Chad Elie

Examining the Tangled Chad Elie / A. Jeff Ifrah Relationship, Part 3

Last post, we presented two different versions of the story of how Chad Elie ended up in a position to help establish, with Utah e-marketer Jeremy Johnson, the SunFirst online poker payment processing operation that later served as the heart of the “Black Friday” poker indictments.

Thursday’s filing by Elie of a malpractice lawsuit against prominent gaming attorney A. Jeff Ifrah, alleging misrepresentation and negligence by Ifrah, begs a deeper examination of Elie’s motivations and history regarding online poker processing.

Chad Elie in 2010.

Chad Elie in 2010.

In Elie’s extensive interview with DiamondFlush last November, he attempts to portary himself as almost an innocent bystander who was dragged kicking and screaming into the online-poker business, but the sentencing memorandum in Elie’s trial, prepared by DOJ attorneys, paints a starkly different picture.  Let’s break down that DOJ summary of Elie’s activities:

In April 2008, Elie met Intabill’s founder Daniel Tzvetkoff in Las Vegas for the first time, and the two discussed whether Elie’s payment processing connections could be used to process payments for internet poker. Following that meeting, Elie worked hard to come up with ways to process the poker transactions for Intabill, including developing an idea (which did not ultimately get off the ground) of using a multi-level marketing program relating to the purchase and sale of internet advertisements as a cover for payments to and from online gamblers.

If true, this means that Elie was intimately aware from the outset of the general need to disguise the nature of the transactions being processed, to not use the gambling code which generally caused online payments to be blocked by the United States’ ACH system.

Although Elie repeatedly told Tzvetkoff and others that he had numerous processing solutions in the works, he ultimately created only one successful gambling processing solution for Intabill. Elie and a colleague from the internet marketing industry – Jeremy Johnson – created a processing account through the National Bank of California in the name of Viable Processing Solutions, with the actual processing to be handled by a division of Intuit. In the account application, Elie claimed that the processing would be for the repayment of payday loans while knowing it would in fact be used to process poker transactions.

Besides the falsifying of the nature of the transactions, this DOJ statement asserts that Elie and Jeremy Johnson were working together long before the SunFirst processing operation was brought online.

Intabill used the Viable Processing Solutions account to process millions of dollars in transactions for Pokerstars before Intuit and the National Bank of California learned they had been misled and refused to continue processing. Although the money in the account was for Intabill (and ultimately Pokerstars), Elie transferred over $4,000,000 from the account to his own bank accounts (purportedly because he believed that his partners had cheated him out of his fair share of processing fees in other businesses), refusing to return the money even following personal entreaties by the head of Pokerstars (co-defendant Isai Scheinberg). Pokerstars sued Elie (though of course not in its own name). After Elie filed a motion to dismiss that raised the issue of revealing the “real” plaintiff, the two sides ultimately came to an agreement through which Elie would return some of the money and find more banks to handle Pokerstars transactions.

Here’s the nub of the Intabill v. Elie case.  According to court records, PokerStars (though unnamed) acquired all rights and interests in Intabill and several related processing entities on April 3, 2009, about a month after Elie pulled out the last of the $4 million, according to a memo signed by A. Jeff Ifrah himself.  Then they set about trying to recoup the money from Elie, filing the action on May 1, 2009.

Elie soon filed a motion to dismiss, however, that specifically asserted that Intabill could have no case to sue him if they were not party to the lawsuit, having assigned their interest in the money being held in Elie’s Viable account to PokerStars, the unnamed third party.

From Elie’s motion to dismiss: “Plaintiff’s attorneys at Greenberg Traurig have been proceeding before this Court in one name (Intabill) while the very same attorneys are asserting to others that Intabill’s purported rights to the funds at issue have been assigned to an undisclosed third-party client.”  Elie’s dismissal motion also referenced Ifrah’s memo: “The Ifrah Declaration was ‘based on [Mr. Ifrah’s] own personal knowledge and alleged the very same core facts on which the Complaint rested.”

The story told by Elie to DiamondFlush about the splitting of the $4 million utterly omits this part of the tale. Contrary to the assertions offered by Elie there, it appears that the deal hammered out between Stars and Elie that summer — even as Elie continued doing payment processing through a couple of separate, Chicago-area banks — was directly connected to the settlement, not wholly independent of it as Elie claimed.  By November of 2009, the Stars processing through SunFirst was up and running, again confirming ongoing business negotiations throughout 2009 between Elie and Stars’ representatives.

