U.S. DOJ Witch Hunt Continues

The United States Department of Justice has handed out subpoenas to at least four major investment banks suspected of having some connection with internet gambling, according to reports by the Times of London and The New York Times. In an attack on an “enemy” second only in passion to President Bush’s attack on Iraq, the government wants to see any communications, be they e-mails, phone conversations, or papers, linking the banks in any way to the online gambling companies.

The four investment houses that are known include HSBC, Dresdner Kleinwort, Credit Suisse and Deutsche Bank, although there could be more. While they are not American companies, they do have significant presence in the U.S., which puts them more in the crosshairs of the DOJ than strictly foreign companies. Both the UK and U.S. offices of the companies were contacted by the DOJ.

The Times of London reported that the initial subpoenas were issued shortly after the Unlawful Internet Gambling Enforcement Act was signed into law in October 2006, but more subpoenas have come down in recent weeks.

The news of these subpoenas close out a tumultuous week and a half for the online poker world which started with the arrests of Neteller’s founders, followed by several online payment processors crucial to the online poker industry, including Neteller, halting business with U.S. customers.

Attorney Lawrence G. Walters told The New York Times that while prosecution of investors of a company that is legal and licensed in its jurisdiction is unprecedented, the subpoenas could just mean that the DOJ is just trying to gather information, not prosecute the investment banks.

Gaming stocks were hit hard by the news. PartyGaming ended the day down 9.76 percent, 888 Holdings was down 3.53 percent, and Sportingbet was down 8.72 percent. Cryptologic ended up the least sick of the bunch, with only a 1.34 percent fall. The Canadian software development company was up almost 2 percent Friday after announcing a deal to enter the Chinese market.

Originally published 2:48 PM Monday, January 22, 2007