United States Attorney
Southern District of New York
FOR IMMEDIATE RELEASE CONTACT: U.S. ATTORNEY’S OFFICE
January 16, 2007 YUSILL SCRIBNER,
REBEKAH CARMICHAEL
PUBLIC INFORMATION OFFICE
(212) 637-2600
FBI
NEIL DONOVAN, JAMES MARGOLIN
PUBLIC INFORMATION OFFICE
(212) 384-2715, 2720
U.S. CHARGES TWO FOUNDERS OF PAYMENT SERVICES COMPANY
WITH LAUNDERING BILLIONS OF DOLLARS OF
INTERNET GAMBLING PROCEEDS
MICHAEL J. GARCIA, the United States Attorney for the
Southern District of New York, and MARK J. MERSHON, the Assistant
Director-in-Charge of the New York Office of the Federal Bureau of
Investigation ("FBI"), announced today that STEPHEN ERIC LAWRENCE
and JOHN DAVID LEFEBVRE were arrested yesterday in connection with
the creation and operation of an internet payment services company
that facilitated the transfer of billions of dollars of illegal
gambling proceeds from United States citizens to the owners of
various internet gambling companies located overseas. According to
the two criminal Complaints unsealed yesterday:
Neteller PLC ("Neteller"), formerly known as Neteller,
Inc., is an internet payment services company that was founded by
LAWRENCE and LEFEBVRE in 1999. Neteller is based in the Isle of
Man and is publicly traded in the United Kingdom. Neteller began
processing internet gambling transactions in approximately July
2000. Internet payment services companies, like Neteller, allow
gambling companies to transfer money collected from United States
customers to bank accounts outside the United States. According to
Neteller’s 2005 annual report, LAWRENCE and LEFEBVRE, through
Neteller, provided payment services to more than 80% of worldwide
gaming merchants.
Since founding Neteller, LAWRENCE and LEFEBVRE have held
numerous senior management positions at the company. For instance,
LAWRENCE served as Chief Executive Officer of Neteller until
December 2002; as executive director of Neteller from 2001 to
-2-
August 31, 2003; and as Chairman of the Board of Directors of
Neteller until May 11, 2006. LAWRENCE left the Board of Directors
on October 13, 2006. LEFEBVRE served as President of Neteller from
2000 to 2002; and was a member of the Board of Directors until
approximately December 2005.
Furthermore, LAWRENCE and LEFEBVRE have both held
significant ownership interests in Neteller. As of December 31,
2004, LAWRENCE was the largest shareholder of Neteller, owning
21.94% of the outstanding shares of Neteller PLC. As of the same
date, LEFEBVRE was the second-largest shareholder of Neteller PLC,
owning 13.44% of the outstanding shares of the company.
At the time that the defendants took Neteller public, the
company acknowledged in its offering documents that United States
law prohibited persons from promoting certain forms of gambling,
including internet gambling, and transmitting funds that are known
to have been derived from criminal activity or are intended to
promote criminal activity. The company’s directors, including
LAWRENCE and LEFEBVRE, also conceded that they were risking
prosecution by the government of the United States under existing
or future federal laws.
In 2005, Neteller processed over $7.3 billion in
financial transactions. According to reports issued by Neteller,
95% of its revenue was derived from money transfers involving
internet gambling companies. On September 11, 2006, the President
and Chief Executive Officer of Neteller described the "online
gaming market" as Neteller’s "main market," and stated that, in the
first half of 2006, Neteller processed $5.1 billion in financial
transactions. As charged in the complaint, approximately 85% of
Neteller’s revenue during that period derived from individuals in
North America, and 75% of its North American revenue was generated
in the United States. Both the operation of an internet gambling
operation and the transferring of the proceeds from these
businesses overseas are illegal under United States law.
LAWRENCE and LEFEBVRE are both charged with conspiring to
transfer funds with the intent to promote illegal gambling. If
convicted, both defendants face a maximum sentence of 20 years’
imprisonment.
