How a Canadian billionaire made a fortune from illegal gaming and avoided prison

The Israeli-Canadian founder of PokerStars used his vast wealth and powerful connections to cut deals
Photo: Isai Scheinberg | Photo via Flickr
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He is arguably one of Canada’s wealthiest and most successful business people that the country knows virtually nothing about.

But Isai Scheinberg is okay with that. The mysterious founder of PokerStars has spent his life avoiding media attention. His Wikipedia page is confoundingly brief, unsure even when he was born or the year he left Israel to move to Toronto.

What the 77-year-old is especially reluctant to discuss is how he managed to dodge prison time after running an illegal gaming empire in the U.S. It’s a story of high-priced lobbying, secret negotiations with justice officials, and a last-minute charm offensive that kept him out of jail even though he openly defied U.S. laws and then avoided arrest for years.

Despite his legal travails, Scheinberg is seen as a hero in the poker community, fighting for players even as justice officials were trying to put him behind bars.

“He always focused on what was best for the game itself,” said Daniel Negreanu, one of Canada’s top poker players, in a video tribute played last year at a ceremony in London where Scheinberg won an international gaming award. “Profits and all those things came secondarily, but first and foremost is making the players happy.”

Today, Scheinberg is trying to reinvent himself as a financial patron in the world of chess. But the air of mystery remains. Earlier this year, the World Chess Federation (FIDE) announced that the Scheinberg family would sponsor the most prestigious tournament ever in Canada. The Candidates tournament, designed to pick the next men’s and women’s world championship contenders, is set for Toronto next April. But the announcement was a surprise to Canadian chess organizers, who never bid for the event and had no idea it was coming to Canada. Some took to social media to wonder: Who is Isai Scheinberg?

What the 77-year-old is especially reluctant to discuss is how he managed to dodge prison time after running an illegal gaming empire in the U.S. It’s a story of high-priced lobbying, secret negotiations with justice officials, and a last-minute charm offensive that kept him out of jail even though he openly defied U.S. laws and then avoided arrest for years.

Scheinberg was born in 1946 in Vilnius, Lithuania. As a teenager he developed interests in mathematics and sports, winning prizes for two years in a row in Lithuania’s Math Olympiad. At 23, he earned his Master’s degree in math from Moscow State University.

In 1971, he and his wife left the Soviet Union when Jews were first allowed to emigrate to Israel. Scheinberg took a job as a software developer with IBM. He came to Toronto in 1982 for a two-year placement with IBM, then moved permanently to Canada in 1987 when he joined the company’s Toronto Research Centre.

It was Scheinberg’s love of poker that convinced him to quit IBM in 2000 and start his own company, PYR Software, which set out to create the infrastructure for online poker play. The next year, he and his son Mark founded PokerStars, which was destined to become the world’s leading online poker community.

Then came the indictments

Scheinberg’s timing could not have been better. Poker was about to take off as a worldwide spectator sport, with high-stakes tournaments and network cable television coverage.

Over the next dozen years, PokerStars signed up tens of millions of registered users and hosted millions of tournaments online. It had more than $1 billion in annual revenues, generating $400 million in profits.

But government regulators were watching developments carefully. PokerStars operated worldwide, and it obtained licenses in countries that had regulatory regimes, such as Italy, France, Spain, Belgium, Denmark, and the U.K. The reception in the U.S., however, was not as friendly. Some states, such as New York, explicitly banned betting on games of chance.

In 2006, the U.S. passed the Unlawful Internet Gambling Enforcement Act, which made it a crime for businesses to process transactions for online gambling that was barred in any state or federally. That convinced some online gaming sites to withdraw from the U.S. immediately. Others, including PokerStars, argued that poker was a game of skill and therefore exempt from the law. They continued to operate in the U.S., raking in even more profits in a suddenly less crowded field.

But it was a risky play, and the day of reckoning came on April 15, 2011, a day dubbed Black Friday by the poker community. The U.S. government shut down PokerStars and two other poker sites, seized bank accounts and issued indictments against 11 people, including Isai Scheinberg. Charges included illegal gambling, bank fraud and money laundering. Scheinberg faced up to 30 years in prison, and it didn’t matter that his company had its headquarters in an off-shore tax haven, the Isle of Man.

