Payment Processor Chad Elie Speaks Out

Senator Harry Reid chats with Chad Elie

Former poker payment processor Chad Elie recently opened a twitter account when his frustration with the Lederer Files got the best of him. His posts were in much part aimed at Howard Lederer, challenging Lederer’s assertion in his recent interviews that he never had anything to do with any payment processors, that he didn’t know them, never met any of them, except “one time at a party” when he was briefly introduced to someone. Elie tweeted a much different version:

“I never met with a payment processor”-Howard Lederer. Interesting Howard,do you not remember the MEETINGS we had?What about NYE?5hr meeting”

and the frenzy began.

Elie,indicted on Black Friday, was sentenced to five months in federal prison in a settlement with SDNY that followed almost a year of trial preparation. He will report to begin his sentence in early January 2013.    

The following interview with Elie is a brief synopsis of his journey as a payment processor these last few years and how wanting to process payments for online poker companies in a legitimate transparent way caused run ins with unsavory characters, including not so legitimate processors, colleagues that lied, cheated and stole their way into millions of dollars worth of wealth, mob enforcers and eventually the F.B.I.  Here is a look at Chad Elie’s story:

 

DF: We are talking to Chad Elie, the payment processor that was indicted on Black Friday. Hi Chad.

CE: Hi, How are you?

DF: OK, thanks. Just for the sake of transparency, I met you and your wife about a year ago in late [ 2011 ] for the very first time, and that was only in relation to your criminal case, which I was following at the time and and we have had no relationship other than that up until this point.

CE: Correct, I believe it was my motion to dismiss…with Paul Clements.

DF: That right, the former Solicitor General of the United States. Fair enough. You were a payment processor for a number of years, and not just for poker. That was your business and regardless of the sense that some people have that payment processors are all fly by night operations, you can clearly say that that’s not true, that it’s a legitimate business and that you’ve been in it for a number of years. Do you want to say a few words about that?

CE: Yes absolutely. I got into payment processing probably as early as 2004, 2005 and really grew a check processing business in Florida and teamed up with a company throughout all the 2000′s almost, a company called Selling Source out of Las Vegas. It’s an ‘Inc 500′ company, almost a billion dollars in revenue, and they were primarily a payday loan company. We had an exclusive contract with them for years, processing payday loans, and working some other angles on marketing with them. But primarily, that’s what we did,  check processing and had some of the biggest deals, biggest bank contracts out there, and thats where everything starts to come into place.

DF: Selling Source is actually where Curtis Pope worked, prior to all this poker processing that happened the last couple of years, correct?

CE: Yes

DF: And Curtis, as I understand it, was contacted by Daniel Tzvetkoff of Intabill, according to court documents in Curtis’ case, to help Daniel find outlets in the United States for banking, is that right, as far as you know?

CE: Yes. Exactly right.

DF: Then Curtis Pope contacted you in some way? You met somehow?

CE: Yes, I was already working with the Selling Source, already flying out to Vegas, working with them. He knew that I was doing processing for them, with them, at a level that no one had in that industry with payday loans, a very high risk market, because you have tons of consumers with checks that are bouncing and whatnot, so [there] was a high level of returns with that. So with that, you have to be very transparent with the banks,letting them know what kind the  transactions are, so yes, that’s where we met. Met in Las Vegas and eventually that’s where I met Daniel Tzvetkoff. when he was out here for the first time in Las Vegas. He was presented to me as the largest processor in the international world, thousands and thousands of clients and he was looking to invest into the payday loan market, and that in doing so, he needed processing of his own. That’s where the correlation came.

DF:  And the agreement that you made with them, to help in processing, was strictly for payday loans at that point in time?

CE:  Correct.

DF: …So you started processing for them. Did you realize at the time that Intabill was processing for online poker or did they just tell you it was all for payday loans?

CE: You know, I didn’t start processing at that time. I was essentially just introducing them to banks I had worked with in the past, sat thru probably 100 pitches of the Selling Source, that this is a payday loan portfolio, that this is who we are, that we are the biggest in the industry, under the Selling Source name. So to think that poker is being processed at the time, using the Selling Source name, being with the CEO/owner, Derrick of the Selling Source, it would be impossible for anyone to figure that out. So they kept that close to the vest, really really close. What I wanted to do was market to the back end of Daniel’s customers, that’s where that came into play, but it never really panned out. So I just continued to find banks and introduce them to banks that I had been working with, and really on a light basis, where I wasn’t so much involved with the day to day of that, it was more the other side, when Daniel decided to invest into the payday loan market.

DF:  …Obviously your experience in payment processing in areas, whether it was for payday loans, or identity theft solutions, or things like that, the banks that you are used to dealing with, quite legitimately, were used to seeing very large amounts of transactions on a daily basis. That’s obviously what would be needed for online poker as well. So I would imagine that that’s one of the reasons that the banking relationships that you had were attractive to them?

CE: Absolutely. Payday loan market is the absolute best market if you are going to mask transactions from poker. The average load of a player is about $ 120.00, I know it moved down from the economy, it went down to about $ 80.00, but the average payday loan going out is about $ 150-200.00, then debiting a consumer’s account for payday loans can be anywhere from as small as $ 10.00 up to $ 50. or $ 100., so it was almost the exact same transactions coming in and out.

DF:  Fair enough. The way that you actually went into business with Curtis I guess was…how did that work?