LAWRENCE, 46, was arrested yesterday in the United States
Virgin Islands and will be presented in federal court in St. Thomas
by tomorrow. LEFEBVRE, 55, was arrested yesterday in Malibu,
California and will be presented in Los Angeles federal court later
today. LAWRENCE currently resides in Paradise Island, Bahamas.
Both are Canadian citizens.
-3-
This prosecution is part of the United States Department
of Justice’s effort to combat unlawful internet gambling through,
among other things, the implementation of the federal anti-money
laundering statutes. Other recent examples of the Justice
Department’s efforts in this regard include the indictments of two
offshore internet gambling companies – Worldwide Telesports, Inc.,
(indictment unsealed on May 17, 2006 in the United States District
Court for the District of Columbia) and BetonSports, PLC, a
publicly traded holding company that owns a number of Internet
sportsbooks and casinos, and its founder, Gary Stephen Kaplan
(indictment unsealed July 17, 2006 in the United States District
Court for the Eastern District of Missouri). Additionally, in July
2003, one of Neteller’s competitors, PayPal, and its parent eBay,
entered into a civil settlement agreement with the United States
Attorney’s Office for the Eastern District of Missouri to settle
allegations it aided in illegal offshore and on-line gambling
activities. As part of the agreement, PayPal agreed to forfeit $10
million, representing proceeds derived by PayPal from the
processing of illegal gambling transactions.
Mr. GARCIA praised the investigative efforts of the FBI
and thanked the United States Custom & Border Patrol, United States
Coast Guard, and Virgin Islands Police Department for their
assistance in the investigation. Mr. GARCIA added that the
investigation is continuing.
Mr. GARCIA stated, "Internet gambling has become a
multibillion-dollar industry that derives a major portion of its
revenues from United States citizens. STEPHEN ERIC LAWRENCE and
JOHN DAVID LEFEBVRE knew when they took their company public that
its activities, as well as those of the internet gambling companies
it assisted, were illegal in the United States. Blatant violations
of U.S. law are not a mere ‘risk’ to be disclosed to prospective
investors. Criminal prosecutions related to online gambling will
be pursued even in cases where assets and defendants are positioned
outside of the United States."
FBI Assistant Director MERSHON stated: "Internet gambling
is a multibillion-dollar industry. A significant portion of that
is the illegal handling of Americans' bets with offshore gaming
companies, which amounts to a colossal criminal enterprise
masquerading as legitimate business. There is ample indication
these defendants knew the American market for their services was
illegal. The FBI is adamant about shutting off the flow of illegal
cash."
-4-
Assistant United States Attorneys TIMOTHY J. TREANOR,
CHRISTOPHER P. CONNIFF, and CHRISTINE MEDING are in charge of the
prosecutions.
The charges contained in the Complaints are merely
accusations, and the defendants are presumed innocent unless and
until proven guilty.
07-012 ###
Approved: ______________________________
CHRISTOPHER P. CONNIFF
TIMOTHY J. TREANOR
Assistant United States Attorneys
Before: HONORABLE DEBRA C. FREEMAN
United States Magistrate Judge
Southern District of New York
- - - - - - - - - - - - - - - - - - - - x SEALED
UNITED STATES OF AMERICA : COMPLAINT
-v- : Violation of
JOHN DAVID LEFEBVRE, : 18 U.S.C. § 1956
Defendant. : COUNTY OF OFFENSE:
NEW YORK/WESTCHESTER
- - - - - - - - - - - - - - - - - - - - x
SOUTHERN DISTRICT OF NEW YORK, ss.:
Maryann Goldman, being duly sworn, deposes and says that
she is a Special Agent with the Federal Bureau of Investigation and
charges as follows:
COUNT ONE
1. From in or about June 1999, up to and including in
or about January 2007, in the Southern District of New York and
elsewhere, JOHN DAVID LEFEBVRE, the defendant, and others known and
unknown, unlawfully, wilfully and knowingly did combine, conspire,
confederate, and agree together and with each other to violate
Section 1956(a)(2)(A) of Title 18, United States Code.
