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Poker Blog established in 2003 as the first stop for poker news, poker stories, and bad poker advice.

February 8, 2007

Feds seize U.S. NETeller money

by Otis

No matter where we play, the conversation always turns to NETeller. Like showing war wounds, players each talk about how much they have stuck in the one-time payment processing giant.

Though articles in U.S.A Today and less reputable sources had hinted at the possibility the United States government had seized NETeller's U.S. customers' money, we had yet to see anything definitive.

Until this morning.

NETeller execs have announced that the U.S. government has seized "not more than $55 million" in U.S. funds and that those seizures will result in ongoing delays in repaying customers what they are owed.

While NETeller continues to make efforts to find a way to repay its U.S. customer base, there is no timetable for payment.

NETeller's Ron Martin said, "The return of funds for our U.S. customers is a top priority for NETeller."

According to NETeller's statement, the U.S. Attorneys Office will likely employ a forensic accountant to start investigating the funds. It appears much of what was seized was in the process of being transfered to or from NETeller. Anyone who sees that static "pending" announcement in their NETeller account, it appears NETeller is talking to you...without really talking to you.

So, that's not good news.

Here is the whole of NETeller's statement:

----

NETELLER Plc (LSE: NLR), the leading global independent online money transfer business, today issued the following update with regard to its US business and criminal charges against two of its founders.

On 19 January 2007, at the request of the Group [Neteller], the Group's legal advisers met with representatives of the United States Attorney's Office for the Southern District of New York ("USAO") to clarify the Group's position with respect to the complaints brought on 16 January 2007 against two of the Group's founders, Mr. Stephen Lawrence and Mr. John Lefebvre. Neither are current employees or directors of NETELLER.

In that meeting, the Group pledged to cooperate with the USAO, indicated it was prepared to begin document production promptly and discussed a potential mechanism for arranging an orderly repayment of funds to US customers.

The discussions between the Group's legal advisers and the USAO are ongoing. The Group is, under advice of its legal advisers, commencing production of documents and intends to cooperate with the USAO in its investigation.

Following upon the complaints dated 16 January 2007, banks in the US began declining to permit transactions involving the Group through accounts maintained at one or more automated clearinghouses in the United States. Additionally, the Group has been advised that the USAO has obtained court-ordered seizure warrants seizing funds pertaining to the Group's transactions.

To the best of the Group's knowledge, it believes that the amount of funds seized by the USAO or otherwise restricted by third parties does not exceed US$ 55 million. These funds were largely in the process of being transferred from the Group to its US customers or vice versa.

As a result of the restrictions placed by third parties, court-ordered seizures, and related legal concerns, the Group is currently unable to make payments to US customers.

Nevertheless, the Group is in discussions with the USAO to manage an orderly return of funds to US customers. As part of these discussions, it is contemplated that the USAO will engage a forensic accounting firm, at the Group's expense, to assist in this process and to examine the Group's financial position.

"The return of funds to our US customers is a top priority for NETELLER" said Ron Martin, Group President and CEO.

US customers wishing to withdraw funds from their NETELLER e-wallet accounts will experience ongoing delays while these discussions continue, and a further update will be provided by the Group once effective repayment mechanisms are determined.

To the Group's knowledge, no criminal action or proceeding has been brought against the Group, its current officers or directors by the USAO. Nevertheless, there can be no assurance that the Group will not be charged in a criminal action at some subsequent time. The Group intends to work with the USAO to seek a negotiated resolution of any allegations relating to its US activities. Any resolution of this matter may lead to potential sanctions against the Group including material financial penalties, fines and forfeitures.

It is emphasized that in line with the Group's standard business practices for all customers, funds held by the Group for US customers are held in segregated trust accounts. The Group's own cash position remains strong and the Group currently has sufficient working capital to fund all its customers' balances as well as ongoing requirements of the business.

NETELLER remains committed to developing its business in line with its stated strategic objectives including geographical and product diversification for all markets. The Group will focus on its continuing business and the opportunities available in the growing markets of Europe, Asia and the Americas outside of the United States. Since the Group's withdrawal from the US market on 18 January 2007, average daily new account sign-ups of new customers from non-US markets has been around 1,400. This compares to average daily sign ups of 3,303 for the year to 31 December 2006. Daily fee revenue since 18 January 2007 has averaged over US$ 200,000 per day (excluding any revenues from Netbanx, 1-Pay and interest income). These metrics demonstrate the resilience of the Group's ongoing business. NETELLER customers not resident in the US continue to be minimally affected by this withdrawal from the US market.

In view of the continuing uncertainty, the Group's shares will continue to be suspended from trading on AIM for the time being. Further announcements will be made as appropriate.

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