BETonSports plc Shares Suspended in US Fraud Probe – Gaming Stocks Suffer

There was no let up in the stock market for online gaming stocks, especially those with a heavy exposure to US gambling markets, after further developments in the BETonSPORTS plc arrest saga.

After the initial confusion about the purpose of the US Federal authorities detaining CEO David Carruthers in Dallas at the weekend, the full weight of US Justice procedure came to bear in the form of a Grand Jury Indictment in which the plaintiffs were named as BETonSPORTS and associated companies, and several individuals with CEO David Carruthers named amongst them.

The Indictment comprises a total of 22 Counts including "Racketeering Conspiracy", "Scheme To Defraud – Mail" and "Tax Evasion". The history is long and appears to relate to a time when various sports betting businesses were being run from within the USA and owned by an individual named Gary Kaplan.

The Board of BetonSports plc updated the market by stating:

"…late on the evening of 17 July, the company obtained a copy of an indictment which was unsealed by the US Department of Justice alleging various criminal acts against multiple defendants which include BETonSPORTS and its subsidiaries and David Carruthers as well as various individuals and corporations. Other than David Carruthers, the other defendants are not involved in the management of BETonSPORTS.

"The Board have also noted that in a Press Release issued by the Department of Justice in the course of the evening of 17 July UK time, reference is made to a temporary restraining order having been obtained by the US Department of Justice against BETonSPORTS. The release states that a civil complaint has been filed in federal court to obtain an order requiring BETonSPORTS to stop taking sports bets from the United States, and to return money held in wagering accounts to account holders in the United States and that a temporary restraining order was issued yesterday. A hearing in the civil case has been requested within 10 days. Reference is also made to the FBI issuing letters to four telephone companies, instructing them to stop providing phone service to the Internet sportsbooks and casinos operated by BETonSPORTS."

Due to the ramifications for its business, BETonSports plc requested a temporary suspension in trading of their shares on the London Stock Exchange.

Since this announcement there have been reports that BETonSPORTS is negotiating with the Department of Justice to return to some semblance of trading order.

Separately, hearings are expected this week in the cases of the plaintiffs arrested in connection with this case. Much hinges on these.

While it does appear that there is a long-standing specific history behind this case, it has nonetheless served as a salutary reminder to investors in this sector that runaway profits are not infinite, and legal issues are complex. Shares in companies with exposures to the US gambling sector have consequently all taken a big hit. These include SportingBet, Neteller, 888.com and Party Gaming, most trading at below 50% of their 2006 highs.

Ed note: Bet at Bet 365 for a handy £100 bonus.

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