2. It was a part and an object of the conspiracy that
JOHN DAVID LEFEBVRE, the defendant, and others known and unknown,
would and did transport, transmit, and transfer monetary
instruments and funds from a place in the United States to and
through a place outside the United States and to a place in the
United States from and through a place outside the United States
with the intent to promote the carrying on of specified unlawful
activity, to wit, the operation of illegal gambling businesses in
violation of Title 18, United States Code, Section 1955, the
illegal transmission of wagers and gambling information, in
violation of Title 18, United States Code, Section 1084, and the
commission of gambling offenses in violation of both New York State
Penal Law, Article 225, and anti-gambling statutes in other states.
2
OVERT ACTS
3. In furtherance of said conspiracy and to effect the
illegal object thereof, JOHN DAVID LEFEBVRE, the defendant, and
others known and unknown, committed the following overt acts, among
others, in the Southern District of New York and elsewhere:
a. In or about June 1999, LEFEBVRE and a coconspirator
(“CC#1") founded a group of businesses (the “Neteller
Group”) to provide online payment services to internet gambling
businesses.
b. Beginning in or about July 2000, and continuing
up to in or about December 2003, LEFEBVRE, CC#1, and others
affiliated with the Neteller Group offered online payment services
through Neteller Inc., a Canadian corporation, to various internet
gambling businesses so that these businesses could illegally access
customers in the United States, including customers in and around
New York City.
c. Beginning in or about January 2004, and
continuing up to in or about January 2007, LEFEBVRE, CC#1, and
others affiliated with the Neteller Group offered online payment
services through Neteller PLC, a corporation based in the Isle of
Man, to various internet gambling businesses so that these
businesses could illegally access customers in the United States,
including in and around New York City.
d. On or about April 14, 2004, LEFEBVRE, CC#1, and
others affiliated with the Neteller Group raised approximately $70
million through an initial public offering of shares in Neteller
PLC on the Alternative Investment Market (“AIM”) of the London
Stock Exchange (“LSE”) in order to, among other things, expand its
business.
(Title 18, United States Code, Sections 1956(h).)
The bases for deponent's knowledge and for the foregoing
charge are, in part, as follows:
4. Since in or about June 2006, the Federal Bureau of
Investigation ("FBI") has been conducting an investigation of
Neteller PLC, a company that is based in Isle of Man and is
publicly-traded in the United Kingdom. The investigation has
revealed that Neteller PLC conducts and facilitates illegal
financial transactions between gambling customers in the United
States and numerous offshore online gambling businesses.
5. I have been personally involved in the investigation
of this matter. This complaint is based upon my involvement in the
investigation, my conversations with other law enforcement
officials and witnesses, and my examination of reports, records,
3
and tapes. Because this complaint is being submitted for the
limited purpose of establishing probable cause, it does not include
all the facts that I have learned during the course of this
investigation. Where the contents of documents and the actions,
statements, and conversations of others are reported herein, they
are reported in substance and in part, except where otherwise
indicated.
6. I have reviewed various business records of Neteller
PLC. These records describe, among other things, the history and
development of the Neteller Group and the services that it
provides. For example, in the prospectus from Neteller PLC’s
initial public offering on the AIM (the “Neteller IPO Prospectus”),
the Board of Directors of Neteller PLC, including JOHN DAVID
LEFEBVRE, the defendant, collectively states that Neteller Inc., a
Canadian corporation, was founded in 1999 by LEFEBVRE and CC#1;
that on January 1, 2004, the Neteller Group began doing business as
Neteller PLC, a corporation based in Isle of Man; that Neteller PLC
specializes in providing online payment processing services to
online merchants and customers; that Neteller PLC, and previously
Neteller Inc., offers services through Neteller.com; that the
primary service provided by Neteller PLC, and previously by
Neteller Inc., is a “virtual wallet” account that enables customers
to deposit, withdraw, or transfer funds with any merchant that
supports the Neteller online payments system; that Neteller PLC
generates its revenues on a fee-for-service basis for any transfer
of money between any combination of members or merchants; and that
Neteller Inc. began processing transactions in July 2000.