CE:  I was in business with Selling Source already. So Curtis was in a downstairs office, and I would always be in the executive’s area upstairs at Selling Source, and Curtis called me up, I was in Florida, and he said “Hey I have an opportunity for you to make a lot of money. There is a company in Australia that needs processing. They are going to invest a lot of money into Selling Source’s payday loan portfolio and we are going to build it with them,  if you can just refer your processors and processing.”  It was as simple as that, that phone call. They told me I would make, I think it was 1% or something like that, or .5% and as simple as setting him up, banking phone calls at that point.  Fast forward a little, Daniel  comes to town, this is when I first meet Daniel. Very little business. He was all about partying, all about going out, all about strip clubs, all about flying to L.A. for the day and going to a red carpet event for the magazine, so it was very much a party lifestyle for Daniel.

DF:  I understand that he liked to throw money around.

CE: I have never seen in my entire life, somebody spend more money in a nightclub.  It was a battle between him and Sam Sciacca, who could spend more money at a nightclub. They would literally call each other up on the phone and say ” I just spent $ 80,000.”, “Oh, I spent $ 120,000.”,  so who could spend more.

DF:  Sam was Daniel’s partner at Intabill, or BT Products or whatever they were calling that development company they had in Australia, right?

CE: Yes.

DF:  So are you sending invoices, or are you just waiting to be paid by Curtis, or…?

CE: Yes, I am waiting to be paid. I guess I was too trustworthy back then. I had a lot of business with the Selling Source that kept me busy, so it was kind of a side thing that I was helping Curtis out with. Until Daniel actually put I think about $ 30-40 million into a payday loan portfolio which later became Hugo. I was actually the President of that company. I owned a percentage of that company.

DF:  Hugo Payday Loans, right?

CE:  Yes

DF: And that was named after Daniel’s son if I remember correctly, right?

CE: Yes.

DF:  So they have this payday loan company which they funded with $ 30-35 million, is that what you are saying?

CE: Yes, I thought the initial amount was $ 30 million, but it cost a lot of money. I mean they went right out of the gate, they hired 100 people, filled this huge call center, state of the art equipment, furniture. They had everything, every angle, soup to nuts, ready to go for this and started doing payday lending.

DF: And Daniel and Intabill, before that time, had been processing for PokerStars and Full Tilt Poker, and other companies, correct?

CE: Come to find out!

DF: Didn’t know at the time though, did you?  As it turns out…well, were you actually paid for the time period that you were supposed to be paid from the work that you  helped set up for Daniel and for Curtis and those people?

CE:  There was a small amount of money that I was paid, just enough to obviously keep me interested. I started at one point to process, my own processing, thru Intabill, Impact as well. I call Intabill and Impact and Curtis all the same company, because they were all working together. We processed a lot of money thru the Impact – Intabill solution through my own company, nothing to do with poker, and when we didn’t receive money on that is when our relationship broke away. I just stopped dealing with them. I would come to Vegas and literally ‘mission impossible’ my way in to the Selling Source to get to the top level, to the Selling Sources executives, to get away from Curtis.

DF: When you were working with Curtis and Impact, outside of the Selling Source, and Intabill, how much was it that they actually owed you that they weren’t paying?

CE:  It was just about $ 4 million.

DF:  About $ 4 million. And did you learn anything from any of these banks that maybe you had set them up with?

CE:  Yes. I was down in Florida. It was quite some time since we had even spoken. I received a phone call from one of the relationships that I did introduce them to, Echo Payments, and I believe it’s ..I forgot the bank name, that’s the branch of them.

DF: National Bank of California?

CE: That’s it.  The lady named Debbie Johnson gives me a call and told me “hey Chad, I have Chad on the phone, on the other line”. I said, hmm, okay. She says “I know this is you”. She hung up on the other line and she said “there is a problem, you have a bank account and someone is trying to transfer the funds into a different settlement account, and you need to get out here immediately and change your access card.” I was just in shock that this account is being processed with. I did introduce them to [this bank]. I did in fact do that, but I didn’t know that they were continuing to process and to know that there were millions and millions of dollars in this bank account with my name in it. At the same time, they owe me all this money. So I flew out to California immediately, I don’t think I let a day waste. I went there and transferred the names off the account…There was Scott Clark, Curtis Pope, Jeff Nelson’s name was on the account. And I withdrew the money that was owed to me. I left more than $ 1+ million, I think $ 1.2 million, and that was it. I left and went back to Florida.

DF: So you were told that they opened this bank account in your name, without you ever knowing about it? You were told that by the bank official, who knew you. And that’s how you were tipped off to this banking that was going on that you didn’t know about being tied to you name at all?

CE: Yes, I introduced them to this bank. I introduced myself, Andrew Thornhill, Curtis Pope, actually Jeremy Johnson was involved in Utah. Kind of strange. It was a very quick meeting and Curtis Pope talked about payday loans and whatnot and I left, I stopped doing business shortly thereafter and come to find out they are processing with poker. They had to set up another account to sweep it out of, and they couldn’t do that without one of the signatures on file being mine. So they screwed themselves up with that.

DF: Wow. So what you did was, the account that was in your name, you withdrew the money that Daniel and Curtis had owed you based on your legitimate processing business that you had had. You left whatever extra there was behind, and you returned to your own business and looked to have nothing further to do with them. Right?

CE: Yes. Until some people showed up at my door down in Florida.

DF:  Just knocked on your door?

