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NETeller Update: Press Release and why founder bargained

written July 2, 2007

The NETeller founders and NETeller as a company were actually guilty of money laundering, so of course they were going to plead. This is the real problem that will further squeeze payment processors. It is a federal crime to process payments and limit the amount of financial information that would generally be present. In this case, the reason that both founders had individual liability even though they were not working for the company anymore is that they had set up an ACH and another financial processing company which Neteller would essential wash gaming money through, as well as using their corporate account in New York. The two of them still owned these two companies, and this is why they had to plea without question.

UIGEA now requires payment processors to break the very strict anti-money laundering laws in place in the U.S., and frankly I am surprised there is not more of a problem yet. Wait until the next tier goes down, and players start getting pulled in on tax evasion and FBAR violations, (which can have up to a 10 sentence with a 500K fine), not to mention that to the federal government every player who makes a peer-to-peer transfer becomes a financial institution and must list this on their Form TD F 90-22.1 with their FBAR's. There is a four part test for gaining leniency if you were determined to have an unwilling violation of FBAR, and most Internet gambling players will fail. If you past this test your FBAR fine will be only 5-10% of the maximum in your Neteller/other similar accounts during the year, but this is much better than the maximum penalty.

NETeller did issue the follwing press release today as well:

Neteller Plc (Public, SEA:NLR)

NETeller, the independent global online payments business, today issued the following statement regarding the announcement on Friday 29 June 2007 by the United States Attorney's Office for the Southern District of New York (USAO) regarding Mr Stephen Lawrence and Mr John Lefebvre, two of the Company's former directors and founder shareholders.

According to the USAO announcement, Mr Lawrence has pleaded guilty to a charge of conspiracy in connection with his role in NETELLER's prior involvement in handling financial transactions between gambling customers in the United States and offshore internet gambling businesses. In relation to this charge, Mr Lawrence also admitted to allegations requiring him to forfeit at least US$ 100 million. The USAO further announced that the case against Mr Lefebvre is still pending.

Other than as shareholders, neither Mr Lawrence nor Mr Lefebvre has any current position with or connection to NETELLER.

NETELLER is continuing to cooperate with the investigation being conducted by the USAO, under the advice of its legal advisers and in accordance with court orders in the Isle of Man. As announced on 4 June 2007, the Company is in discussions with the USAO for the purpose of resolving the investigation and has advised the USAO that it will use its best efforts to resolve the investigation no later than 13 July 2007. The Company does not currently believe that these developments will delay its efforts to resolve the investigation by that date

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