7. I have reviewed various business records of Neteller
PLC that provide information regarding the scope of the online
payment services provided by Neteller PLC, including the following:
a. In the Neteller IPO Prospectus, the Board of
Directors of Neteller PLC, including JOHN DAVID LEFEBVRE, the
defendant, collectively states that more than 95 percent of the
revenues generated by the Neteller Group, is derived from
processing money transfers pertaining to the online gambling
market; and that on or about March 1, 2004, Neteller PLC had
685,945 member accounts, of which approximately 88 percent belonged
to North American residents.
b. Neteller PLC’s 2004 annual report states that,
in 2004, Neteller PLC processed $3.4 billion in financial
transactions; and that Neteller PLC provides gambling customers
with access to more than 80 percent of the online gaming merchants
in the world.
c. Neteller PLC’s 2005 annual report states that,
in 2005, Neteller PLC processed over $7.3 billion in financial
transactions; that Neteller PLC provides gambling customers with
access to more than 80 percent of worldwide gaming merchants; and
4
that, in 2005, Neteller PLC had $172.1 million in revenues and
$91.5 million in net profit.
d. In Neteller PLC’s half yearly report for the
six-month period ending June 30, 2006, dated September 11, 2006,
the President and Chief Executive Officer of Neteller PLC described
the “online gaming market” as Neteller PLC’s “main market,” and
stated that, in the first half of 2006, Neteller PLC processed $5.1
billion in financial transactions, and that approximately 85
percent of Neteller PLC’s revenue during that period derived from
individuals in North America.
e. The transcript of a public conference call that
occurred on or about September 11, 2006, between officers of
Neteller PLC and financial analysts, reflects that the Chief
Financial Officer of Neteller PLC stated during the conference call
that approximately 75 percent of the revenue of Neteller PLC
originated from customers in the United States.
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
5
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.
9. I have reviewed various business records obtained
from financial institutions that provide information regarding
international monetary transactions conducted by, or on behalf of,
Neteller PLC, including the following:
a. Records of automated clearinghouse (“ACH”)
transactions obtained pursuant to subpoena from an automated
clearinghouse located in the United States demonstrate that
Neteller processes a significant amount of customer transactions
through the automated clearinghouse system, including transactions
from customers in Manhattan. The ACH system permits Neteller to
handle internet-based customer transactions. These records further
demonstrate that Neteller uses a payment service company (the
“Payment Company”) to conduct its customers’ ACH transactions in
the name of the Payment Company. By doing so, Neteller PLC
conceals the nature of these financial transactions. The Payment
Company receives funds in the United States on behalf of Neteller
PLC, and then transfers the funds out of the United States to
accounts controlled by Neteller PLC in Canada.
b. Records of wire transfers obtained pursuant to
subpoena from a bank in the United States (the “US Bank”)
demonstrate that, from in or about January 2006 up to and including
in or about March 2006, a total of approximately $98 million was
transferred by wire from an account in the name of the Payment
Company at the US Bank in the United States to an account in the
name of JSL Systems Inc. at National Bank of Canada in Calgary,
Alberta, Canada. Neteller PLC’s 2004 annual report states that JSL
Systems Inc. is a related company that is owned by a director of
Neteller PLC that processes transactions for Neteller PLC and is
paid a nominal fee for its services. In the Neteller IPO
Prospectus, the Board of Directors of Neteller PLC, including JOHN
DAVID LEFEBVRE, the defendant, collectively states that LEFEBVRE
and CC#1 are partners in and/or directors of JSL Systems Inc.
6
c. Records of wire transfers obtained pursuant to
subpoena from the US Bank demonstrate that, from in or about March
2006 up to and including in or about April 2006, a total of
approximately $50 million was transferred from an account in the
name of the Payment Company at the US Bank in the United States to
an account in the name of Cardload Inc. at National Bank of Canada
in Calgary, Alberta, Canada. Neteller PLC’s 2004 annual report
states that Cardload Inc. is a wholly-owned subsidiary of Neteller
PLC.