CE:  You know, I had a very small office in Florida at the time. The office was kind of unique, the doors were opened like back doors, not sliders, but somebody came and the office door was locked and two Italians were there, straight out of the Sopranos. I opened the door a little ways and I said ‘Can I help you?’ and they said “We are here to talk to Chad”. They put their foot in the door, so they pushed open the doors, and they say, with their Italian accents ” we are here to talk, we are here about Curtis. You know what we are here for.” There was this whole scene. Went into my office. I didn’t want to spook my receptionist or anything and closed the door behind me. They wanted to try to bully me into giving them money, accusing me of stealing and at that time I had a licensed firearm. Fortunately, I am not the best with guns, and my gun’s clip was out of the gun. I put the clip in the gun, and as soon as I did, it clicked and the guy heard it. He came over, his hand was shaking. He grabbed my gun and put it down and said “We don’t need to go there yet. We don’t need to go there.” It’s the craziest scene. He takes it and puts it down and then he tries to wipe his fingerprints off with a piece of paper. It was almost next to impossible because it was a hard piece of paper. I said “I will do this for you”. I knew right then and there that if they were truly who they were representing themselves to be, I probably would have been dead.  They put Curtis on the phone. Curtis was talking, and then they left. And that was that. That was their big intimidation army that was in the news about.

DF: Wow. Wow. They talked to Curtis on the phone in front of you, or they put him on the phone to talk to you?

CE: They did, yes. They put him on the phone and there was this conversation, “I don’t know what you are talking about. Money that’s stolen?” There was an older gentlemen and then the young muscle. Straight out of the movies. It was actually funny because it did not intimidate me. I’m not trying to say I was this hard guy, because I was scared, but they didn’t intimidate me because I didn’t steal any money. You can say what you want, beat me up, shoot me, but I am not going to change my story.

DF: And this was in early 2009?

CE:  Yep.

DF:  And this just happened to be about the same time that Intabill’s processing for Full Tilt and PokerStars was not in the best shape? They apparently were quite behind in forwarding funds that were due to PokerStars and Full Tilt, and people were starting to notice? I guess for some period of time, according to documents that I’ve seen, they claimed that the money was just tied up in the reserves? Maybe, quickly, you would like to tell listeners [readers] the way that reserves usually work in payment processing?

CE:  Yes, it’s actually quite simple. There are two ways to do it. There is a way to put the prepaid reserve up to guarantee security for the bank, which I am accustomed to doing, or doing a 10% reserve, or a 5% reserve, where the money comes off the transaction. So if you process $ 1 million, $ 100,000. would be put for reserve. Then you would build that reserve up to a certain point where it would be capped. From what I know with Intabill, that’s definitely not what happened. Daniel was buying yachts, racing teams, everything across the globe. And we did significant amounts of study on him preparing for trial. I couldn’t wait for the day he was going to take the stand.

DF: Well, as it turns out, the $ 30-35 million that you mentioned Daniel and Curtis and others invested in this Hugo Payday Loans, that was reportedly used from the money that was due to PokerStars and Full Tilt Poker, correct?

CE:  Correct.

DF: Didn’t know that at the time of course..and this all occurred at the same time, early in 2009, when it became a significant enough amount that PokerStars and Full Tilt began to notice that there was this huge amount of money that was owed to them that was not being paid to them in a timely fashion. This would have been right about the time that Intabill pretty much went belly up. And, as you’ve mentioned, Daniel was known…I think he bought a racing team [cars] in Australia, he bought nightclubs, he bought real estate, he lived a very high lifestyle for a young man in his 20′s.  And the company was pretty much gone. I know they were sued for the money that they owed to Full Tilt and PokerStars, I believe to the amount of approximately $ 100 million. Perhaps, $ 42 to Full Tilt and a little more than that to PokerStars. And this was at the same time that while PokerStars and Full Tilt were trying to chase down the money owed to them, that you were contacted, regarding the $ 4 million that you had retrieved from what you believed to be your own money, from the account that Curtis had set up. I’ve been told that Daniel and Curtis and Sam just blamed you for taking the money and told PokerStars and Full Tilt that you were responsible for the fact that they couldn’t be paid. Is that the way that it happened?

CE:  Yes, originally that’s what happened. It was a great little ploy for them to make off with more time in what ended up being a big, big, huge theft of $ 100 million. My little aspect of things, my little amount of money, compared to that…they did this whole song and dance of look, “Chad has the money, and Chad has this and this is why you can’t get paid”…  So Stars sent down attorneys and investigators to talk to me and I told them, “hey, let’s settle this in, the facts are so crazy, let’s go to court.” We started going to court. Then they started to see the facts that ‘He didn’t steal, he didn’t steal this money. He was owed money.’  I was able to negotiate with  PokerStars and said “hey look, out of good faith, let’s just do it 50-50. I’ll take a bite, you take a bite.”  That’s the bottom line and we settled. They knew both sides, what the facts were and in the meantime, Daniel and Curtis are making off with all this money. It was a huge ploy that they did, it worked for some part but didn’t work at the end for them. An interesting time.

DF:  You were not processing for PokerStars or Full Tilt Poker at the time?

CE: No, no no.

DF: And sometime after that settlement… although it appeared in the indictment, the charges against you from black Friday, that that was all tied together? It was alleged that the agreement was made between PokerStars and yourself to settle on this on the basis that a quid pro quo that you start processing for them, but you’ve told me that that is not true, that it didn’t really happen that way, that it was two quite separate things and that one did not rely on the other?

