David Carruthers, a Scot, was arrested as he changed plane in
Texas en route to Costa Rica, where the company is based. The
company's shares are listed on the London Stock Exchange but
trading was suspended on the news.
Carruthers had been one of the most vocal critics of incoming US
legislation outlawing gambling. His arrest has knocked £900 million
off gaming shares in the stock markets since Monday as investors
flee what may soon be a troubled sector.
Though online gambling is not outlawed specifically yet, the US
Department of Justice has used the 1963 Wire Act to claim it is
illegal and to take intermittent action. Despite specific
legislation allowing between-state horseracing betting it has even
taken action against horseracing gambling in the past.
“Illegal commercial gambling across state and international
borders is a crime,” said US Attorney Catherine Hanaway of the
Eastern District of Missouri. “Misuse of the Internet to violate
the law can ultimately only serve to harm legitimate businesses.
This indictment is but one step in a series of actions designed to
punish and seize the profits of individuals who disregard federal
and state laws.”
The case against Carruthers and 10 others claims that those
behind the company took illegal bets and that they have failed to
pay taxes on their earnings, said the Department of Justice.
Undercover police had placed bets with the company and its
subsidiaries, the DoJ said.
BetonSports.com has stopped taking bets. "In light of court
papers filed in the United States, the company has temporarily
suspended this facility pending its ability to assess its full
position," said a statement posted on BetonSports.com. "During this
period no financial or wagering transactions can be executed."
The DoJ says that it has issued a warrant for the arrest of Gary
Kaplan, the company founder, who lives in Costa Rica. It says that
Kaplan failed to pay taxes on gambling income of $3.3 billion and
is seeking a total of $4.5 billion in penalties from all the
accused.
The House of Representatives passed a new law just last week
that sought to outlaw almost all forms of internet gambling. That
law must now be passed by the Senate. It is estimated that around
half of the $12 billion a year online gambling industry involves US
citizens, despite its difficult legal position there.
The indictment under which Carruthers and four others were
arrested was returned by a federal grand jury but only released to
the public after the arrests.
In addition to the criminal charges the DoJ has filed a civil
action seeking to stop the company taking any more bets from US
citizens. It also wants to force the firm to return all money held
in betting accounts of US citizens.
BetonSports.com chairman Clive Parritt told the Financial Times
that he and Carruthers had expected that there would be problems
with Carruthers entering the US, but that the pair had not made
contingency plans for his arrest.
