Offshore online gambling site seeks to become legal U.S. operator
02 Oct 2020

A Costa Rica-based online sportsbook that illegally took bets from American customers for years has reached a nonprosecution agreement with the U.S. Justice Department, as the company attempts to move into the legal sports-betting market in the U.S.

Gambling site 5Dimes and federal prosecutors in the Eastern District of Pennsylvania announced a deal Wednesday that clears the company’s owner, Laura Varela, of wrongdoing and resolves the company’s legal troubles over its more than two decades of operating offshore and accepting bets from Americans. The Justice Department has been investigating the company for illegal gambling, money laundering, wire fraud and other offenses, according to the agreement.

The deal appears to be the first of its kind since a U.S. Supreme Court ruling in 2018 allowed states beyond Nevada to legalize sports wagering, triggering a rapid expansion of the industry. 5Dimes has stopped accepting bets from U.S. customers as part of the settlement. But the agreement paves the way for the company to seek the right to operate as a legal sportsbook, a step its lawyers say it plans to take.

As part of the agreement, 5Dimes will forfeit more than $46 million in assets including cash, cryptocurrency, sports memorabilia and sports cars. No information from any of the firm’s customers was turned over to the Justice Department as part of the settlement.

“The settlement agreement announced today is a victory for the United States in ceasing the illegal activity of a company that was being investigated for a multitude of crimes, including a sophisticated money laundering operation,” said federal prosecutor William McSwain.

Proponents of legalizing sports betting in the U.S. have long pointed out that many websites based offshore take wagers from customers in the U.S. to circumvent anti-gambling laws. With people in the U.S. already gambling big on sports, they argue, the practice should be legalized, regulated and taxed to boost state revenues. Americans illegally bet an estimated $150 billion on sports annually before the Supreme Court ruling, according to the American Gaming Association, an industry trade group.

The Justice Department’s investigation into 5Dimes was under way when its American founder, William Sean “Tony” Creighton, was kidnapped in Costa Rica in 2018 and found dead a year later.

The agreement accuses the late Mr. Creighton of catering primarily to American customers in violation of U.S. law and taking steps to hide his activities, such as using aliases and shell companies to disguise his ownership of the company. It says that his widow, Ms. Varela, lacked involvement in the alleged illegal activities.

After his death, Ms. Varela became the owner of 5Dimes. In an interview, she said she was never involved in managing the company, even after Mr. Creighton’s disappearance—a significant factor in the Justice Department’s agreeing to a settlement that could eventually let the company operate legally.

“I just kept waiting for him to come back,” Ms. Varela said.

When it became clear 5Dimes would become her responsibility, she said, she contacted the U.S. government to resolve continuing investigations. Prosecutors said in the agreement that Ms. Varela restructured 5Dimes to be “suitable for participating in lawful gaming operations across the world” and the company and any transfer of its assets “will be free and clear of any legal restriction” related to the earlier investigation.

As casino operators and online brands like FanDuel and DraftKings have expanded rapidly into sports betting, it remains to be seen whether offshore sportsbooks will be licensed—or at least cleared to sell their assets to a licensed operator—after flouting U.S. anti-gambling laws.

By Katherine Sayre and Byron Tau, The Wall Street Journal, 30 September 2020

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