![\"\"](\"http://old.pokerati.com/wp-content/uploads/2011/04/sanfordmillar-mug.jpg\" "\\"sanfordmillar-mug\\"")
OP-ED
There are two actions pending against online poker companies in the Southern District of New York — an indictment of individual defendants, and a civil forfeiture complaint against the companies. The civil forfeiture complaint seeks forfeiture of all assets of the defendants, including specified domains and bank accounts.
There have been several civil and criminal forfeiture cases brought by the DoJ in recent years, including Daniel Tzvetkoff\’s and Douglas Rennick\’s (which are the original and first superseding indictments in the current case). Similar forfeiture cases have also been brought against other payment processors, but in none of these cases, as far as I know, have the Poker companies filed claims objecting to the seizures. Also of note is that no players made claims either.
Any player who makes a claim [for their deposits] should expect criminal inquiry by the FBI and IRS, and would not be able to recover on provable claims for some time. If the Poker companies default on the civil forfeiture, players will have no real legal recovery.
For the purpose of filing Foreign Bank Account Reports, some players may have taken the position, consistent with the position of the IRS, that they are general unsecured creditors in a common pool fund of deposits, and as such have no control or discretion over the investment of the funds. If this position is correct, then the DoJ\’s forfeiture claims may have legs, as there may be no players to come forward able to make the specific factual statements necessary for a bonafide claim. Further, in order for the Poker companies to make claims, they likely would have to submit to jurisdiction of the U.S. and open their books and records to the DoJ and IRS among others.
Players who think they can write off their funds on deposit for tax purposes, and thereby get some benefit by tax losses, may run into the problem that IRC §165 limits gambling losses to gambling winnings (plus travel and related expenses for professional gamblers). But that means the winnings must have been reported and will require proof of deposits made. For some players, proof of deposit may be problematic.
Any player who makes a claim should expect to face full disclosure requirements on inquiry by the FBI and IRS (likely Criminal Investigation Division) and would not be able to recover on provable claims for some time, and at a non-trivial expense. For among other things, for players to prevail, they will need to get cooperation from the Poker companies and produce \”competent evidence\”.
If there is a possibility that the Poker companies default on the civil forfeiture, the players will have no real legal recovery.
Just my observations.
Sanford Millar is a domestic and international tax attorney in LA, and Commissioner of the California Bar\’s Taxation Law Advisory Commission. Find him at MillarLawOffice.com, where his firm handles cross-border compliance matters with a sub-specialty in e-commerce and internet gaming.