CE:  Absolutely not. That’s just not how PokerStars would work. Even Curtis Pope tried that [with PokerStars]. Let us process for you and we will pay you back, and thats…PokerStars is an unbelievable stand-up company. They don’t work like that. You have an issue, you have to handle it separately.  It was well after when I flew out to the Isle of Man to meet with PokerStars and present them with … What people should know is the world of processing, when FTP and PokerStars are processing, the processors were like feeding, they were like fish feeding on little minnows, they(processors) were trying to steal as much money as they could. Set up a processing solution for, even if it’s a week, even if it’s two weeks, you are stealing millions and millions of dollars from these guys. I mean that was the M.O. It’s because the banks didn’t know about it. They had a safety net of, okay, we are going to get PokerStars transactions and we re going to process through a bank, we will have a delay in paying them, so when the bank finds out it’s poker, we have our money and these guys, what are they going to do. It’s stealing. It was killing me to continue to see that happen. So we came up with a transparent processing solution. Let’s get the bank to sign off on it. The bank will sign off on it, we will have a transparency letter, and that was it. Furthermore, to pay Full Tilt and PokerStars faster than anyone ever paid. We paid within 24-48 hours, anything that came thru the bank, right back to them. To show them, look there is going to be no stealing. The players are going to get their funds. Deposits are going to go through. And the banks going to sign off on it. And they loved it. Obviously they loved it. That’s where the industry, at least for PokerStars, went. PokerStars always wanted to be transparent. I don’t personally believe that outside of that, that if they were processing transparently. I don’t know.

DF:  So this was sometime in 2009, that you began processing for PokerStars?

CE:  Yes.

DF:  And based on totally transparent processing?

CE:  Correct

DF:  You did not have a relationship at that time with Full Tilt, that came later, correct?

CE:  We had discussions with Full Tilt the same trip, we spoke with Nelson Burtnick over there. Just a very light conversation of how we were going to process and that was it. Definitely exclusive, up to that point, with PokerStars.

DF:  Ok and this would have been thru the Utah bank?

CE:  It was. Through Sun First.

DF:  And this was at the time..did you form a partnership with Jeremy Johnson? Is my timing right?

CE:  Oh yes. At the same time I was processing checks for years and years and we came up with check21 software. To boor the people listening or reading, it’s X937 files, something that the government put in for the 2001 crisis, when all the checks got clogged up in the airplane. So it’s a digital check that goes thru the system. So we developed the software and we thought it would be great for processing. It turned out to be good and we put that in, and reached out to Jeremy and said “hey I really believe in this software and processing for peer-to-peer poker. This is what I want to do and would you want to do a 50-50 partnership with me” and he said yes. I put up $ 4 million of my own money, into  Elite Debit, and  this was Elite Debit California. And that was the route. I moved out to California instantly. Moved out of Florida to develop this relationship with  SunFirst and PokerStars.

DF: And Jeremy Johnson, just for historical reasons, was actually quite well known in payment processing by that time and he was a very big player, was he not?

CE: Yes, he was the biggest in any affiliate show or marketing show, he marketed tons of product and to do that you have to have processing and process upwards of $ 400 million. He was always with the Attorney General [Utah] at events, signed off on everything he was doing. He was in the Who’s Who of California, Vegas and Utah. So I thought it would be the best best place ever to process with, for PokerStars and Full Tilt.

DF:  But his background in processing was all on credit cards, correct?

CE: Correct, 100% credit cards.

DF:  Yours was all e-checks?

CE: Yep.

DF:  Significant difference there. So you formed this alliance with Jeremy Johnson, and you started processing for PokerStars, through Sun First Bank in Utah, and everything was going fine until?

CE:  Everything was perfect. Couldn’t have been better, I believe, for PokerStars and Full Tilt. I don’t want to speak on their behalf but 24-48 hour funding, processing every day, settlements all the way. Up until October/November is when Jeremy and Jason Vowell and Todd Vowell decided to, what I believe and what I know from everything I’ve read and from documents , their planned heist of the player funds. They delayed the credits coming out of the bank. We were processing anywhere from $ 1 million to $ 3 million per day. So that adds up very quickly. So if you are processing let’s say $ 1 million per day, you have $ 1 million per day going out in credits to players…if you stop the credits going out to players,  then you are stuck with this big pile of money and that’s what they ended up doing, and running off with it.

DF: So just by delaying a day, or two, or just a week, is a significant amount of money.

CE:  Oh yes.

DF:  And did they actually start another company with the same name as yours? How did they manage to siphon off this money?

CE: In early 2010, Jeremy opened up Elite Debit in Utah vs. California, where I was. He opened up that to start to steal money from my processing profits. That’s when that started. The Vowells came in, Jason and Todd, as the accountants. Todd was a whiz with numbers and  to work with somebody like PokerStars you needed somebody of his caliber that worked with the big three accounting firms and  to have the numbers perfect. And they were perfect. He got paid a flat salary, then somewhere over time it turned into Todd Vowell and Jason Vowell processing where Jeremy was calling the shots. I was out of the picture for the day to day or anything. I would only get called if there were certain issues that needed to be fixed. Then I really got a call when they found out that the FDIC came in to shut down the bank or put them on a ‘cease and desist’ because they didnt have enough capital. They wanted to stop the processing that day. I got a phonecall that the FDIC would allow the processing to continue and only half hour later got another call that there were no reserves in the bank for the processing. So it was an immediate ‘cease and desist’.  Everything had been looted. There was absolutely no money in the bank. There was some of the payments that were being processed for the players but as far as the millions and millions of dollars…I believe Full Tilt put in $ 5 million maybe as a reserve to protect the bank, to assure the bank had no financial harm. I think PokerStars maybe $ 2 million, maybe even more, I don’t know the exact numbers. But there was a lot of money that just disappeared. And that’s who has it.

