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Why US NETeller Accounts Were Frozen

By Andrea Klein, Jan 21st 2008

Back in March, 2007 the online payment company NETeller announced that the accounts of US based online players were frozen. The also announced in a public statement that those funds will be returned but they were speaking of only $55 million or so that was seized by the U.S. Attorneys. They said nothing about the other hundreds of millions of dollars from NETeller's US gamblers.

But in the whole, back than I understood that they actually said to return all of its customers funds. So, I concluded that the money were safe - not only was it held in separate escrow accounts, but NETeller is so rich that it could pay back everyone with its own cash.

In the end, US players got their money back, all of them. But the deal NETeller struck with the U.S. Attorneys for the Southern District of New York, which had detained the two founders of NETeller, was upsetting. US player’s funds were given back only after they had been inspected by an independent company, Navigant Consulting, Inc. The company offered "financial consulting and forensic accounting services to the company, including oversight of the process of returning funds to U.S. customers."

As said by Investopedia.com, "Forensic Accounting" "utilizes accounting, auditing, and investigative skills to perform an inspection into a company's financial statements. Therefore, they provide an accounting examination that is suitable for court." Dictionary.com also says: Forensic accountants are qualified to look beyond the numbers and deal with the business reality of a situation. They are frequently used in fraud cases."

So why the $55 million was held from American patrons’ accounts subjected to this kind of analysis? There is no accusation that NETeller was implicated in anything fraudulent. It would be nice to suppose that the U.S. Attorneys are concerned about money laundering by Islamist terrorists. But in fact the Department of Justice is running a war of threats against online poker gamblers.

The truth is that the Department of Justice wants to know who has been gambling online, to intimidate them, and, more significantly, to see if they paid taxes on their online gambling winnings.

In conclusion, don’t let yourself intimidated. I’ve read many emails in which online players were wondering if they will go to jail for gambling online. The answer is NO. Even if one makes a bet with an illegal bookie no federal law is violated. More, even if some states do make it illegal to gamble, none care enough to bring charges.

Things are different with paying taxes. First, every US based player who had large sums of money flowing to, and especially from NETeller should think their tax returns for the past few years will be inspected. If the accountants say a person had received thousands of dollars more from NETeller than that person ever deposited, the I.R.S. is going to want to see whether that income was reported.

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