Back to the DOJ brief, which confirms the continuing relationship:

The temporarily strained relationship with Pokerstars did not inhibit Elie from continuing to process gambling transactions, however.  In the summer of 2009 Elie processed millions of dollars of transactions for all three Poker Companies through his company Viable Marketing Corporation via an account Elie had opened at Fifth Third Bank to process for what he told his banker were payments for his online clubs.  Elie did not tell the bank he would be processing internet gambling transactions, and when the bank halted the processing, alarmed by the high volume of returned transactions, Elie falsely denied that the transactions related to internet gambling, including in an e-mail to his banker.

The SunFirst operation wasn’t brought online out of nowhere; it was rushed into service immediately after Elie’s Chicago processing scheme was shut down in late October, 2009, and about $8 million in Stars player funds was seized:

On or about October 26, 2009, the Government obtained warrants from a United States Magistrate Judge for the seizure of approximately $8.6 million in bank accounts controlled by Elie at Fifth Third Bank and Bank of America.  On that same day, Elie spoke briefly to two FBI agents, who informed Elie that the funds were seized because they related to the processing of illegal gambling transactions.  Elie stated that he would travel to New York the following week to meet with the FBI agents and discuss the matter, but did not do so.  Instead, Elie continued with negotiations already underway with defendant Campos whereby Elie and Elie’s partner, Jeremy Johnson, would purchase a substantial share of Sunfirst Bank (“Sunfirst”) in Saint George, Utah, in return for Sunfirst processing transactions for the Poker Companies.

The SunFirst operation was up and running withing two weeks of the Fifth/Third and BOA seizures, keeping Stars processing running virtually uninterrupted.  Elie was already in contact (or avoiding it) with FBI officials regarding his poker payment processing, but it’s a reasonable bet, given his subsequent reinvention of history, that he declined to share that information with SunFirst Bank officials.

Elie even testified how Jeremy Johnson and others stole all the money from the SunFirst operation and secreted tens of millions in assets, in currency, precious metals, real estate and other assets.  Elie allowed as it was Johnson and his accountants who removed Elie’s name from the SunFirst records, but the DOJ tells a different story:

Following the seizures of the Viable Marketing account at Fifth Third Bank, however, Elie stepped back to serve as a silent partner in the new venture, instructing Sunfirst to keep his name off the account and arranging (after discussing the matter with a representative of Full Tilt Poker) for Jeremy Johnson to hold the stock in the bank on Elie’s behalf.  Elie remained undeterred in moving forward even after another partner in the Sunfirst venture, Andrew Thornhill, was forced to abandon the Sunfirst project after being arrested on December 16, 2009 arrest based on a warrant from the Southern District of New York relating to processing payments for the Poker Companies.  See United States v. Andrew Thornhill, 10 Cr. 533 (S.D.N.Y) (AKH).  Several other arrests in late 2009 and early 2010 of former associates of Elie, including Curtis Pope and Daniel Tzvetkoff, likewise had no impact on Elie’s continued willingness to process gambling transactions.

What evidence did the DOJ provide to buttress its assertions?  There was plenty of that as well.  When Andrew Thornhill was arrested, they seized his computer, and obtained several chats and e-mails involving Elie.   Elie joined forces with Thornhill, Pope, Tzvetkoff and the others, he promoted himself as someone able to help solve Intabill’s processing difficulties.  From elsewhere in Elie’s sentencing memo:

For example, in one chat with Thornhill in May 2008, Thornhill asks Elie whether he can help Tzvektoff’s Intabill issue $15 million in ACH credits (i.e. payments for gamblers withdrawing money).  Elie responds “I don’t know how much traffic or data he has but I can handle the riskiest shit.  And I can make everyone a SHIT ton of money.”

Nor was that an isolated instance.  Continuing on:

In another example, in an October 2008 chat with Thornhill relating to processing solutions, Elie commented that “NACHA [the entity that administers the Automated Clearinghouse electronic payments systems] is hot for the trot / they are on a mission to get people out of the system like myself.”  Elie’s own actions – the disguised processing, the lies to banks, and the willingness to exploit small banks in desperate need of funds – evince a cynical and mercenary view of financial rules created so that authorities can monitor and block the use of the financial system to fund illegal enterprises.

Elie was far more involved in and enthused about the poker processing than he later chose to admit, and in the process of changing from a foe to a friend and business partner of PokerStars in the summer of 2009, he ended up working with A. Jeff Ifrah.

Even then, other legal complications of Elie’s would play back into the tale.  More on that next post.

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