The official NETELLER thread. (First 40 days.) #1 of 2.

[brink]

Good point. If someone sent 50k to poker sites and sportsbooks, lost 25k and withdrew 25k, providing you had accurate records, there wouldn't be a problem.

But.

This is the beginning of a HUGE mess for alot of folks with Neteller accounts. If you were a small player and only xfered very small amounts, probably not a problem.

But anyone xfering any significant amounts will have to answer questions about it. It may take a couple of years before they get around to you. But they will get around to you.

This is not unlike the folks who had credit and or atm cards from a couple of offshore banks. Visa, or mastercard, handed over all the records. In time, each and every one of those folks had a knock on their door.

Even worse I suppose, is how this will open the door and give the govt a clear glimpse into all the sportsbook and poker sites, as they all did business with neteller and many/most still have their funds tied up.

Without a doubt, this will have a major impact across the board for a few years to come.

The main problem with all of this for those LAW ABIDING players who report their earnings, is that you will have to more than likely spend a significant amount of money defending yourself by hiring a tax attorney.

[Mike Haven]

I have roughly the same thoughts.

I just wrote this pm to someone:

"It's "worrying", if you would be worried if Neteller gave the US Authorities your name as a gambler with a considerable Neteller balance and you had not filed Tax papers declaring winnings.

I don't know if they can be forced to hand over such records; but to keep out of jail, why would they not? There's probably some reason they could come up with, T&C, law, whatever, to excuse themselves.

From the US Authorities' pov, if they had this mass of information, I would work out a system to check possible big winners' Tax Returns on a realistic basis. Say, if someone was a regular withdrawer of, say, $3000 per month, etc, etc. It wouldn't be difficult to work something out, then check those specific cases and ignore the rest.

I think it's still arguable whether actually playing online poker is illegal or not, so go after definitely illegal non-tax declarers and make a lot of money out of back taxes and fines.

But who knows? I'm only surmising."

[thing85]

[ QUOTE ]
"In that meeting, the Group pledged to cooperate with the USAO, indicated it was prepared to begin document production promptly and discussed a potential mechanism for arranging an orderly repayment of funds to US customers."

I guess that when you supply your SS#, as part of this "orderly repayment", you can expect some witholding for IRS purposes.

[/ QUOTE ]

This is entirely false. As someone mentioned, the IRS withholds money for tax on INCOME. The IRS, while they are often seen as the "bad guys" aren't going to randomly withhold funds in a bank account. AFAIK, the IRS currently has no involvement whatsoever in this current NETeller issue.

Now, if they audit your NETeller records and compare them to taxes that you have paid and there is a huge gap, maybe an issue will arise. This audit like any other would probably only affect a very small % of people. And like typical income tax return audits, they would probably only go after accounts with relatively high balances.

This is all speculation of course, but there's no reason to panic and say OMGZ THE IRS IS GOING TO STEAL MY MONIES!!

[gone.flying]

[ QUOTE ]
Finally, Neteller responds with a little beacon of light:

Press Release
NETELLER Works to Return Funds to US Customers After US Withdrawal


8 February 2007 - NETELLER Plc (LSE: NLR), the leading global independent online money transfer business, today issued the following update with regard to its US business and criminal charges against two of its founders.

On 19 January 2007, at the request of the Group, the Group’s legal advisers met with representatives of the United States Attorney’s Office for the Southern District of New York (“USAO”) to clarify the Group’s position with respect to the complaints brought on 16 January 2007 against two of the Group’s founders, Mr. Stephen Lawrence and Mr. John Lefebvre. Neither are current employees or directors of NETELLER. In that meeting, the Group pledged to cooperate with the USAO, indicated it was prepared to begin document production promptly and discussed a potential mechanism for arranging an orderly repayment of funds to US customers.

The discussions between the Group’s legal advisers and the USAO are ongoing. The Group is, under advice of its legal advisers, commencing production of documents and intends to cooperate with the USAO in its investigation.

Following upon the complaints dated 16 January 2007, banks in the US began declining to permit transactions involving the Group through accounts maintained at one or more automated clearinghouses in the United States. Additionally, the Group has been advised that the USAO has obtained court-ordered seizure warrants seizing funds pertaining to the Group’s transactions. To the best of the Group’s knowledge, it believes that the amount of funds seized by the USAO or otherwise restricted by third parties does not exceed US$ 55 million. These funds were largely in the process of being transferred from the Group to its US customers or vice versa.

