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Cantor Fitzgerald affiliate penalized $22.5 million for illegal gambling and money laundering

Image courtesy of CG TechnologyA gambling firm financed by Cantor Fitzgerald that became one of the biggest sports books in the United States entered into a non-prosecution agreement with the DOJ Monday and agreed to pay $16.5 million in criminal penalties and forfeiture.

CG Technology LP, formerly Cantor Gaming, also Monday paid a $6 million civil penalty to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) “for egregious and systemic violations of the anti-money laundering provisions of the Bank Secrecy Act.”

Cantor Gaming changed its name to CG Technology LP in January 2014.

Michael Colbert, Cantor Gaming’s former Director of Risk Management, pleaded guilty in federal court in New York in 2013 to conspiring to participate in an illegal gambling business.

Prosecutors linked him to the “Jersey Boys” gambling ring. In May this year, police arrested 46 people in New Jersey, New York, and Florida and seized $2 million cash linked to gambling, money laundering, and racketeering.

Colbert faces up to five years in prison when he’s sentenced.

CG Technology’s two-year non-prosecution agreement requires the firm to continue cooperating with the DOJ.

Having an agent or “runner” place a bet on behalf of a third-party in exchange for compensation is known as “messenger betting.” It’s illegal for a licensed sports book in Nevada to knowingly accept wagers from compensated agents.

In 2014, Cantor Gaming paid the State of Nevada $5.5 million to settle allegations that the firm knew or should have known about Colbert’s illegal gambling activity.

The firm operates race and sports books in eight Las Vegas casinos — the Venetian, the Palazzo, the M Resort Spa Casino, the Hard Rock Hotel and Casino, the Tropicana, the Cosmopolitan, the Palms Casino Resort, and the Silverton Casino Hotel.

Cantor Gaming handled more than 30 percent of all sports wagers in Nevada. “At the same time, it failed to have an appropriate AML program in place, FinCEN said.

Cantor Gaming didn’t have sufficient internal controls and mandatory independent audits, FinCEN said. The firm didn’t provide sufficient AML training for its officers and employees or use all available information to detect and report suspicious transactions. 

“Cantor Gaming committed thousands of recordkeeping violations, including . . . failing to keep required records on its highest-volume patron who placed more than $300 million in wagers between 2010 and 2013,” FinCEN said.

From 2009 through 2013, Cantor Gaming offered higher betting limits than other sports books and gave important bettors preferential treatment, the DOJ said.

The special treatment included direct access to Michael Colbert, whose job was to set the lines and odds for the betting contests. 

Important bettors dealt with Colbert and his staff rather than the “front of the house” staff supervised by Cantor Gaming’s chief operating officer.

Colbert and his staff knowingly accepted “messenger betting” and out-of-state betting, the DOJ said. They also processed large cash deposits and withdrawals and third-party wire transfers, “knowing that the property involved represented the proceeds of some form of illegal activity.” 

The DOJ said Monday the non-prosecution agreement recognized Cantor Gaming’s “decision to accept full responsibility, provide complete cooperation, and take remedial measures to enforce best industry practices going forward.”

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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