“Foreign firms that choose to operate in the United States are not free to flout the laws they don’t like simply because they can’t bear to be parted from their profits,” said Manhattan U.S. Attorney Preet Bharara.

Dodging and lobbying

Scheinberg wasn’t a resident of the U.S., and he made sure he didn’t set foot in the country after the indictment was issued. Instead, he engaged in a years-long effort of lobbying and negotiations, trying to convince politicians and prosecutors that poker was a legitimate business after all and that his charges should be downgraded or dropped.

To help in the fight, he hired Dick Gephardt, former Democratic majority leader in the House of Representatives and many-time aspirant for the presidency. Gephardt lobbied politicians for changes to the 2006 act and for legal regulation of poker. U.S. lobbyist disclosure records show Gephardt’s company represented PokerStars for years before and after Black Friday, and was paid $600,000 U.S. in 2011 alone.

Though he had been indicted and was evading the reach of U.S. law enforcement, Scheinberg continued to bargain with authorities. He agreed to repay players whose funds had been frozen, and even did the same for a competitor when he was allowed to acquire their assets. The U.S. government also filed a civil suit against PokerStars, and it was settled when Scheinberg agreed to pay an extraordinary $731 million US. His attorneys later listed that as one of his “good deeds” which warranted a lower criminal sentence.

For the years he was a wanted man in the U.S., Scheinberg shuttled between Canada, Israel, England and the Isle of Man. It isn’t clear how he was able to travel so freely while facing a serious indictment in a country that is generally eager to seek extradition of major lawbreakers. The U.S. Attorney’s office for the Southern District of New York declined a request for an interview and refused to say whether they ever asked Canada to extradite Scheinberg.

In 2015, two attorneys with the Southern District travelled to London, England to meet with Scheinberg in person. Instead of trying to have him arrested, they engaged in a remarkable 10-hour face-to-face meeting over two days to discuss his charges. To argue his case, Scheinberg had at his side Paul Schechtman, a former Southern District assistant attorney, and Barbara Jones, a former Southern District senior judge.

Prosecutors offered to drop the bank fraud allegation in return for a guilty plea on other charges. But Scheinberg didn’t want to be saddled with any felony conviction, so the New York prosecutors went home and Scheinberg continued his evasion of U.S. justice.

Indictment, what indictment?

With a criminal cloud hanging over his head, Scheinberg decided to sell PokerStars. His son Mark, who was never charged criminally, was now in charge. The company was still pulling in hundreds of millions of dollars annually from outside the U.S., and a sale was arranged to Montreal-based Amaya Gaming Group Inc. in 2014 for a staggering $4.9 billion US.

The sale launched Scheinberg and his son into the ranks of the world’s super-rich, but it also attracted the attention of Quebec’s financial markets regulator, the Autorité des marchés financiers.

Mark and Isai Scheinberg
Mark Scheinberg's Facebook

Amaya’s stock price had shot up before the deal was announced. The Quebec regulators charged David Baazov, CEO of Amaya, with insider trading. Amazingly, they turned to Scheinberg as their star witness.

“Mr. Scheinberg was at all times cooperative with our investigation and subsequent prosecution, providing material assistance to our case,” said Stéphanie Jolin, an attorney with the Autorité in a court document. She said Scheinberg came to Canada and made himself available for an in-person interview, an interesting development given that Scheinberg was still under indictment just across the Quebec border in New York.

“Ultimately, Mr. Scheinberg had significant and helpful evidence to give to the court,” Jolin said. The Autorité declined to be interviewed about the case, or answer questions about why they collaborated with a man wanted for crimes in the U.S.. A court eventually dismissed the charges against Baazov, citing “repeated errors” and “a lack of rigour” on the part of the Autorité.

Pivoting to chess

After the sale to Amaya, Mark Scheinberg became the public face of a global real estate and investing company with holdings around the world, including a luxury boutique hotel in Toronto. On paper, Isai has no direct involvement in the family business. But court documents show he is a consultant to Ibid Capital in the Isle of Man, which serves the Scheinberg Family Office.

