Legislation
US – 5Dimes ordered to pay $46.8m as settlement with US prosecutors
By Phil - 2 October 2020
United States Attorney William M. McSwain announced that the internet sports betting company, 5D Holdings Ltd. and Laura Varela, have agreed to forfeit more than $46.8m in gambling proceeds as part of a settlement agreement in a criminal investigation into 5Dimes’ sports betting operation based in Costa Rica that allowed American gamblers to place bets, primarily through its website www.5Dimes.eu, in violation of US law.
Beginning in at least 2011, 5Dimes Casino and Sportsbook accepted wagers from and made payouts to US bettors, and transferred more than $46.8 million in proceeds earned from its illegal gambling activities in such a manner as to attempt to hide the nature, location, source, and control of the funds.
5Dimes was previously owned and operated by Varela’s husband, William Sean Creighton, a US citizen who moved to Costa Rica, where he created and operated 5Dimes in violation of US law. From at least 2011 until approximately September 24, 2018, Creighton exercised full and exclusive control over 5Dimes, although he hid his control over the company by utilising an alias and operating the business through several shell companies. In September 2018, Creighton was kidnapped and subsequently murdered. Over a year later, Creighton’s remains were discovered and positively identified in Costa Rica; Creighton’s death has been ruled a homicide by Costa Rican authorities.
A new corporate entity, 5D Americas LLC, has already been incorporated in the State of Delaware.
In the spring of 2019, Ms. Varela voluntarily contacted the EDPA to resolve any prior criminal activity by 5Dimes. This settlement agreement is a direct result of Ms. Varela’s extraordinary cooperation with the EDPA to resolve the criminal investigation and clear the Company. As part of the settlement, Ms. Varela identified criminal assets associated with the Company and agreed to forfeit more than $46 million in value to the government. The cooperation did not include disclosing information or identities of any customers.
As noted in the settlement agreement, the government’s lengthy investigation confirmed that Ms. Varela was not involved in any illegal actions of 5Dimes. The agreement expressly clarifies there are no legal restrictions on Ms. Varela’s use of her assets or the assets of the 5Dimes brand to explore future options, including, but not limited to, re-constituting the 5Dimes brand to be licensed to conduct legal, regulated gaming activities in the U.S. and internationally.
“It has been a very difficult two years for me and my family,” said Ms. Varela. “But today marks a pivotal turning point and a fresh start for me and the 5Dimes brand, as well as a milestone for the legalization of sports gaming in the U.S. My husband’s death was tragic, but he loved 5Dimes and all of its loyal customers. Now his spirit will be able to live on as the 5Dimes brand begins this new chapter.”
Ms. Varela added: “Along with a team of trusted advisors, I am exploring how we might relaunch 5Dimes as a legal sportsbook and casino in the legal, regulated US market to continue serving our many loyal customers.”
“Laura is an inspiring, strong person, and we’re excited that she is one step closer to participating in the regulated U.S. sports-betting market. It has been a privilege to represent her,” said Stephen A. Miller of Cozen O’Connor, one of Ms. Varela’s attorneys.
Mr. Miller added: “Consumer interest in sports betting is enormous and only growing, but most of that interest has translated to bets placed with offshore operators rather than with operators in the legal and regulated market. As a result, state governments are missing out on a substantial amount of tax revenue. Laura presents U.S. regulators with a tremendous opportunity – she is the new owner of a tremendously respected brand that voluntarily settled its exposure with U.S. prosecutors and became compliant with US law so that it could serve customers in appropriate jurisdictions. If the regulators refuse to license an innocent owner like Laura, then no other offshore sportsbook will even bother to try to clean up its act and follow her lead.”
The Agreement required 5Dimes to stop servicing US customers by September 30, 2020. To satisfy that demand, 5Dimes stopped taking bets from U.S. customers as of September 21, 2020, until it is reconstituted as a new, legal and licensed entity in the U.S. 5Dimes notified its players to suspend their accounts and transfer their balances by September 25, 2020. Any customers who did not request a withdrawal of their funds by September 25, 2020 will have those funds transferred to Epiq, a third-party claims administrator, who will seek to deliver the funds to the account holder. In compliance with the agreement, any customer funds that are not claimed by September 30, 2021, will be forfeited to the US government.
Beginning in approximately May 2016, the United States Attorney’s Office for the Eastern District of Pennsylvania, in conjunction with the Department of Homeland Security Investigations, began investigating Creighton and 5Dimes for possible violations of federal criminal laws including, but not limited to, illegal gambling, money laundering, wire fraud, and other related offenses. During Creighton’s lifetime, Varela, a Costa Rican citizen, was never employed as a manager at 5Dimes, nor did she exercise any control over the operations of 5Dimes. Following Creighton’s death, Varela assumed responsibility for 5Dimes assets, but did not exercise day-to-day authority over the operations of 5Dimes. Varela subsequently took control of 5Dimes and sought to resolve the federal investigation and change the operations of the company in a manner that complies with US law. In order to resolve the federal investigation of 5Dimes (which continued after Creighton’s kidnapping), Varela and 5Dimes have entered into a settlement agreement with the EDPA in which they have agreed to forfeit more than $46.8m and acknowledged that those funds are the proceeds of various unlawful gambling-related offenses.
