The United States this week arrested John Lefebvre and Stephen Lawrence, the founders of Neteller PLC, for conspiring to transfer funds to promote illegal gambling in violation of 18 U.S.C. s 1956(a)(2)(A). (See SiliconValley.com article and the criminal complaint.) Founded in 1999 and based in the Isle of Man, Neteller is a payment intermediary, a “virtual wallet,” establishing accounts for online gamblers and transferring money for wagering to Internet gambling sites. Referring to data in the prospectus for Neteller’s $70 million initial public offering in 2004 and Neteller’s 2005 annual report, the complaint alleges that Neteller derives more than 95% of its revenues from money transfers connected to gambling, that in 2004 Neteller processed $3.4 billion in transactions in 2004 and provided access to more than 80% of online gaming merchants worldwide, that in 2005 Neteller processed over $7.3 billion in financial transactions, had $172.1 million in revenues, and earned $91.5 million in net profit, and that in the first six months of 2006 Neteller processed $5.1 billion in financial transactions. Lefebvre and Lawrence, both Canadian citizens, were arrested in Malibu and the U.S. Virgin Islands, respectively. They could face up to 20 years in prison.
Their arrests may take Lefebvre and Lawrence out of the picture, but what will happen to Neteller?