The International Consortium of Investigative Journalists, which investigated Pokerstars as part of the Paradise Papers, reported that during this time Isai lived in a secluded, multimillion-dollar mansion on the Isle of Man, from which the U.S. Justice Department was unable to extradite him. “He could often be seen walking his dog.”

In 2016, the Scheinbergs bought a substantial stake in chess.com, the largest online chess platform in the world. Time Magazine named it one of the 100 most influential companies of 2023. CEO Erik Allebest was delighted to have the Scheinbergs on board.

“Isai and Mark together were helpful for us to navigate some of the things of what it was like to have a growing game,” Allebest said in an interview. “It was helpful to have some wise hands and heads that had scaled an organization to the size that they had.”

But did Allebest have reservations about getting into business with a man who was still facing a criminal indictment and the potential of substantial jail time?

“I think that's why Mark made the investment and not Isai, despite Isai being the one interested,” he said. “I did not feel like I was getting involved whatsoever with a shady or bad person in any way. I felt like there were politically-motivated, special interest-motivated things going on that would get resolved in the way that they did.”

The Scheinbergs decided to end their investment in 2020. “Despite no longer being investors, they have remained friends, advisors and philanthropists,” Allebest said.

Endgame for the poker king

Scheinberg’s luck ran out on June 7, 2019. While in Switzerland seeking medical treatment for his wife, he was arrested at the U.S. government’s request. He spent 26 days in jail before getting bail, and in October the Swiss Federal Office of Justice approved the U.S. request for extradition. Though Scheinberg initially fought the order, he abandoned his appeal and flew to Kennedy Airport in New York on Jan. 17, 2020. Authorities whisked him to court, where he pleaded not guilty and was released on a $1 million bond and a promise to stay in the state.

Two months later, following a deal with the prosecution, Scheinberg pled guilty to a single felony charge of operating an illegal gambling business, which carried a potential five-year sentence. He told the court he was aware the U.S. considered his business illegal, and admitted he actively participated in the decision to continue. “That was a mistake in judgement. I deeply regret not taking steps to cause PokerStars to close its American business,” he said.

“My felony conviction will haunt me the rest of my life. I recognize my failings. I wish that I could go back and make different choices.”

In advance of sentencing, Scheinberg and his lawyers amassed a huge number of testimonials from people praising him and vouching for his integrity. That included everyone from family members and friends, former employees, retired Israeli generals, a former president of Tel Aviv University, an Italian gaming regulator, chess grandmasters, and a variety of recipients of his philanthropy. Dick Gephardt, who lobbied for him over the years, said: “I cannot think of anyone I worked with who would exceed Mr. Scheinberg in integrity, ethical behaviour, moral character and generosity.”

The testimonials appear to have had their intended impact.

On Sept. 23, 2020, Judge Lewis Kaplan sentenced Scheinberg to a $30,000 fine plus the time he had already served in a Swiss jail – a far cry from the 30-year maximum sentence he once faced. Despite the prosecutor’s arguments about the seriousness of the offence and the years of evading justice, the judge was sympathetic.

“Mr. Scheinberg, I don't condone what you did, but the world is filled with fallible people and fallible people make mistakes. This was a big mistake, but it is not one that in my judgement should ruin the balance of your life,” Kaplan said. In facing his reckoning, Scheinberg told the court: “My felony conviction will haunt me the rest of my life. I recognize my failings. I wish that I could go back and make different choices.”

Scheinberg still refuses to be transparent

Isai Scheinberg would only agree to answer questions about his sponsorship of chess. He refused to say what business involvements he still had, whether he intended to monetize his interest in chess, or if he had any regrets about how the PokerStars saga unfolded.

“I started to support chess events over 15 years ago,” he said. “It was in memory of my late father Matafia Scheinberg. He was not a professional chess player but loved chess, and while he was a student in Kaunas, Lithuania, he played in two chess Olympiads representing Lithuania.”

Now free to travel in the U.S., Scheinberg went to Las Vegas in July where he received the World Poker Tour Honours Award. With his legal troubles behind him, it’s chess that occupies much of his time. And given his expertise in Internet gaming, his advice about the next online frontier might be of interest to entrepreneurs.

“I believe there is a bright future for online chess. Hundreds of millions of people love to play chess and playing online is an easy and convenient way to find opponents to play.”

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