DF:  In reading the cases against Johnson and others, it’s said that they hid money with fathers-in-laws, brothers-in-laws, and cousins and in gold bars and silver. I mean how true really is that, if you know, and how did they manage to do it and how long did it take? Was it quick?

CE:  I know what I saw and what I testified to in Johnson’s bail hearing. The DOJ in Utah indicted him and they asked me for my information on what I knew of assets, because they knew I had sued him. I testified against him. I had no problem doing that. There was a room, a separate outhouse or pool room outside of Johnson’s parents’ house. Independent. Anyone could just walk in. This is what’s crazy. There was no lock on the outside, other than a normal door lock. Inside there were safes upon safes, gold, gold shavings, gold coins and mountains of cash in these safes, packed. It’s something I’d never seen before in my life. How much money, gold, silver, silver bars in truckloads.

DF:  Wow. Wow. Just hidden in somebody’s cabana? Out by the pool?

CE: At his parents, yeah.

DF:  How long of a period of time did it take for them to siphon off this money from the bank? And is that where it all came from? Clearly they didn’t get away with that much from those accounts, from the processing accounts, did they?

CE:  Yeah. From my understanding, that money was known as some of the profits from processing. One thing that the DOJ is correct about is that processors did make a lot of money from payment processing. If you look at the overall amount of transactions, you are looking at 20-60,000 transactions on a day to day basis, going in and out so you are doubling it to 120,000 so on a big scale, it’s a lot of money. You are looking at anywhere from $ 100-300,000. on a daily basis that  a processor could potentially make. What I was told was that money, that was always the carrot over my head, ‘hey this is half yours. You can come in here anytime’. I was definitely naive and I was stupid not to take it, but at the end of the processing…when I got the phone call is when all that money disappeared. I think it was a week to two weeks of solid payouts to players. If players are going to be mad about anything…I understand what Ray and those guys did, which is just horrible, it’s equivalent to what Johnson and Todd Vowell and Jason Vowell did. They took the money that was payouts, the money actually going to the players, money in transit, they were seconds away from being paid, and they took it for their own will.

DF: Do you know how much money it was that they actually walked off with?

CE:  I don’t know. It’s definitely at the $ 20 million + mark.

DF: And that’s the case, its still open, against Jeremy Johnson I believe. His criminal case and then there is a civil case as well and them there is a civil case in Nevada against him too, correct?

CE: You know what’s interesting about that is that we went up for the bail hearing. We lobbied, well not really lobbied, but we said “Here is a clear cut case for you. He stole this money. This is it. We have the documentation. We have where the money went. It’s clear cut.” They were not interested in that. For some reason, it’s just okay to steal players’ funds, which is just shocking to me. They just didn’t want to do that [prosecute]. To this day it has my mind boggling.

DF: Okay so you did sue them, did you sue them to try to get what was owed to you?

CE:  It was twofold. I had my problems with them and about the money and when I learned about the player funds, it was a joint effort between myself and the two poker companies to go after him to find out where this money went. We filed the lawsuit, and it was a sealed lawsuit to get a TRO, temporary restraining order, on his account. It’s almost next to impossible for an individual to get one, so we filed it sealed so no one could find out about it. We were waiting for more evidence to show where he was moving the money, where Jason Vowell was moving the money to. We had his flights going to Andorra, going to Dubai, we had all this information. Then the FTC sues Johnson and gets a TRO. We had no choice but to release our sealed documentation then. They came and said that “Chad Elie is on a race to the courthouse steps to get to the money first”. That wasn’t the case. The Judge allowed them to intervene in our case so we had to voluntarily drop it for now.

DF: And the money is still owed to PokerStars and Full Tilt, or would have been to Full Tilt, but that is where some players’ funds ended up.

CE:  Absolutely.

DF:  Probably to the tune of $ 20 million combined for both companies, is that your feeling based on what you know?

CE:  Yes, I think that it’s more, I just can’t really state that. I am pretty confident that it’s in the $ 30 million range.

DF: And that would be a combination between PokerStars and Full Tilt?

CE:  Correct. You are talking about reserves, the whole kit and caboodle. Gone.

DF:  And that was probably, I believe, about November 2010, are we around the right time frame?

CE:  Yep, you’re right.

DF:  And after that period of time, you’re not processing for poker anymore?

CE:  Correct.

DF: And come January 2011, or late December 2010, you started talking to the poker companies again?

CE: Yeah, in between that time period, I wanted to start another processing company. Johnson left me with no money. He literally stole all my profits. And I had a house to live in, which is fine. Obviously it’s great. A car. Some cool toys. But honestly, we had no money. My wife and I had zero money in our account. We were actually bouncing checks. So I had to borrow some money, to go find another processing company and build up from scratch again.