10. I have reviewed various business records of Neteller
PLC that provide information regarding the involvement of JOHN
DAVID LEFEBVRE, the defendant, in the business affairs of Neteller
Inc. and Neteller PLC, including the following:
a. In the Neteller IPO Prospectus, the Board of
Directors of Neteller PLC, including LEFEBVRE, collectively states
the following: LEFEBVRE is a lawyer who co-founded the Neteller
Group in 1999; LEFEBVRE participated in developing the online
payment services of the Neteller Group and participated in raising
capital for the Neteller Group; LEFEBVRE served as President of
Neteller Inc. from 2000 to 2002 and drew a salary and other
compensation from Neteller Inc.; LEFEBVRE is a member of the Board
of Directors of Neteller PLC and would remain a director upon
admission of Neteller PLC to AIM; and prior to the IPO, LEFEBVRE
owned approximately 25 percent of Neteller PLC, and after the IPO,
LEFEBVRE owned approximately 22 percent of Neteller PLC.
b. Neteller PLC’s 2004 annual report states that
LEFEBVRE is a co-founder and director of Neteller PLC; on or about
December 31, 2004, LEFEBVRE was the second-largest shareholder of
Neteller PLC, owning 13.44% percent of the outstanding shares of
Neteller PLC; during 2004, the Board of Directors of Neteller PLC
granted LEFEBVRE options to purchase additional shares of Neteller
PLC; and during 2004, Neteller PLC paid LEFEBVRE consulting fees
for services rendered.
c. Neteller PLC’s 2005 annual report states that
LEFEBVRE served as director of Neteller PLC until on or about
December 15, 2005; during 2005, the Board of Directors of Neteller
PLC granted LEFEBVRE options to purchase additional shares of
Neteller PLC; and during 2005, Neteller PLC paid LEFEBVRE
compensation for serving as a director.
11. I have reviewed various business records of Neteller
PLC that demonstrate that JOHN DAVID LEFEBVRE, the defendant, had
knowledge that he was participating in criminal activity in the
United States. For example, in the Neteller IPO Prospectus, the
Board of Directors of Neteller PLC, including LEFEBVRE,
collectively states that criminal laws exist in the United States
that prohibit persons from promoting certain forms of gambling;
7
that criminal laws exist in the United States that prohibit the
transmission of funds that are known to have been derived from
criminal activity or are intended to promote criminal activity;
that to date most of the criminal prosecutions related to online
gambling in the United States have been limited to cases where
assets or relevant individuals are located in the United States;
that the Neteller Group does not maintain offices or assets in the
United States; and that there can be no assurance that the
government of the United States will not try to prosecute the
Neteller Group under existing or future federal laws.
WHEREFORE, deponent prays that a warrant be issued for
the arrest of the above-named individual and that he be arrested
and imprisoned or bailed as the case may be.
________________________________
MARYANN GOLDMAN
SPECIAL AGENT
FEDERAL BUREAU OF INVESTIGATION
Sworn to before me this
day of January 16, 2007
________________________________
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF NEW YORK
Approved: ______________________________
CHRISTOPHER P. CONNIFF
TIMOTHY J. TREANOR
Assistant United States Attorneys
Before: HONORABLE DEBRA C. FREEMAN
United States Magistrate Judge
Southern District of New York
- - - - - - - - - - - - - - - - - - - - x SEALED
UNITED STATES OF AMERICA : COMPLAINT
-v- : Violation of
STEPHEN ERIC LAWRENCE, : 18 U.S.C. § 1956
Defendant. : COUNTY OF OFFENSE:
NEW YORK/WESTCHESTER
- - - - - - - - - - - - - - - - - - - - x
SOUTHERN DISTRICT OF NEW YORK, ss.:
Maryann Goldman, being duly sworn, deposes and says that
she is a Special Agent with the Federal Bureau of Investigation and
charges as follows:
COUNT ONE
1. From in or about June 1999, up to and including in
or about January 2007, in the Southern District of New York and
elsewhere, STEPHEN ERIC LAWRENCE, the defendant, and others known
and unknown, unlawfully, wilfully and knowingly did combine,
conspire, confederate, and agree together and with each other to
violate Section 1956(a)(2)(A) of Title 18, United States Code.
