Can a long-time bad actor like 5Dimes become legitimate in the eyes of regulators?

Offshore Operator 5Dimes Settles For $47 Million As It Attempts To Clean Up Its Act

The easiest path to a clean reputation is to not engage in criminality to begin with. That’s not stopping offshore sportsbook and casino 5Dimes from attempting to take a more convoluted route to regulatory legitimacy, however.

The company announced this week that it had reached a $46.8 million settlement with the US Attorney’s Office for the Eastern District of Pennsylvania. The company and its current owner, Laura Varela, admitted its wrongdoings, including running an illegal gambling operation, wire fraud, and money laundering. The settlement notes that Varela reached out to US authorities of her own accord to make amends and that the government’s investigation cleared her of any personal involvement in the crimes.

In return for paying the settlement, Varela and 5Dimes have immunity from prosecution by the DOJ for these and any other crimes committed prior to Sept. 30. Earlier in the month, the company had ceased taking bets from US customers and advised them to withdraw their funds.

On its website and in a press release, the company makes it clear that it sees the deal as paving the way for legal entry into the US market. Varela’s attorney, Jeff Ifrah, told the Wall Street Journal that applying for a license in New Jersey will be the first order of business.

It remains to be seen how regulators feel about the company’s history. PokerStars is the canonical example of a former black market company successfully transitioning into legal and licensed operation. That wasn’t an easy process, however, and wasn’t a success across the board. Although the company now operates legally in several states, it remains on the wrong side of Nevada’s bad actor clause and cannot obtain a license there.

A change of ownership and of heart

Varela is the widow of 5Dimes’ original founder, William Sean “Tony” Creighton. In a press release, she discussed her husband’s death, the settlement, and her plans for the future:

“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 US. My husband’s death was tragic, but he loved 5Dimes and all of its loyal customers […] Along with a team of trusted advisers, 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.”

Creighton, a US citizen, moved to Costa Rica to conduct his illegal business out of the reach of US authorities. He went missing in late 2018. The disappearance was ruled a kidnapping, and 12 people were arrested four months later in connection with the crime, some in Costa Rica and others in Spain. Police later found Creighton’s remains in an unmarked grave in a cemetery near the Costa Rican town of Quepos.

Creighton’s death is tragic, but it simplifies the company’s legal position. Though Varela was cleared of personal wrongdoing, Creighton most likely would not have been, and his continued leadership at the company would have made a pivot to legal operations difficult or impossible.

Having inherited the company just as legal sports betting was taking off in the US, Varela faced an interesting choice. Paying the settlement and seeking licenses for US operations is an expensive gamble. It could be lucrative if it pays off, but even if not, it grants her more personal freedom. She can now travel freely without worrying about extradition and can sell the company at some later date if she so chooses.

Not quite squeaky-clean

The terms of the settlement include assurance that the US Attorney’s Office will advocate for 5Dimes and Varela and answer any questions that regulators might have. That’s no guarantee that regulators won’t find other issues with the company’s conduct, however.

For one thing, 5Dimes support has allegedly advised US customers to play at another site, BetAnySports. This has lines, product offerings, and even website text that’s identical to 5Dimes’. There are therefore some obvious questions about how the companies are connected, such as whether anyone still working at 5Dimes could be implicated in BetAnySports’ continued illegal operations.

There is also the fact that 5Dimes continues to serve some gray markets. The legality of online gambling isn’t as clear everywhere as it is in the US. Most governments have opinions on the matter, but in many cases, the relevant laws and their interpretation haven’t been tested in court. Even well-established operators vary considerably in terms of which they deem to be off-limits.

The US isn’t the only country for which 5Dimes has suspended service. The pull-down menu for countries on its sign-up page omits a total of 13 black and gray markets. It’s unclear whether it ceased serving all of these at the same time as the US or whether some it never accepted in the first place.

Where 5Dimes is and isn’t active

The countries from which 5Dimes won’t currently take sign-ups are as follows:

  • Australia
  • Costa Rica
  • France
  • Hungary
  • Portugal
  • Russia
  • Slovakia
  • Slovenia
  • Switzerland
  • Ukraine
  • United Kingdom
  • United States

For the most part, these are countries with clear licensing procedures. 5Dimes may be considering legal entry into some of those as well. There are, however, some strange inclusions and omissions.

The fact that 5Dimes doesn’t serve customers in Costa Rica, where its servers are located, is sure to raise a few eyebrows, for starters. Conversely, it is still taking sign-ups from some regulated markets where it does not hold a license.

For instance, it refuses French and Portuguese customers, yet accepts ones from Italy and Spain, where the regulatory picture is not so different. In some cases, the difference may come down to whether the countries have taken a stance on 5Dimes specifically, as the French courts did in 2011. In others, it may have to do with whether US regulators have commented on the legal status of the country, as the New Jersey Division of Gaming Enforcement did for Australia.

Ultimately, 5Dimes’ success or failure will come down to the whims of individual regulators. Some states have been more lenient than others. However, 5Dimes is attempting a very quick turnaround without going to quite the same lengths PokerStars did. How New Jersey and Pennsylvania regulators decide to play this will set an important precedent. More importantly, it will shape how other offshore operators approach the possibility of seeking legitimacy in the future.

- Alex is a journalist from Dartmouth, Nova Scotia, Canada. Now site runner for Online Poker Report, he has been writing about poker and the online gambling industry in various capacities since 2014.
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