Creighton’s operation of 5Dimes in violation of US law involved the use of third-party payment processors to accept payments from the U.S.-based bettors. These TPPPs processed credit card transactions for 5Dimes, and charged the customers’ credit cards on behalf of 5Dimes, thereby concealing the true nature of the charges from the credit card companies that otherwise would not have processed the payments had 5Dimes attempted to process the charges directly. Once the TPPPs received the betting funds from the US customers’ credit cards, the funds were transferred to bank accounts in the names of shell companies controlled and operated by Creighton until his disappearance and death. Creighton also laundered 5Dimes’ unlawful gambling proceeds in various additional ways, including through bulk cash transportation and the purchase of gold bars, gold coins, and expensive collectible sports cards.
During the investigation, HSI seized approximately $3,376,189 in cash and other assets belonging to Creighton, including a 1948 George Mikan rookie basketball card, which Creighton purchased for over $400,000 (which at the time was the most expensive basketball card ever sold, and which now resides at the Smithsonian Institute), and a 1970 Pete Maravich rookie basketball card, as well as over $715,000 worth of rare coins. As part of the settlement agreement, 5Dimes and Varela have agreed to forfeit these seized assets, and have agreed to help in the collection and forfeiture of additional assets totaling more than $26,000,000. Further, 5Dimes and Varela have agreed to forfeit approximately $2,000,000 that was seized in Costa Rica by Costa Rican law enforcement, and to pay and consent to the forfeiture of an additional $15,000,000 of the proceeds of the criminal conduct.
All told, pursuant to the terms of the settlement agreement, 5Dimes and Varela have agreed to forfeit a total of $46,817,880.60, which they agree constitutes proceeds that are traceable to transactions in violation of Title 18, United States Code, Sections 1343 (wire fraud), 1084 (illegal transmission of gambling information), 371 (conspiracy to commit wire fraud), and were involved in transactions in violation of Title 18, United States Code, Section 1956 (money laundering). Varela has fully cooperated with the investigation and has worked with EDPA to identify criminal assets associated with 5Dimes, has overseen the implementation of compliance procedures, and has reorganized the corporate structure of the company into a streamlined, transparent corporate structure, and caused 5Dimes to cease violating U.S. law.
Pursuant to the terms of the settlement agreement, the United States Attorney’s Office for the Eastern District of Pennsylvania has agreed to not criminally prosecute 5Dimes or Varela for any crimes committed prior to September 30, 2020 (except for criminal tax violations, if any, as to which EDPA does not make any agreement), and will not file a civil action relating to the conduct described in the settlement agreement.
“The settlement agreement announced today is a victory for the United States in ceasing the illegal activity of a company that was being investigated for a multitude of crimes, including a sophisticated money laundering operation,” said U.S. Attorney McSwain. “It is also a testament to the dedication of the investigators and prosecutors who doggedly pursued this case even after the primary target was kidnapped and murdered. As the Office has done with a variety of criminal and civil matters, we will use every tool at our disposal to hold individuals and businesses accountable and ensure their compliance with federal law.”
“Through our 5Dimes investigation, Homeland Security Investigations illuminated a massive global network of criminals whose profession was to launder proceeds for drug cartels, kleptocratic regimes, illegal mining operations, and fraudsters,” said Brian A. Michael, Special Agent in Charge, HSI Philadelphia. “Today’s announcement of the global settlement agreement and significant monetary seizures demonstrates HSI’s commitment with our partners to deny criminal organisations the financial proceeds of their illicit activities.”
“Transnational Criminal Organisations are concerned with one priority: making and hiding money. This investigation demonstrates the sophisticated efforts of the actors to secrete their ill-gotten gains, in this case, from gambling. The scheme is just as viable for laundering drug proceeds, those from weapons or human trafficking, or other illegal activities,” said Jeremiah A. Daley, Executive Director of the Liberty Mid-Atlantic High Intensity Drug Trafficking Area (HIDTA). “We are proud to support HSI in pursuing all forms of money laundering from any source.”
The case was investigated by the Department of Homeland Security, Homeland Security Investigations with support from the Liberty Mid-Atlantic HIDTA, the Philadelphia Police Department, and the Pennsylvania State Police. The criminal investigation and settlement was handled for the Eastern District of Pennsylvania by Assistant United States Attorneys Michael S. Lowe and Maria M. Carrillo.
