Court Orders Penalties In Internet Casino Case
Attorney General Spitzer announced today that his office has won a $1.8 million judgment against the operators of an Internet gambling casino.
The operators of the Suffolk county-based World Interactive Gaming Corporation (WIGC) have been ordered by a judge to pay $1.8 million in restitution to defrauded investors of the operation. The judge also assessed WIGC another $4.5 million in penalties.
The company sold units of shares in the gaming business for $10,000 each to 114 investors, including ten from New York. Principals of the company squandered hundreds of thousands of dollars financing a lavish lifestyle that included extravagant trips, exorbitant salaries, and expensive cars.
Last July, State Supreme Court Judge Charles Ramos ruled that WIGC had violated state and corporate securities laws by failing to register with the Attorney General's office, and by failing to disclose to investors that 46 percent of their funds were to be used to pay salaries, commissions, and consulting fees to the corporation's principals.
The judge also found that establishment and operation of the casino violated state and federal gambling laws.
"This decision is important because it marks the first time that a court has ordered penalties against those involved in illegal Internet gambling," said Spitzer. "This case demonstrates that gambling, whether online or offline, is illegal and that promoting this type of activity carries serious legal and monetary consequences."
WIGC principals had claimed that because their computer servers were licensed and located in Antigua, they were not subject to New York gambling laws.
But in his precedent-setting ruling last year, Judge Ramos disagreed, saying, "It is irrelevant that Internet gambling is legal in Antigua. The act of entering the bet and transmitting the information from New York via the Internet is adequate to constitute gambling activity within New York State....The Internet site creates a virtual casino within the user's computer terminal."
In July of 1998, the Attorney General's office seized $750,000 from the corporation, money that now will be used to help satisfy the judgment. It's estimated that investors will receive at least one third of their money back.
"Now that we have an order from the judge, we will use every resource we have to try and locate additional assets from company principals so that we can attempt to return even more money to the investors," said Spitzer. "This case should serve as a warning to others who might be thinking of using the Internet to defraud investors."
The amount of the restitution and penalties -- $6.3 million -- is believed to be one of the largest ever in a case handled by the Attorney General's office.
Spitzer thanked the Federal Trade Commission's New York office for its assistance with the case.
The case was handled by Joel Michael Schwarz of the Internet Bureau, under the direction of Bureau Chief Caitlin Halligan and Eric Dinallo, head of the Investor Protection Bureau.