The opinion of the court was delivered by: Kimba M. Wood, U.S.D.J.:
Defendants Full Tilt Poker Ltd. ("Full Tilt"), Tiltware LLC, Vantage Ltd., Filco Ltd., Kolyma Corp. A.V.V., Pocket Kings Ltd., Ranston Ltd., and Mail Media Ltd. (collectively, the "Corporate Defendants"), and Raymond Bitar ("Bitar"), Howard Lederer ("Lederer"), Christopher Ferguson ("Ferguson"), and Rafael Furst ("Furst") (collectively, the "Individual Defendants") have moved, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), to dismiss the claims asserted by Plaintiff Kristin Lawson ("Lawson") on behalf of herself and a purported nationwide class. [Dkt. No. 41]. Lawson seeks to represent a class of U.S. residents who, on April 15, 2011, "held real-money Full Tilt Poker Player Accounts and who were owed money by Full Tilt." (Amended Compl. ¶ 34 (the "AC")) [Dkt. No. 32].
The AC asserts a claim against all Defendants for conversion of funds held in the player accounts. The AC also asserts a claim under 18 U.S.C. § 1964(c) of the Racketeer Influence and Corrupt Organizations Act ("RICO"), alleging that certain Defendants (the "RICO Defendants") conspired and engaged in a pattern of bank fraud, wire fraud, and money laundering.
For the reasons that follow, Defendants motion to dismiss is GRANTED in part, and DENIED in part.
The following facts are drawn from the AC, and are accepted as true for purposes of this motion to dismiss. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
A.Federal Action Against Online Poker
In the late 1990s, various companies began providing online forums for individuals to play poker with real money. In the ensuing decade, Internet poker drew about 15 million Americans to bet an estimated $30 billion per year. (AC ¶ 2). By 2004, the industry had made an estimated $1 billion in profits. (Id.).
In 2006, Congress enacted the Unlawful Internet Gambling Enforcement Act ("UIGEA"), 31 U.S.C. §§ 5361-5367, which made it a federal offense for gambling businesses to "knowingly accept" most forms of payment "in connection with the participation of another person in unlawful Internet gambling." See 31 U.S.C. § 5361. In light of UIGEA, certain U.S. banks began prohibiting online poker businesses from opening bank accounts if the businesses intended to engage in Internet-gambling transactions with U.S. customers. (AC ¶ 3). In light of these prohibitions, some online poker providers terminated their U.S. operations. (Id.). Others, including Full Tilt, continued to operate, and allegedly devised a scheme to deceive U.S. banks into once again processing gambling transactions from U.S. players. (Id. ¶ 4). As a result, Defendants continued to collect money from U.S. players. As of April 2011, Full Tilt held approximately $150 million of U.S. player funds. (Id. ¶¶ 1, 6).
On April 15, 2011, known as "Black Friday" in the online gambling world, the United States Attorney for the Southern District of New York shut down the websites of the three largest online poker companies operating in the United States, including Full Tilt, seized their assets, and issued arrest warrants for their founders. (Id. ¶ 9). An ensuing criminal indictment accused various defendants of multiple UIGEA violations, conspiracy to commit bank and wire fraud, and conspiracy to commit money laundering. See United States v. Scheinberg, S3 No. 10 Cr. 336 (S.D.N.Y. Apr. 14, 2011) (Kaplan, J.) [Cr. Dkt. No. 20]. Soon after the indictment, the Department of Justice ("DOJ") filed a civil suit seeking in rem forfeiture of defendants' assets and any proceeds derived from their illegal acts. See United States v. Pokerstars, No. 11 Civ. 2564 (S.D.N.Y. Sept. 21, 2011) (Wood, J.) ("Pokerstars Compl.") [Pokerstars Dkt. No. 53]. The suit also sought monetary judgments from each of the Individual Defendants.
Lawson claims that since these actions, and despite Full Tilt's agreement with the DOJ "to facilitate the repatriation of U.S. players' funds," Full Tilt has not permitted U.S. players to cash out of their Full Tilt accounts. (AC ¶¶ 12-13).
B.Subsequent Private Actions
A number of civil lawsuits have subsequently been filed by and on behalf of online poker players who cannot access the funds in their Full Tilt accounts.
On June 30, 2011, private plaintiffs filed a putative class action seeking recovery of approximately $150 million that they claimed was "locked up" in Full Tilt player accounts. Segal v. Bitar, No. 11 Civ. 4521, 2012 WL 273609, at *2 (S.D.N.Y. Jan. 30, 2012) (Sand, J.) (citing Segal Compl. ¶ 42). The Segal complaint asserted both a conversion and a RICO claim, and named both corporate and individual defendants. Id. at *1. The Segal defendants moved to dismiss the complaint for lack of personal jurisdiction and for failure to state a claim. Id. at *2. District Judge Leonard B. Sand granted the motion in part. Judge Sand determined that the Segal plaintiffs failed to establish personal jurisdiction over the individual defendants and also lacked standing pursue their RICO claim. Id. at *6-8, *10-13. The court did, however, uphold the conversion claim with respect to the corporate defendants. Id. at *8-10.
Two months after the Segal plaintiffs filed their complaint, Plaintiff Kristin Lawson, a Minnesota resident, filed the instant action. (Original Compl.) [Dkt. No. 1]. Lawson's allegations overlapped substantially with those asserted in Segal. After Judge Sand adjudicated the motion to dismiss in Segal, Lawson sought leave to file an amended complaint. [Dkt. No. 22]. Following briefing, the Court granted Lawson's motion, [Dkt. No 31], and Lawson filed the AC on March 13, 2012.
The AC maintains many parallels with Segal. For example, as in Segal, the AC asserts that Defendants wrongfully froze "approximately $150 million in players' funds." (AC ¶ 9). The AC also asserts both a conversion claim and a RICO claim. The conversion claim stems from the freezing of Full Tilt player accounts. The RICO claim alleges that Defendants engaged in an unlawful enterprise designed to avoid the financial controls spurred by UIGEA by, inter alia, (1) directing third-party processors to apply fake codes to credit card gambling transactions, (2) creating sham merchant and e-commerce websites that would not be easily associated with online poker, and (3) using false codes and sham companies in processing e-checks. (See id. ¶¶ 53-57). Lawson also contends that the RICO Defendants misrepresented the security of player accounts, (id. ¶¶ 110-113), and concealed and laundered the proceeds of their scheme by through offshore banks, (id. ¶ 118).
Although most of the allegations in the AC are the same as the Segal allegations, there are some important differences. In light of Judge Sand's determination that the Segal plaintiffs failed to establish jurisdiction over the individual defendants, the AC names only four individuals-Bitar, Lederer, Ferguson, and Furst. These Individual Defendants are alleged to be among the founders of Full Tilt, as well as part owners of a Tiltware, LLC, a California-based parent company. (Id. ¶ 85). These are also the same four individuals against whom the Government seeks recovery in the Pokerstars civil action. The AC also alleges that each of these individuals received millions of dollars in personal payments out of player funds. (Id. ¶¶ 26-29).
Defendants have now moved to dismiss the AC on many of the same grounds as asserted in Segal. [Dkt. No. 41]. Like Segal, this matter was originally assigned to the Honorable Leonard B. Sand. On November 29, ...