As a result of the restrictions placed by third parties, court-ordered seizures, and related legal concerns, the Group is currently unable to make payments to US customers. Nevertheless, the Group is in discussions with the USAO to manage an orderly return of funds to US customers. As part of these discussions, it is contemplated that the USAO will engage a forensic accounting firm, at the Group’s expense, to assist in this process and to examine the Group’s financial position . “The return of funds to our US customers is a top priority for NETELLER” said Ron Martin, Group President and CEO. US customers wishing to withdraw funds from their NETELLER e-wallet accounts will experience ongoing delays while these discussions continue, and a further update will be provided by the Group once effective repayment mechanisms are determined.

To the Group’s knowledge, no criminal action or proceeding has been brought against the Group, its current officers or directors by the USAO. Nevertheless, there can be no assurance that the Group will not be charged in a criminal action at some subsequent time. The Group intends to work with the USAO to seek a negotiated resolution of any allegations relating to its US activities. Any resolution of this matter may lead to potential sanctions against the Group including material financial penalties, fines and forfeitures.

It is emphasized that in line with the Group’s standard business practices for all customers, funds held by the Group for US customers are held in segregated trust accounts. The Group’s own cash position remains strong and the Group currently has sufficient working capital to fund all its customers’ balances as well as ongoing requirements of the business.

NETELLER remains committed to developing its business in line with its stated strategic objectives including geographical and product diversification for all markets. The Group will focus on its continuing business and the opportunities available in the growing markets of Europe, Asia and the Americas outside of the United States. Since the Group’s withdrawal from the US market on 18 January 2007, average daily new account sign-ups of new customers from non-US markets has been around 1,400. This compares to average daily sign ups of 3,303 for the year to 31 December 2006. Daily fee revenue since 18 January 2007 has averaged over US$ 200,000 per day (excluding any revenues from Netbanx, 1-Pay and interest income). These metrics demonstrate the resilience of the Group's ongoing business. NETELLER customers not resident in the US continue to be minimally affected by this withdrawal from the US market.

In view of the continuing uncertainty, the Group's shares will continue to be suspended from trading on AIM for the time being. Further announcements will be made as appropriate.

[/ QUOTE ]

Three points:

1. It's quite a concern that they have no idea exactly what has been seized. I think they are saying that there may be up to $55m of US customers money in EFT limbo - that's pretty bad - NT could claim that once those funds had left their possession with respect to a customer EFT request, that they might not be held primarily responsible for the safe end delivery of funds if an ACH froze the funds at the DoJ's request

2. I'm guessing the timeline for return of US funds just moved way out past the 1 year mark - they are only 'contemplating' the appointment of a forensic accounting firm as a potential solution - the language is VERY circumspect. They've got to get the DoJ to agree to the idea, then agree on the methodolgy with the DoJ, then they've got to agree on the selection of FA with the DoJ etc etc. Then they have to set a date for the FA to start work trawling trough millions of transactions to identify those which meet the DoJ's criteria for return to account holder. 6-12 weeks? wait a minute while I make sure my pigs can find the landing strip

3. This release was purely for the capital markets - the clearest possible indication that NT has no idea how or when this will be resolved is in the last sentence

[brink]

I realize the Pay Pal case was a civil one, and had much, much different circumstances, however, they too, as part of a settlement, turned over their records.

I know of more than a couple of folks who had knocks on their door when that happened. Only, in those cases, it wasn't about their taxes or their gambling, but rather the person/company they sent the funds to.

But the point is, the door is open.

[Little_Luck]

I am confused by this forensic accounting part. What is the point of this forensic accounting, what is their main motive? What possible way would they choose who gets their money and who doesn't? It seems like if you are American, you should get your money?

The article says something about using the firm to examine the group's financial position, what does that have to do with anything?

[RonFezBuddy]

"Additionally, the Group has been advised that the USAO has obtained court-ordered seizure warrants seizing funds pertaining to the Group’s transactions."

Are they referring to the customers funds or Neteller's operational funds?

[KARLC]

I just wonder if WHEN you get your money, the 1099 is going to come with it. You can then prove with a win/loss record (like at a B&M casino) you didn't make a profit. The assumption is you did. I work at a Casino. You can cash out as much as you want and not pay taxes from table games. BUT at 10,000 a CTR (cash transaction report) is sent to the IRS. Not showing you made anything, but rather showing you took 10,000 in cash and now the gov has a record. I'm sure an audit is on the way if nothing is claimed as a win/loss.

[gone.flying]

[ QUOTE ]
"Additionally, the Group has been advised that the USAO has obtained court-ordered seizure warrants seizing funds pertaining to the Group’s transactions."

Are they referring to the customers funds or Neteller's operational funds?

[/ QUOTE ]

It will depend on whether the DoJ is looking to claw back funds that passed through JSL systems which could run into the $M100's

[KARLC]

I'm sure the gov doesn't want the millions they are losing out on. They are doing all this to protect us from evil gambling.