Daniel Tzvetkoff: The Tech Founder Who Took Down Online Poker
A programmer in the United States realized that online poker platforms were using his payment processor to circumvent banking regulations. He could report it. Or he could profit from it.
Words by Dean Whitaker3 min read
A programmer in the United States realized that online poker platforms were using his payment processor to circumvent banking regulations. He could report it. Or he could profit from it.
He did both.
Daniel Tzvetkoff created a payment processing system that allowed online casinos to accept US player deposits even though the Unlawful Internet Gambling Enforcement Act (UIGEA) explicitly prohibited it.
He made enormous sums of money. Then he turned state's evidence.
The Setup
It was 2005. Online poker was booming. PokerStars, Full Tilt, and Absolute Poker were processing millions in bets from US players every day.
But banks were starting to refuse poker-related transactions. The UIGEA had just passed. Banking transfers to gambling sites were becoming a liability for processors.
Someone needed to solve this problem for the poker sites. That someone was Tzvetkoff.
He created a payment processor that used shell companies and deceptive routing to hide gambling transactions. To a bank, a deposit looked like a restaurant purchase or a retail transaction, not a gambling deposit.
The poker sites paid him fees. A lot of fees. He made tens of millions of dollars.
But he also kept detailed records.
So he made a deal: he would provide evidence of the poker sites' violation in exchange for leniency.
Why He Cooperated
Federal authorities approached Tzvetkoff in 2007. They had evidence of his involvement in the payment processing scheme. He faced significant prison time.
So he made a deal: he would provide evidence of the poker sites' violation in exchange for leniency.
He turned over his records. The records showed PokerStars, Full Tilt, and Absolute Poker knowingly using his payment processing system to circumvent US banking law.
The records were devastating.
The Consequence
On May 12, 2011 (Black Friday), federal prosecutors unsealed indictments based largely on evidence Tzvetkoff provided.
PokerStars and Absolute Poker were charged with money laundering and violating the UIGEA. Full Tilt was also charged.
PokerStars eventually paid a $731 million settlement and agreed to return player funds. Full Tilt's assets were seized.
Tzvetkoff's deal allowed him to avoid the worst of the consequences. He pleaded guilty but served minimal prison time (reports vary, but it was less than two years).
Tzvetkoff is often portrayed as a villain: the guy who profited from illegal transactions then turned on his clients.
The Philosophy
Tzvetkoff is often portrayed as a villain: the guy who profited from illegal transactions then turned on his clients.
But there's another reading: he saw a problem (payment processing for poker), solved it (payment system), profited from it (tens of millions), and then recognized the risk was too high (federal prosecution).
Once he recognized the risk, he cooperated.
This is actually a sensible economic decision. The question is just whether it's ethically defensible.
He made money helping people break the law. Then he cooperated to avoid prison. The people he helped (the poker sites) suffered as a result.
Was he acting in self-interest? Obviously. Was he a hero? Obviously not.
Was he a pragmatist? Probably.
What It Reveals
The Tzvetkoff story reveals something uncomfortable about online poker: it exists in the space between "legal" and "completely illegal." The gray area where smart people can make vast sums of money.
Tzvetkoff occupied that gray area for years. He made money. Everyone assumed the infrastructure was stable.
But it wasn't. It was always fragile. Always dependent on the government's enforcement priorities.
Once enforcement became a priority, everything collapsed.
The Lesson
Online gambling infrastructure is fragile in jurisdictions where it's not explicitly legal. Tzvetkoff proved this. He built a fortune on that fragility.
Then he watched it crumble.
The lesson for players: if your online poker account depends on payment processing schemes, your account depends on a structure that could collapse at any moment.
Legalized, regulated poker (like what exists in Nevada and New Jersey) doesn't have this problem. The infrastructure is stable because it's legal.
Unregulated poker (like what Tzvetkoff's system enabled) is profitable until it isn't.
Tzvetkoff understood this eventually. He just learned it the expensive way.