2. It was a part and an object of the conspiracy that
STEPHEN ERIC LAWRENCE, the defendant, and others known and unknown,
would and did transport, transmit, and transfer monetary
instruments and funds from a place in the United States to and
through a place outside the United States and to a place in the
United States from and through a place outside the United States
with the intent to promote the carrying on of specified unlawful
activity, to wit, the operation of illegal gambling businesses in
violation of Title 18, United States Code, Section 1955, the
illegal transmission of wagers and gambling information, in
violation of Title 18, United States Code, Section 1084, and the
commission of gambling offenses in violation of both New York State
Penal Law, Article 225, and anti-gambling statutes in other states.
2
OVERT ACTS
3. In furtherance of said conspiracy and to effect the
illegal object thereof, STEPHEN ERIC LAWRENCE, the defendant, and
others known and unknown, committed the following overt acts, among
others, in the Southern District of New York and elsewhere:
a. In or about 1999, LAWRENCE and a co-conspirator
(“CC#1") founded a group of businesses (the “Neteller Group”) to
provide online payment services to internet gambling businesses.
b. Beginning in or about July 2000, and continuing
up to in or about December 2003, LAWRENCE, CC#1, and others
affiliated with the Neteller Group offered online payment services
through Neteller Inc., a Canadian corporation, to various internet
gambling businesses so that these businesses could illegally access
customers in the United States, including customers in and around
New York City.
c. Beginning in or about January 2004, and
continuing up to in or about January 2007, LAWRENCE, CC#1, and
others affiliated with the Neteller Group offered online payment
services through Neteller PLC, a corporation based in the Isle of
Man, to various internet gambling businesses so that these
businesses could illegally access customers in the United States,
including in and around New York City.
d. On or about April 14, 2004, LAWRENCE, CC#1, and
others affiliated with the Neteller Group raised approximately $70
million through an initial public offering of shares in Neteller
PLC on the Alternative Investment Market (“AIM”) of the London
Stock Exchange (“LSE”) in order to, among other things, expand
their online payment business.
(Title 18, United States Code, Sections 1956(h).)
The bases for deponent's knowledge and for the foregoing
charge are, in part, as follows:
4. Since in or about June 2006, the Federal Bureau of
Investigation ("FBI") has been conducting an investigation of
Neteller PLC, a company that is based in Isle of Man and is
publicly-traded in the United Kingdom. The investigation has
revealed that Neteller PLC conducts and facilitates illegal
financial transactions between gambling customers in the United
States and numerous offshore online gambling businesses.
5. I have been personally involved in the investigation
of this matter. This complaint is based upon my involvement in the
investigation, my conversations with other law enforcement
officials and witnesses, and my examination of reports, records,
and tapes. Because this complaint is being submitted for the
3
limited purpose of establishing probable cause, it does not include
all the facts that I have learned during the course of this
investigation. Where the contents of documents and the actions,
statements, and conversations of others are reported herein, they
are reported in substance and in part, except where otherwise
indicated.
6. I have reviewed various business records of Neteller
PLC. These records describe, among other things, the history and
development of the Neteller Group and the services that it
provides. For example, in the prospectus from Neteller PLC’s
initial public offering on the AIM (the “Neteller IPO Prospectus”),
the Board of Directors of Neteller PLC, including STEPHEN ERIC
LAWRENCE, the defendant, collectively states that Neteller Inc., a
Canadian corporation, was founded in 1999 by LAWRENCE and CC#1;
that on January 1, 2004, the Neteller Group began doing business as
Neteller PLC, a corporation based in Isle of Man; that Neteller PLC
specializes in providing online payment processing services to
online merchants and customers; that Neteller PLC, and previously
Neteller Inc., offers services through Neteller.com; that the
primary service provided by Neteller PLC, and previously by
Neteller Inc., is a “virtual wallet” account that enables customers
to deposit, withdraw, or transfer funds with any merchant that
supports the Neteller online payments system; that Neteller PLC
generates its revenues on a fee-for-service basis for any transfer
of money between any combination of members or merchants; and that
Neteller Inc. began processing transactions in July 2000.