In the meantime, I wanted to process for poker, but it was just, it’s a weird industry With what was happening with Johnson. I wanted to get a clear cut answer with the FDIC, what was happening there. I hired a law firm out of DC to contact the FDIC, to find out, you know, hey, what’s going on with SunFirst bank. I don’t want to make the same mistakes. They knew about me, they knew my name, they said that there were no problems with me at SunFirst and the poker companies. I mean, I was essentially talking for the poker companies and I said, wow, that’s great. Let’s go to Chicago, that was where I formed another relationship.Let’s see if they want to process poker. That was where I went a little different route In Chicago, we had the entire board present at every meeting to vote unanimously on poker.

DF: The board of the bank.

CE: Yes. And that was all American, and then New City Bank. What people don’t know is that there was a city attorney, the head of the entire board, which again everyone voted unanimously that peer-to-peer poker is a game of skill,if it doesn’t meet the requirements, we have legal opinions, and you know, they were proud to process it. Another thing is we offered, I offered banks, here’s this portfolio, a payday loan portfolio. It has about 50% returns. Um, you know, it’s, you’re going to have consumers complaining, yada yada yada, and here’s poker processing, and here’s legal opinions, so you choose. It’s simple as that, and there wasn’t one bank that didn’t choose poker. So it was on their own will. There was no promise for investments just to process poker, because it would have went the same way if they had processed other transactions.

DF: So now it’s the end of December 2010, and you’re just beginning again with a new company to begin processing for PokerStars and Full Tilt again. And it’s New Year’s Eve 2010, leading into 2011, and you told me about a dinner that you had for a New Year’s Eve celebration. Maybe you’d like to expound on that a little bit?

CE: Yeah. Absolutely. I got a phone call from Ray. He invited me out to a New Year’s private event, Jay-Z and Coldplay, at the Cosmopolitan, grand opening. 600 people were invited. I was honored to be invited, and to go out to dinner first, me and my wife, fiancée at the time.

So we showed up for dinner, and there were two parties, I guess. All the same party, but two tables put out. Ray asked me to talk to Howard, to sit with Howard at his dinner table, which was kind of awkward for me. I mean, I had a relationship with Ray, now I’m sitting with somebody completely different, directly across from him for the entire dinner at STK in the Cosmopolitan.

Anyone who has ever eaten there knows it’s a 3 hour, 4 hour process. And it was just strictly business, I mean, Howard was there, his wife, his sister, I think her boyfriend or whatever he is to her, and my fiancée at the time. Ray sat at another table with a Full Tilt Pro, I think a couple of marketing people were in town. And I would even look at Ray during the dinner at the other table and say, you know, do I really have to talk business with him?

We sat there, and it was nothing but the Howard Lederer show. I mean, all he did was talk about himself and how he built a 3 billion dollar, 2 billion dollar company, and you know, I don’t even think my poor wife at the time said one word. She was just like, are we really doing this on New Year’s, are we really talking business for 2 or 3 hours or 4 hours, Chad? It was and I talked about payment processing, everything we had done about transparency and the industry and why we wouldn’t process the backlog transactions for Full Tilt, because of the risk of players not knowing the transactions were coming in. And then the problems that causes for banks – if you process a transaction that hadn’t gone in for a couple weeks, then the consumer probably doesn’t know, ie the player, and then the player is going to charge back that check and then it’s going to go to the bank.  It’s not something we were willing to do. The reserves would have had to been raised and we just wanted to be a transparent clean operation.

Howard told me that he needed processors just like us, that were transparent. He said they couldn’t work with non-transparent processors anymore. I was in shock when he was being that open with me, about his other processors. It’s something that no one talked about.

DF:  The Howard Lederer Show, is that what you said?  This is the same Howard Lederer who specifically just said, in a videotaped interview, that he had never spoken to a payment processor, ever, except one time at a party?

CE:  One time at band camp…

DF: …This one time at a party when he said hello, but he never discussed payment processing with anyone, never met any payment processors, was not involved in it whatsoever. But you are telling me that this conversation, specifically with just Howard and his wife and guests, that it did not happen with Ray Bitar, who was actually sitting at another table?

CE:  Ray couldn’t hear anything that we were saying.  Just for the record, Howard was right about the Full Tilt one time meeting, that was the first time we had met. And it was a meet and greet, I just flew in and I was invited to the Full Tilt Fourth of July party…

DF:  That’s the barbeque, every year? That’s the one that was at the Golden Nugget that year?

CE:  Correct, Yep.

DF:  And you saw Howard there and obviously other Full Tilt people, right?

CE: Yes, I was with Ray, we kind of came in at the tail end, just to catch the fireworks and eat something really quick.  We met Howard really briefly, and that was it, he was right on that. But he forgot the entire day of festivities at the Cosmopolitan.

DF:  And you had another meeting as well, the picture that you posted on twitter and, in fact, it’s been posted on two plus two for over a year now. When a few of us saw it last year, we did get a kick out of it. At the time, I don’t think any of us outed it much, you were going to trial. I’m talking about you shaking hands with Harry Reid, the Senator from Nevada.

CE:  That’s right.

DF:  And Howard met you there as well, at that function?

CE:  That is correct. He knew I was a payment processor. Jeremy Johnson was there, that’s another payment processor he talked to.

DF:  So New Year’s Eve 2010 going into 2011 was actually the 3rd or 4th time you had met Howard, and you spoke specifically to him for several hours, strictly about business, about Full Tilt and about processing. And you talked specifically about the backlog that the company had and that you weren’t interested in taking part in that, for the obvious reasons that you already outlined, because of the banks and the potential chargebacks being rather high, which are a problem in itself. I am just trying to confirm.  This conversation took place, Howard knew there was a backlog, and you discussed the fact that there was this backlog with the e-checks at Full Tilt, January 1, 2011. Correct?

