authorities took down the giant Australia-based payment processor Intabill, crippling some of the same sites whose own day in the US’s crosshairs came a year later.

It’s fair to say the Intabill / Black Friday case has already stretched over a decade, but even that undersells it. For at least three years before the Intabill takedown, the Department of Justice (DOJ) and the Federal Trade Commission (FTC) had already worked jointly on other investigations that had shut down several other independent third-party processors. The Black Friday crackdown was just the final and largest blow.

Scheinberg, the final target

One by one, the 11 individual Black Friday defendants had to answer to American jurisprudence, which has both a long international reach and seemingly infinite patience. The independent third-party payment processors, including John Campos, Chad Elie, Bradley Franzen, and Ira Rubin, were rounded up first. These independent types ended up facing the harshest penalties; from the US’s view, they were the ones most directly circumventing the banking rules within the US’s 2006 Unlawful Internet Gambling Enforcement Act (UIGEA).

Then the attention turned to the executives of the major US-facing sites who could be linked to the payment processors. At least two execs each from PokerStars, Full Tilt Poker, and Absolute Poker were charged. Full Tilt’s Ray Bitar and Absolute Poker’s Scott Tom and Brent Beckley have become reviled figures in poker lore, after they and their companies walked off with hundreds of millions of dollars in unrefunded player deposits.

There were still those nagging individual charges against Scheinberg that had to be dealt with at some point.

Isai Scheinberg and PokerStars were far different. Alone among the Black Friday sites, PokerStars was able to quickly return all existing balances to US players. Stars and Scheinberg went far, far further than that, however, agreeing to a corporate settlement in 2012 that eventually refunded the missing bankrolls for jilted FTP and AP players as well.

Yet, even though Scheinberg and his attorneys had been negotiating with the US all along, there were still those nagging individual charges against him that had to be dealt with at some point. During the years that followed, some reports called him a fugitive. Those reports were wrong. Scheinberg, with dual Canadian and Israeli citizenship, hadn’t even been in the States for several years prior to Black Friday.

Still, a negotiated surrender had to happen, and it did, this past January. Scheinberg turned himself in to Swiss authorities, was almost immediately on his way to New York (where he officially and voluntarily surrendered), and after filing a not-guilty plea and being processed through the court system, was released on a $1 million bond to a pricey midtown Manhattan hotel.

It was all legal theater. A couple of months later, Scheinberg switched his plea to guilty, though that had likely been the plan all along. There was no big rush, because there’s always a months-long gap between making the deal and the actual court sentencing.

COVID-19 and a California lodge

Sometimes, though, unexpected events intervene. That happened with Scheinberg, who with his wife took up residence at Manhattan’s Sofitel hotel to await September’s sentencing date. Specifically, COVID-19 intervened, shutting down New York City while killing thousands of New Yorkers.

The Scheinbergs have, in recent weeks, become effectively stranded at the Sofitel. According to a recent court motion, they are the only guests at the hotel, which has also closed its food service and other hotel amenities. Nearby food stores and other services are also closed.

The disclosure came in a motion made by Scheinberg’s attorneys, who hoped to move up his sentencing date to June. Unfortunately, even though no one involved — Scheinberg and his counsel, DOJ prosecutors, or presiding judge Lewis Kaplan — had any particular objection to the idea, Kaplan had to rule against the motion on technical terms. Too much paperwork dependent on third parties, such as a formal pre-sentencing report, remained incomplete.

Scheinberg would be willing to add an extra $1 million to his bond.

So Scheinberg’s counsel withdrew that plan and came up with an alternative: Scheinberg would be willing to add an extra $1 million to his bond if they would be allowed to relocate to a private lodge in northern California until September’s sentencing.

The DOJ attorneys filed a complementary memo stating that they had no objection; Scheinberg has been an exemplary bailee to date. Judge Kaplan had yet to rule on the motion as of Friday, but it looks like Scheinberg will indeed spend the next few months in California.

Nothing but the coda

While there’s something about the situation that smacks a little bit of special treatment for the rich, well, that’s the way it is in the US of A. Yet it’s also worth noting that not only has Scheinberg been an exemplary bailee, he’s also been more of a hero through this Black Friday than any of his co-defendants. He helped resolve the huge problem facing the DOJ in helping make affected players’ balances good.

That’s never going to get him elected to the Poker Hall of Fame (for myriad other reasons), but it will keep him out of jail. Given the sentences given to the other Black Friday defendants plus a likely very favorable pre-sentencing report, it’s virtually unfathomable that he’ll receive anything other than a time-served sentence.

Scheinberg might end up being fined $2m instead of $1m, since in the American justice system, those bail amounts rarely seem to get returned. But that’s likely been sealed with a nod and a wink at this point, too. It’ll be an expensive lodge stay at that, even if the food is better than at Bellevue.

Meanwhile, the online poker world will remain indelibly stamped with Isai Scheinberg’s influence. Even in the US, where the game is just a fraction of its glory a decade ago. It’s been a long, strange trip, yet the entire Black Friday tale is almost complete.