7. I have reviewed various business records of Neteller
PLC that provide information regarding the scope of the online
payment services provided by Neteller PLC, including the following:
a. In the Neteller IPO Prospectus, the Board of
Directors of Neteller PLC, including STEPHEN ERIC LAWRENCE, the
defendant, collectively states that more than 95 percent of the
revenues generated by the Neteller Group, is derived from
processing money transfers pertaining to the online gambling
market; and that on or about March 1, 2004, Neteller PLC had
685,945 member accounts, of which approximately 88 percent belonged
to North American residents.
b. Neteller PLC’s 2004 annual report states that,
in 2004, Neteller PLC processed $3.4 billion in financial
transactions; and Neteller PLC provides gambling customers with
access to more than 80 percent of the online gaming merchants in
the world.
c. Neteller PLC’s 2005 annual report states that,
in 2005, Neteller PLC processed over $7.3 billion in financial
transactions; Neteller PLC provides gambling customers with access
to more than 80 percent of worldwide gaming merchants; and in 2005,
Neteller PLC had $172.1 million in revenues and $91.5 million in
4
net profit.
d. In Neteller PLC’s half yearly report for the
six-month period ending June 30, 2006, dated September 11, 2006,
the President and Chief Executive Officer of Neteller PLC described
the “online gaming market” as Neteller PLC’s “main market,” and
stated that, in the first half of 2006, Neteller PLC processed $5.1
billion in financial transactions, and that approximately 85
percent of Neteller PLC’s revenue during that period derived from
individuals in North America.
e. The transcript of a public conference call that
occurred on or about September 11, 2006, between officers of
Neteller PLC and financial analysts, reflects that the Chief
Financial Officer of Neteller PLC stated during the conference call
that approximately 75 percent of the revenue of Neteller PLC
originated from customers in the United States.
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
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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.
9. I have reviewed various business records obtained
from financial institutions that provide information regarding
international monetary transactions conducted by, or on behalf of,
Neteller PLC, including the following:
a. Records of automated clearinghouse (“ACH”)
transactions obtained pursuant to subpoena from an automated
clearinghouse located in the United States demonstrate that
Neteller processes a significant amount of customer transactions
through the automated clearinghouse system, including transactions
from customers in Manhattan. The ACH system permits Neteller to
handle internet-based customer transactions. These records further
demonstrate that Neteller uses a payment service company (the
“Payment Company”) to conduct its customers’ ACH transactions in
the name of the Payment Company. By doing so, Neteller PLC
conceals the nature of these financial transactions. The Payment
Company receives funds in the United States on behalf of Neteller
PLC, and then transfers the funds out of the United States to
accounts controlled by Neteller PLC in Canada.
b. Records of wire transfers obtained pursuant to
subpoena from a bank in the United States (the “US Bank”)
demonstrate that, from in or about January 2006 up to and including
in or about March 2006, a total of approximately $98 million was
transferred by wire from an account in the name of the Payment
Company at the US Bank in the United States to an account in the
name of JSL Systems Inc. at National Bank of Canada in Calgary,
Alberta, Canada. Neteller PLC’s 2004 annual report states that JSL
Systems Inc. is a related company that is owned by a director of
Neteller PLC that processes transactions for Neteller PLC and is
paid a nominal fee for its services. In the Neteller IPO
Prospectus, the Board of Directors of Neteller PLC, including
STEPHEN ERIC LAWRENCE, the defendant, collectively states that
LAWRENCE and CC#1 are partners in and/or directors of JSL Systems
Inc.
