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Four charged over massive illegal gambling operation

Authorities in New York have broken up what they claim is “possibly” the largest illegal gambling operation yet dismantled  by a local prosecutor’s office.

Four individuals have been charged in a 57-count indictment that alleges bookmakers across the United States pulled in close to $1 billion in wagers on NFL games alone during the 2015 season, according to Brooklyn District Attorney Ken Thompson.

"Illegal gambling is not a victimless crime — it preys on peoples' vulnerabilities and directly leads to money laundering, loansharking and a host of other crimes,"  Thompson said in a statement following the unsealing of the indictment last week.

"The principals of this huge gambling operation — possibly the biggest one ever to be dismantled by a local prosecutor's office — allegedly moved millions of dollars around the United States and the world and used various tactics to launder these proceeds."

Gordon Mitchnick, 58, of Crestline, California, Joseph Schneider, 39, of La Verne, California, Arthur Rossi, 66, of Manhattan, N.Y., and Claude Ferguson, 43, also of Crestline, are charged with enterprise corruption and promoting gambling.

Mitchnick — the alleged ringleader — and Schneider and Ferguson were arraigned on June 30 in Brooklyn Supreme Court where Justice Alan Marrus set bail at $2 million, $500,000 and $50,000, respectively. Rossi was arraigned June 24 in Brooklyn Supreme Court, where bail was set at $50,000.

The alleged billion-dollar operation catered to thousands of bettors, accepting $927 million in wagers on NFL games during the 2015 season, the district attorney’s office said. 

It is alleged the operation accepted bets from thousands of gamblers on various professional and collegiate sporting events, including football, basketball, baseball, hockey and soccer. Up to $200,000 per month was spent maintaining a “wire room” in San Jose, Costa Rica, and on other operating expenses, according to the indictment.  Mitchnick boasted, according to the district attorney, about innovating online gambling and used a variety of methods to launder millions of dollars, including buying 20 properties.

Additional arrests are expected as part of the investigation, Thompson said. A number of names are blanked out in the indictment.

According to the district attorney’s office, Mitchnick claimed to be be one of the first bookmakers to use the “pay per head” system of online-based gambling. Under pay-per-head, individual bookmakers, called master agents or agents, based in the U.S., make use of websites and offshore back offices. Each of the agents pay either a flat fee or a certain amount per gambler.

Schneider is accused of paying a fee of $30,000 for the use of services during peak gambling periods.

Thompson said that, according to the indictment, between April 10, 2015 and June 9, 2016, the defendants were part of an illegal enterprise headed by Mitchnick, who controlled a series of Internet sports gambling sites, including www.wagerabc.com, www.thewagerspot.com and www,hustler247.ag.

All three sites have been taken down but cached pages claimed the Costa Rica wire room, or back office, had 100 employees. 

Mitchnick allegedly employed a staff in Costa Rica to run the operation’s main office, or wire room, and communicated with them regularly through e-mail, text messages and WhatsApp.

“The enterprise offered a variety of services to master agents and agents and accommodated a variety of service and fee arrangements, depending on need and customer base,” according to Thompson.

Schneider managed and controlled numerous master agents and agents, who paid him on a per head basis, it is alleged.

Rossi was allegedly another master agent who used the websites maintained on Mitchnick’s servers and controlled a series of agents.

Ferguson was allegedly a “runner” who collected money from, held money for and distributed money among the participants of the illegal enterprise.

He also participated in money laundering, it is claimed. On at least one occasion, he traveled between U.S. airports with a suitcase filled with over $50,000 in cash, according to the investigation.

Attorney Bruce Maffeo said his client, Gordon Mitchnick, the alleged mastermind of the online gambling enterprise, has pleaded not guilty.

Maffeo was dismissive of the near $1 billion figure released by Brooklyn DA Thompson, describing the number as "unhinged," and "voodoo economics."

"This is a garden variety gambling case put on steroids," said Maffeo. "I am confident that as the case is litigated, the number in the press release will diminish in significance, and be seen as a PR stunt."

This story was updated the afternoon of July 6 with the comments from Maffeo.