Another Online Payment Processing Arrest

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36 year old Todd Lyons of Beverley, Massachusetts, is being prosecuted under the Unlawful Internet Gambling Enforcement Act (UIGEA), the rules of which will come into effect only on June 1, 2010. A 36 count indictment unsealed last week had the Department of Justice (DoJ) charge Todd with crimes of racketeering, money laundering, operating an illegal gambling business, interstate travel in aid of racketeering, filing false tax returns and a host of other related charges.

The Salem News, which was the first to break the news, reported that Lyons was involved in an enterprise that handled funds for offshore gambling operators. There is supposed to be documented evidence of $22 million collected by Lyons. It has been alleged that Lyons was working for Sports Offshore, which had its web site and customer support services in St. Johns in Antigua since 1997, but actually offered sports betting services to American citizens within the United States jurisdiction. Lyons collected millions of dollars from Americans from Massachusetts to Florida. U.S. Attorney Carmen Ortiz said in a press release, "The conduct alleged in this case reveals a blatant effort to circumvent gaming and tax laws. The notion that the type of activity alleged here is legal because it is conducted over the Internet from offshore is pure fiction."

The charges against Todd are full of murky financial wrongdoings. He accepted checks from online gamblers in Massachusetts for their wagering and passed them through the US banking system. Specific allegations have been made about falsification of his tax returns. Lyons claimed earnings of $49,437 in 2004 but earned at least $162,112. Similarly in 2005 his earnings were $216,007 as against his claim of $97,352. He even sent cash from Massachusetts to Antigua through FedEx. Lyons earnings consisted of commissions earned on the losses made by the American online players. He was also the conduit for channeling payments collected by other agents who had their own customers. The online gambling operator used an Antiguan front company called Benevolence Funding Ltd. to launder a part of the funds received from the illegal online gambling operations to avoid detection.

If found guilty Lyons can get a maximum prison sentence of 20 years on the racketeering and money-laundering charges alone. He can get another 10 years on the other charges. Each count also carries a three-year term of supervised release and fines up to $250,000. The investigating agencies involved in the case were the Internal Revenue Service's Criminal Investigation Unit and the Massachusetts State Police. They were helped by the Essex County district attorney's office.

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