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c. Records of wire transfers obtained pursuant to
subpoena from the US Bank demonstrate that, from in or about March
2006 up to and including in or about April 2006, a total of
approximately $50 million was transferred from an account in the
name of the Payment Company at the US Bank in the United States to
an account in the name of Cardload Inc. at National Bank of Canada
in Calgary, Alberta, Canada. Neteller PLC’s 2004 annual report
states that Cardload Inc. is a wholly-owned subsidiary of Neteller
PLC.
10. I have reviewed various business records of Neteller
PLC that provide information regarding the involvement of STEPHEN
ERIC LAWRENCE, the defendant, in the business affairs of Neteller
Inc. and Neteller PLC, including the following:
a. In the Neteller IPO Prospectus, the Board of
Directors of Neteller PLC, including LAWRENCE, collectively states
the following: LAWRENCE founded the Neteller Group in June 1999;
LAWRENCE participated in developing the online payment services of
the Neteller Group and participated in raising capital for the
Neteller Group; LAWRENCE served as Chief Executive Officer of
Neteller Inc. until December 2002 and drew a salary and other
compensation from Neteller Inc.; LAWRENCE served as executive
director of Neteller Inc. from 2001 to August 31, 2003; LAWRENCE
was Chairman of the Board of Directors of Neteller PLC and would
continue to serve as Chairman upon admission of Neteller PLC to
AIM; LAWRENCE owned approximately 42 percent of Neteller PLC prior
to the IPO, and LAWRENCE would own approximately 36 percent of
Neteller PLC after the IPO; and LAWRENCE advanced to Neteller PLC
approximately $3 million in an interest-free loan.
b. Neteller PLC’s 2004 annual report states that
Neteller PLC is the creation of LAWRENCE who is a major shareholder
of Neteller PLC; LAWRENCE served as Chief Executive Officer of
Neteller Inc. until December 2002; throughout 2004, LAWRENCE was
the Chairman of the Board of Directors of Neteller PLC; on or about
December 31, 2004, LAWRENCE was the largest shareholder of Neteller
PLC, owning 21.94% percent of the outstanding shares of Neteller
PLC; and during 2004, the Board of Directors of Neteller PLC
granted LAWRENCE options to purchase additional shares of Neteller
PLC.
c. Neteller PLC’s 2005 annual report states that
LAWRENCE served as Chairman of the Board of Directors of Neteller
PLC during 2005, but that LAWRENCE would step down from his
position as Chairman at Neteller PLC’s annual general meeting in
2006; during 2005, the Board of Directors of Neteller PLC granted
LAWRENCE options to purchase additional shares of Neteller PLC; and
during 2005, Neteller PLC paid LAWRENCE compensation for serving as
a director.
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11. I have reviewed various business records of Neteller
PLC that demonstrate that STEPHEN ERIC LAWRENCE, the defendant, had
knowledge that he was participating in criminal activity in the
United States. For example, in the Neteller IPO Prospectus, the
Board of Directors of Neteller PLC, including LAWRENCE,
collectively states that criminal laws exist in the United States
that prohibit persons from promoting certain forms of gambling;
criminal laws exist in the United States that prohibit the
transmission of funds that are known to have been derived from
criminal activity or are intended to promote criminal activity;
that to date most of the criminal prosecutions related to online
gambling in the United States have been limited to cases where
assets or relevant individuals are located in the United States;
that the Neteller Group does not maintain offices or assets in the
United States; and that there can be no assurance that the
government of the United States will not try to prosecute the
Neteller Group under existing or future federal laws.
WHEREFORE, deponent prays that a warrant be issued for
the arrest of the above-named individual and that he be arrested
and imprisoned or bailed as the case may be.
________________________________
MARYANN GOLDMAN
SPECIAL AGENT
FEDERAL BUREAU OF INVESTIGATION
Sworn to before me this
day of January 16, 2007
________________________________
UNITED STATES MAGISTRATE JUDGE
SOUTHERN DISTRICT OF NEW YORK