CE:  Correct, well it wasn’t really the first yet!

DF: Ok, December 31st, that’s even a day earlier, I was giving the benefit of the doubt. So when he says he did not realize that there were any problem with  any e-check backlog at all until April 7, 2011, there is a three or four month discrepancy there. Would you agree with that?

CE:  Yeah, just a little (laughs).

DF: So this conversation went on for several hours, and it was not just dinner conversation, it was strictly business. And when dinner was over, didn’t you tell me you actually went to a concert together?

CE:  yes, but before that I watched Ray and Howard play a little craps. They must have played with $ 75,000. on the table. I think we played craps for about an hour. We all smoked cigars at the table and there wasn’t too much business talking there, but a lot of high stakes craps going on. After that, we made our way to the concert, for the private event. Jay-Z Coldpplay concent. Limited to 600 people. Hottest ticket in Vegas at the time and Ray had a fistful of armbands to get in there.

DF: And Howard joined you and you were all together at the concert as well?

CE: Yes, yes.

DF:  Did you ever see Howard again after that?

CE:  No business, it was just at his house to go get Ray. Ray would stay at his house. Footballs were big there. Ray would stay in the mini mansion, which was deemed the mother-in-law suite or house.

DF: The guest house?

CE:  Yes, I think it’s 4000 sq. ft., just ridiculously huge.

DF:  I think we just read about that in the second amended complaint, but yes, it seemed rather large, larger in fact than the main house, isn’t it?

CE:  It’s pretty big, I wouldn’t know the square footage or whatever.

DF:  So Ray would stay there and you actually visited Howard’s house to meet Ray or watch football or something like that? And that took place after January 1, 2011 and obviously before Black Friday?

CE:  Yep, correct.

DF:  And you did not speak to Howard after Black Friday at all?

CE:  No.

DF:  Ok, so maybe he meant that he didn’t speak to any payment processors after Black Friday, because clearly before that, he had three or four meetings just with you alone, and one of which was many hours long and just business. So now, it’s April 15th. You have been for the last couple of months processing for Full Tilt and for PokerStars, correct?

CE:  Yes

DF: And in a transparent way?

CE:  Correct.

DF:  And you, and I believe just one other processor, the credit union in Arizona, were probably the only processors available to Full Tilt at the time? Do you know?

CE:  From what I understand that had some little processing.  The credit union was processing only so many states and they didnt in fact process for Full Tilt until the tail end, close to Black Friday. I was even told they wanted ownership in the companies to continue processing, but it was only PokerStars then they allowed Full Tilt in. So there was some time that Full Tilt didn’t have any processing whatsoever. I was getting daily phonecalls from Nelson, definitely a few times a week from Ray, begging me to process the backlog. I got offered as high as 20-25% to process it.

DF:  And a normal percentage for payment processors is probably 2 or 3%, and in high risk, maybe 6%?

CE: Correct. And it’s astronomical rates they were offering. It didn’t matter what channel, which way you processed it and that was directly from Nelson. It’s just something we don’t do, we never did, to process what’s called “legacy” in the industry, it’s too difficult. I mean an average poker player will do multiple loads into their player accounts. You are talking about 10 checks for $ 50 that you are going to have to send thru to the bank that are all months old. Doesn’t make sense.

DF: Then that same player has lost already and will have no problem charging back and there is significant cost and risk for the bank and the processor? And you were being offered like a 20% fee to try to handle some of these?

CE:  Oh yeah. At the time I think it was around $ 30-40 million.  I remember asking Nelson how much, what kind of a backlog are you talking about and he never gave a full-on answer, just whatever I wanted. And that’s what his answer would be time and time again.  It was just day in and day out. Ray specifically called me and said ‘Look Chad, I am going to have to start making important business decisions here shortly, if you don’t start accepting these transactions, or you don’t find a place for them’..I didn’t get that obviously until well after Black Friday that they were stealing, that they didn’t have player funds. And those important business decisions were either a). to stop paying themselves extraordinary rates or b). pull out of the U.S. because their ponzi was coming close.

DF:  And this was, these conversations were taking place the end of December/beginning of January?

CE:  Yeah, I would say it grew more rapid in December, the tail end of December and all the way strong up to Black Friday. It was to a point where I would avoid Nelson’s phonecalls.

DF:  Were you processing for them only not taking backlog? Were you processing new things, or not at all?

CE:  I processed through January and then the FDIC stopped the processing in Chicago. I had just signed a deal for another bank, actually on  the eve of Black Friday. so that was that.

DF:  So you  tried, but you werent interested in working on the backlog at all so any interest they may have had with processors willing to clear that up would not have been through your company, it would have been done elsewhere?

CE:  Correct.

DF:  So now it’s April 15th, it’s Black Friday. What happened? How did you find out?

CE:  Well, it’s six in the morning and we got the loud knocks on the door, like slamming knocks.My wife, fiancee at the time, jumps out of bed, runs downstairs. Now mind you, I am in the state of mind of going through this war with  Jeremy Johnson and the  Vowells, of suing them and this and that and I hear our dogs barking and the FBI screaming “Where’s Chad? Where’s Chad?” So I come out, she is in her underwear and a shirt, they come blazing upstairs as I am walking downstairs. I had my blackberry in my hand and their guns are drawn…

DF: Guns are drawn???

