Feds seize internet cafés’ bank accounts as “sweepstakes” illegal-gambling proceeds
Published: December 5, 2012
On Oct. 24, when law enforcers descended on at least 11 internet cafés in the Baltimore area to seize computers that allegedly were used for illegal gambling by offering so-called “sweepstakes” games, authorities also were cracking down by emptying the businesses’ bank accounts, taking money they say is money-laundered illegal-gambling proceeds, according to court records made publicly available in Maryland’s federal court on Nov. 16.
“I submit,” wrote special agent Irina Kuvykina of U.S. Immigration and Customs Enforcement in an affidavit supporting the bank-account seizure warrant, “that there is probable cause to believe” that businesses involved in running internet cafés in Baltimore “have been engaged in activities constituting the operation of an illegal gambling business and money laundering from at least 2011 and up to and including the present.” U.S. District Court Magistrate Judge Susan Gauvey signed the warrant on Oct. 22, two days before it was executed, according to court records.
Five businesses’ accounts were targeted: Hot Spot Entertainment, Lakeside Leasing Enterprise, Innovative Entertainment of Maryland, G-IV Capital Group, and Hidden Treasures Sweepstakes. Available court records reveal the amount seized from only one account—$30.76 from Hidden Treasures—so it remains unclear how much was seized from the other four.
Kuvykina’s affidavit relies on federal anti-gambling statutes and Maryland laws prohibiting illegal slot machines. It does not mention a new Maryland law (“Sweepstakes Loser?,” Mobtown Beat, June 27), set to take effect in January, establishing a ban on “sweepstakes” games played on computers at internet cafés. Operators have claimed the games are exempt from anti-gambling laws because the outcome of each bet is determined before a player places it, and because players don’t have to pay to play, they simply need to purchase internet time on the parlors’ computers. Debate over the new law, when it was still under consideration by the General Assembly, was contentious (“Sweepstakes Take,” Mobtown Beat, May 9).
City Paper requested from the Baltimore County Police Department a copy of the search-warrant affidavit supporting the seizures of machines at internet cafés in October, but spokesperson Elise Armacost explained in an email that “our detectives will not be releasing any documents or reports” involving the raids, because “the investigation remains open and no charges have been filed.” She added that “we are currently processing and reviewing the evidence recovered” during the raids.
An attorney for some of the parties whose businesses were targeted, Steven Wrobel, says a lot has happened in the past six months with the regulation of the sweepstakes games—“good luck trying to get a grasp” on it, he says—though he points to a recent ruling from the Maryland State Lottery and Gaming Control Commission that specifically declares them to be illegal slot machines. The ruling denied a petition by Patapsco Bingo, a Baltimore City business, asking the commission to find internet sweepstakes games in compliance with Maryland law. Wrobel calls the ban “ironic,” since it occurred as Maryland voters passed a referendum on Nov. 4 to expand state-controlled gambling.
“So now we’ve got the feds involved,” Wrobel says of the bank-account seizures. Meanwhile, he says, “we are negotiating the return of the machines” from Baltimore County authorities. He points out that the businesses recently had purchased licenses to operate their businesses—an expense that, in the case of Hidden Treasures, may explain why there was so little money in its seized account.
The crackdown on the sweepstakes operators is reminiscent of a series of law-enforcement measures against a Baltimore amusement-device company, which started in 2009, right after the state’s first expanded-gambling referendum passed in 2008. That’s when Nick’s Amusements, a company whose coin-operated video terminals allowed patrons to play point-accumulating games of chance, was targeted for illegal gambling and money laundering. A large amount of assets was seized from the company and its owner, John Zorzit, a politically prominent businessman (“Feds charge Nick’s Amusements for laundering gambling proceeds,” Mobtown Beat, Oct. 28, 2010). Ultimately, the federal government kept $1 million of the seized money, while Nick’s Amusements was charged with and pleaded guilty to one count of laundering illegal-gambling money, paid a $400 fine, and settled for the return of 17 pieces of seized real estate and $237,162.69.
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