Cantor Fitzgerald Affiliate To Pay More Than $16 Million In Penalties And Forfeiture For Engaging In Illegal Gambling And Money Laundering Schemes

CG Technology, LP, formerly doing business as Cantor Gaming (CG Technology and Cantor Gaming),[1] one of the largest race and sports book operators in the United States, has entered into a non-prosecution agreement and agreed to pay $16.5 million in penalties and forfeiture to the federal government to resolve a criminal investigation into the company’s past involvement in illegal gambling and money laundering schemes.  In addition, pursuant to the agreement, CG Technology will provide continuing cooperation and has undertaken far-reaching reforms to its business and compliance operations.  Michael Colbert, a former senior executive officer at Cantor Gaming, who was the Director of Risk Management, previously pleaded guilty in the United States District Court for the Eastern District of New York to conspiring to participate in an illegal gambling business.  Colbert faces up to five years’ imprisonment for his involvement in criminal activity at Cantor Gaming.

The resolution was announced by Robert L. Capers, United States Attorney for the Eastern District of New York; Daniel G. Bogden, United States Attorney for the District of Nevada; Philip Bartlett, Inspector in Charge, United States Postal Inspection Service, New York Division (USPIS); Richard Weber, Chief, Internal Revenue Service, Criminal Investigation (IRS-CI); and James P. O’Neill, Commissioner, New York City Police Department (NYPD).

“Cantor Gaming quickly grew into one of the largest race and sports book operators in the United States.  Unacceptably, this growth came at the expense of compliance with the law, and as a result Cantor Gaming became a place where at least two large-scale illegal bookmakers could launder their ill-gotten proceeds.  The Cantor Gaming senior officer who oversaw the illegal conduct has pleaded guilty for his involvement in this criminal activity.  The non-prosecution agreement recognizes Cantor Gaming’s decision to accept full responsibility, provide complete cooperation, and take remedial measures to enforce best industry practices going forward,” stated U.S. Attorney Capers.  Mr. Capers thanked the investigative agencies for their outstanding commitment and dedication over the course of this investigation.  Mr. Capers also thanked the District Attorney’s Office for Queens County, the Financial Crimes Enforcement Network of the Department of the Treasury, and the Nevada Gaming Control Board, Enforcement Division for their assistance with the investigation. 

“CG Technology’s admissions that it violated federal laws by accepting messenger betting, out-of-state betting, and processing large amounts of monies which were the proceeds of illegal activities, are significant victories for the government,” said U.S. Attorney Bogden. 

“CG Technology, formerly Cantor Gaming, ran its enterprise with total disregard for government regulations and the penalties associated with breaking the law.  As Postal Inspectors and their law enforcement partners continue to prove, greed and eagerness to ‘game’ the system will never be tolerated, and those who choose to ignore the law will be brought to justice,” said USPIS Inspector Bartlett.  

“Cantor Gaming bet on never getting caught but this wager didn’t pay off,” said Chief Weber, IRS Criminal Investigation.  “Financial transactions always leave a money trail and IRS-CI Special Agents relentlessly follow that trail.  This large scale illegal bookmaking investigation uncovered the kind of widespread corruption that is too often associated with criminal enterprises.  Working with our law enforcement partners, we will continue to pursue these types of investigations to keep the books clean for consumers and corporations who are following the law.”

“Illegal sports betting is a multi-million-dollar business often involving other illicit activity.  There is good reason why this activity needs to be regulated and operated according to the law and industry standards.  The ‎illegal conduct forming the basis for this investigation was clearly motivated by greed and deliberate disregard for the rules of the gaming industry.  This settlement should serve as a message to those who try to beat the system,” stated NYPD Commissioner O’Neill.

Pursuant to the non-prosecution agreement signed today, Cantor Gaming, which is now known as CG Technology, acknowledged and accepted responsibility for aiding and abetting the operation of an illegal gambling business and money laundering from approximately 2009 through 2013.  Cantor Gaming, an affiliate of the financial services company Cantor Fitzgerald, LP, operates race and sports books in the following eight casinos all located in Las Vegas, Nevada: 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’s strategy to grow its business required it to attract and retain bettors who frequently placed large wagers on sporting contests.  To do so, Cantor Gaming offered higher betting limits than other sports books and gave the important bettors preferential treatment, including direct access to Michael Colbert, whose job was to set the lines and odds for the betting contests.  Important bettors interacted with Colbert and his staff rather than the “front of the house” staff that was under the supervision of Cantor Gaming’s chief operating officer, which normally handled interactions with bettors.  To accommodate some of the important bettors, Colbert and his staff facilitated violations of state and federal laws, including: (a) knowingly accepting and facilitating “messenger betting”[2] in its sports books on repeated occasions; (b) knowingly accepting and facilitating out-of-state betting activity through wire communications; and (c) processing large cash deposits and withdrawals and third-party wire transfers, knowing that the property involved represented the proceeds of some form of illegal activity.  As set forth in the Statement Facts, which is attached to the non-prosecution agreement, two of these important high volume bettors ran illegal bookmaking operations and were able to launder their illegal proceeds through Cantor Gaming wagering accounts.

On or about August 21, 2013, Michael Colbert pleaded guilty in the Eastern District of New York to conspiracy to conduct an illegal gambling business, in violation of Title 18, United States Code, Section 371, and faces a term of imprisonment of up to five years when sentenced. 

In light of CG Technology’s complete acceptance of responsibility for the full breadth of its unlawful conduct, cooperation, and far-reaching remedial measures, the government has agreed not to prosecute CG Technology for its criminal conduct, provided that CG Technology complies for two years with all the terms of the agreement executed today. 

The government’s case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys James P. Loonam and Matthew Amatruda are in charge of the case, with assistance from Assistant United States Attorney Brian Morris of the Office’s Civil Division, which is responsible for the forfeiture of assets, as well as Assistant United States Attorney Nicholas Dickinson of the District of Nevada.   

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This resolution was the result of efforts by the President’s Financial Fraud Enforcement Task Force.  The task force was established to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. attorneys’ offices, and state and local partners, it is the broadest coalition of law enforcement, investigatory, and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state, and local authorities; addressing discrimination in the lending and financial markets; and conducting outreach to the public, victims, financial institutions, and other organizations.  Since fiscal year 2009, the Justice Department has filed over 18,000 financial fraud cases against more than 25,000 defendants.  For more information on the task force, please visit www.StopFraud.gov.