A billion-dollar sports gambling operation based out of San José, Costa Rica may be out of luck after United States authorities arrested the men they say are the brains behind the illegal gambling scheme.
Thursday’s wide-reaching, 57-count indictment from Brooklyn, New York District Attorney Ken Thompson alleges that four men from California and New York promoted illegal gambling through a large network of sportsbooks with an office headquartered in Costa Rica.
Online sports gambling is legal in Costa Rica but not in the U.S.
Defendants Gordon Mitchnick, 58; Joseph Schneider, 39; Arthur Rossi, 66; and Claude Ferguson, 43, were charged with enterprise corruption, first-degree promoting gambling, second-degree possession of gambling records and fifth-degree conspiracy. If convicted, they could spend up to 25 years in prison.
Prosecutors said that the California-native Mitchnick, whose bail was set at $2 million at an arraignment Wednesday, was the head of the operation. According to the Brooklyn District Attorney’s office, the network of offshore sportsbooks included WagerABC, The WagerSpot and Hustler 247, which Mitchnick and fellow defendants began operating in April 2015.
Mitchnick is alleged to have accepted sports wagers from thousands of betters through the gambling-based websites. According to authorities, the operation accepted $927 million in bets just on NFL games during the most recent 2015-2016 season.
District Attorney Thompson called the gambling operation “possibly the biggest ever to be dismantled by a local prosecutor’s office.”
The DA said Mitchnick had a main office, called a “wireroom,” in San José, where up to $200,000 was sent every month to pay for employee salaries, rent and other operating expenses. Evidence showed that Mitchnick regularly stayed in contact with his Costa Rican-based staff through email and WhatsApp, according to the DA.
“Illegal gambling is not a victimless crime,” Thompson said in a news release. “It preys on peoples’ vulnerabilities and directly leads to money laundering, loansharking, and a host of other crimes.”
The indictment alleged that the sportsbooks used an affiliate program to pay clients an incentive that attracts active users to make wagers through the websites. The practice is common in the industry.
The DA said that Mitchnick bragged in his communications about being one of the first bookmakers to employ the “pay-per-head” system that pays such affiliates a certain amount of money for each customer they bring into the sportsbook.
That system is now considered somewhat antiquated. Many of the major offshore sportsbooks now use a program that pays their affiliates for the amount of money a client has lost in wagers.
Schneider and Rossi are alleged to have been “Master Agents,” or affiliates who brought in accounts from a large number of clients. They are both accused of laundering payments and proceeds, according to the indictment.
Ferguson is also believed to have laundered money as a “runner” who collected and distributed profits. Investigators said Ferguson once traveled between U.S. airports with a suitcase filled with over $50,000 in cash.
The Brooklyn District Attorney’s office said more arrests are likely to come from the investigation.