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Growing impatience as players ask, "When do we get our money back?"
With the BetonSports debacle seemingly going from bad to worse, American gamblers who made deposits through the companys telephone and online facilities are growing increasingly impatient at the lack of information on when they will get their deposits back from a management that appears to be mesmerised by the abrupt reversal of fortunes the company has suffered as a result of US legal action.
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There appeared to be some sympathy from the main prosecutor of BetonSports, U.S. Attorney Catherine Hanaway, who told Associated Press that last month's federal restraining order requires BetOnSports to return any money that American customers have tied up with the site.
The order, which expires next Monday [August 14 2006] but could be extended, also prevents BetOnSports from taking U.S.-based bets.
However, on a tougher note Hanaway said if BetOnSports doesn't return the money, the U.S. government has every right to seize it. The six foot, cigar smoking Republican lawyer contends the bets were placed illegally, violating the 1961 federal Wire Act. That means the government could take the money to settle legal claims in the same way it takes money from drug cartels, Hanaway said.
An executive with BetOnSports reassured players, telling Associated Press in an unofficial and anonymous statement that the company is trying to return deposits and pending wagers before that scenario plays out.
"Customers will get their money," the executive said, who spoke on the condition of anonymity because he was "not authorised" to speak publicly about the case.
But the executive said that because of the judge's order on July 17, some payment processors have stopped doing business with BetOnSports. The executive said BetOnSports has no way to transfer the bulk of the pending wagers or deposits to gamblers.
"We are in a difficult position," he said, declining to give the value of the pending wagers and deposits.
Associated Press surmised that it could be considerable. Most of the wagers placed on BetOnSports come from the U.S. For the 53 weeks preceding February 2005, the company's sportsbook had more than 71 000 active customers who placed 9.9 million bets. The average bet was $109. Prosecutors said 97 percent of the sports bets are made on American football, basketball and baseball.
Adding to the players' woes is the news that processors like Neteller and FireOne have suspended services to BetonSports despite the fact the Justice Department has not yet gone after these third party companies. Like BetOnSports, Neteller and FireOne are publicly traded in London and regulated by British authorities.
"Neteller has for the moment suspended doing business with BetOnSports and is reviewing the relationship in light of what happened," company spokesman Sebastian Hoyle told the news agency. The BetOnSports executive says FirePay has also stopped doing business with the betting site.
David Schwartz, chief financial officer of FireOne Group, FirePay's parent company, did not respond to messages left on his voice mail in Canada. In a conference call Tuesday with analysts to discuss quarterly financial results, FireOne would not talk about BetOnSports.
The question of player deposits being forfeit to the State was addressed by respected law professor at Whittier College I. Nelson Rose, who said that the government has a strong case against BetOnSports but not against its customers.
"The Wire Act does make it a crime to be in the gambling business and accept sports bets but it does not make it a crime to be the bettor," Rose said.
Rose said the government can't confiscate the deposits, because the bettors haven't done anything illegal. To say the bettors are as guilty as the bookies is wrong, he said. "This is saying the buyer of drugs is aiding and abetting the seller of drugs and therefore is guilty of selling drugs," Rose said. "It won't wash."
Rose said the government needs to rethink its position and the money should be returned to the bettors. "There are lots of legal questions involved in this but the one ... that's not in question is that the money in those accounts belongs to the players," Rose said. "These are deposits, not disputes over winnings."
STOP PRESS:
As InfoPowa went to press this week, The Times reported from the UK that BetOnSports has shut down its American-facing businesses with the loss of 800 jobs as part of a bid to shake itself free of racketeering, conspiracy and fraud allegations surrounding it and its former executives.
The newspaper claims that formally cancelling any potential access for American customers is also aimed at ending BoS's exposure to a market where online gaming is a contentious issue and internet sports betting is deemed illegal.
BetOnSports has yet to establish how much it will cost to exit its US-facing businesses, which are based in Costa Rica and Antigua. It is currently holding talks with its bankers and the companies that process its cash to try to release funds.
Paying off staff and creditors is dependent on the successful completion of these talks, BetonSports said.
BetonSports spokesman Kevin Smith said it no longer considered the US operation, which accounts for around 80 percent of group revenues, to be viable. It will close down operations in Costa Rica and Antigua, which serve the business, as soon as practicable.
It will also look to pay liabilities to staff and creditors and repay balances due to US customers, although it pointed out this depended on its ability to release funds and earn sufficient profits from non-US facing operations.
The move leaves BetOnSports, which is quoted on the London Stock Exchange but has no UK businesses, with operations in Asia, Argentina and Mexico. The London-listed company has an Asian business which took $20 million in bets from 10 000 active players in the last financial year.
Wayne Brown, an analyst at Altium Securities, speculated that BetOnSports may have to sell off its Asian arm to settle all its outstanding liabilities.
"Therefore we fear there may be little to nothing left for shareholders," Brown said.
"This comes ahead of one of the busiest periods of the year and we would expect that the likes of Leisure & Gaming and Sportingbet to be beneficiaries of the closure of a significant competitor although sentiment across the sector short-term is likely to take a further hit," he said.
Shares in BetOnSports were last month suspended at 122.5p, valuing the company at GBP 110.24 million.
BetOnSports went public in July 2004, raising $101 million, and ending with a first-day market capitalization of $209 million. When trading was halted on July 17, the shares were worth about $234 million.
In its first quarter, ending May 6, it took in wagers of $735 million and had 50,000 active players.
According to Bloomberg data, some of its largest institutional shareholders are funds controlled by major American investment houses, like Goldman Sachs, Merrill Lynch and Morgan Stanley, and their domestic and overseas subsidiaries.
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