FBI Busts Payment Service Founders

Former execs at NETeller plead guilty to handling illegal online gambling transactions; shares suspended, chairman steps down

The two founders of NETeller, a popular online payment service, are now facing jail time after pleading guilty to brokering illegal online gambling transactions, the FBI said earlier this week.

The company has suspended trading of its stock, and the current chairman of the board has resigned, NETeller said today.

John David Lefebvre, a founder and former president of the NETeller Group, admitted that he and co-founder Steven Lawrence conspired with others to promote illegal gambling by providing payment services in the United States to offshore Internet gambling businesses.

Lefebvre now faces up to five years in jail, a $250,000 fine, and the forfeiture of $100 million that is now considered ill-gotten gains. Lawrence, who pleaded guilty to the same conspiracy on June 29, is also responsible for paying the $100 million.

NETeller, an Isle of Man-based company that handles transactions for millions of customers in some 160 countries, has suspended the trading of its shares on the London Stock Exchange's AIM market. Earlier today, the company accepted the resignation of Gord Herman as executive chairman and director, who said he wishes to "concentrate on personal matters." Dale Johnson, non-executive director, will assume the role of non-executive chairman.

The company says that Lefebvre and Lawrence, who left the firm in 2004, have nothing to do with its current operations.

In his allocution, Lefebvre admitted that NETeller had provided payment services to Internet gambling businesses located outside the United States, enabling those businesses to take bets from gamblers in the U.S., where such betting is illegal. Lefebvre admitted that he knew the company's activity was illegal and that his conduct was wrong.

The investigation came to a head earlier this year, when law enforcement agencies seized some $55 million in assets belonging to NETeller's U.S. customers. The company said today that it will begin redistributing those funds to the customers, once the investigation has been finalized.

The company continues to handle online transactions for customers in non-U.S. countries. Officials say they do not know when the company's stock will begin trading again.

— Tim Wilson, Site Editor, Dark Reading

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