CE:  Oh yeah

DF:  For a payment processor. They need guns.

CE:  Everyone had guns, and this one guy had his gun drawn directly at my face, and he’s screaming at me to get down. I am so not knowing what’s going on, I’m texting I think, my lawyer or somebody and I said, “no no no, I am the good guy!” You just want to talk?” And then the gun came within six inches of my face, slams me down on the ground, handcuffs me and completes what’s called clearing the house…They go through every nook and cranny in your house. They put me in my living room, essentially hog-tied in the back. I asked them “Why am I in handcuffs, why am I being arrested?”  They said they didn’t know, they had no clue, that it was sealed at the time. And I was fishing for information and I said ” Well is it from New York? or Where are the guys from New York?” and they said “They couldn’t make it”. So I knew at that point it was related to poker.  I just didn’t know the extent, even until I was trying to be released on bail, then I looked over thru the cage and found out that everyone was indicted.

DF:  And they weren’t telling you anything at that point in time? You just didn’t know until later? They just threw you in a cage, really?

CE: Well, when they commented back to me where the guys from New York were, I knew it  was not because of Jeremy Johnson and I was in one room and I was leaving my house, they were bringing me outside to bring me to jail and they had brought my wife into the corner and started interrogating her, one female agent and three other agents, still guns are out, not pointed at her but on the counter and I commented and just asked “Can I say goodbye to her?” and they said yes, yes you can. So we walked round my kitchen and I said “hey Destiny, come over here, I want to talk to you real quick. Do you guys mind if we talk? I said Destiny, you don’t need to talk to these people, but I am not hiding anything whatsoever.” So anything they asked her, it was amazing, it was “So what do you think your fiance does” and she said “He processes poker”. Might as well have been a white flag on Sun First, on every Chicago bank, that there was a PokerStars flag there or a Full Tilt flag there. If you came up to me, I don’t care who you were, “What do you do?” “I am a payment processor and my two largest clients are PokerStars and Full Tilt and I’m proud of it.”  There was no hiding anything.

DF:  Wow. Guns drawn. Payment processor. Look how dangerous you are.  How long did you spend in jail?

CE:  Just that day. There was some trouble getting released. That picture on the internet, the one that Calvin Ayre put out, with the moustache…

DF:  Yeah, who the heck is that?

CE: That’s Chad Elie!

DF:  I mean, I’ve seen the picture before and I’ve met you, so I knew that wasn’t you, and probably off by about 30 years. I don’t know who that poor guy is but are you telling me that the FBI thought that was the person they were supposed to be arresting?

CE: Yeah, they wouldn’t let me out because they…the first guy that came to talk to me, not my attorney but he was standing in,  he said “Oh, looks like you aren’t getting out anytime soon.” I said “For what!” And he said “Because you have like 12 to 13 felonies” and I go “Are you kidding me? You have to go back and check that out. Did you look at my social, my date of birth?”  About fifteen minutes later he says “you were right. I don’t know if I can get this in time to the magistrate”.  That’s finally when I had a lawyer come in and represent me and get me in front of a magistrate. When I came out there was a flood of media. Thats when I knew the severity. My wife’s lips talking to me saying “everything, Full Tilt, PokerStars is down. No one can play on them”. It was just shocking to me.

DF:  So that’s when you found out how really big it was at the time. Luckily you were out, before the weekend, you came out the same day.

CE:  I did. Campos spent the weekend I heard.

DF:  Well Ira Rubin spent longer than that! Took them an extra month to find him though. Okay, there was never any question in your mind, I mean you …many people and quite often, not only in this case but others, all plead not guilty then some deal is made quite quickly and the plea is changed and people go about their business, regardless of whether there is a fine, whether there is cooperation or anything. And you made the decision right from the beginning to fight?

CE:  I did, yes. They offered me, I don’t even think it was 48 hours and there were deals on the table and I stone cold refused to do that. At the time I didn’t have any, barely any money to pay for my legal bills and what kind of case I was up against. Luckily I had a contract with PokerStars. That’s a stand up company. They were true to their word on everything. Full Tilt, I had a contract with them, not a penny. They wouldn’t help out with anything, although they wanted to ride on the coattails. It was an independent decision to move forward with that and I lived, breathed, everything for a very long time on this case. There wasn’t anything I didn’t read, probably 4 or 5 times. Made about 20 trips to New York, mock trial scheduled and then a day before I was moving to New York, I mean I had my dog vaccinated with the health certificate to fly to New York, to go move there, to go to trial. And that was it, I flew out there, we got a call and I pled guilty.

DF: We were all a little shocked. I had a place ready for a week, I wasn’t ready for a month but I was ready for a week. All those months, at least those three, four, five months just prior to when the trial would have started in April, there were  pretty significant motions being filed, based on fighting UIGEA, there were significant charges against you obviously, and it could have amounted to many many many years, God forbid, if you had been convicted on some of those charges. But certainly you are saying that you believe that you were innocent, that you had certain legal opinions that had to do with your state of mind, which was one of the arguments that was before the judge at the time that you decided to give up the fight. The wire act had just been found a few months before to  be not applicable to poker. The fight that you began is one that continues now, in other courts and perhaps again in this court in this case, for other people. You did change your mind, for whatever personal reason that you did so and now you are facing a five month sentence, is that what you agreed to?

CE:  That’s what the judge sentenced, yes, five months in federal prison.

DF: And this is Judge Kaplan. This is the same judge who we saw, I guess on that first date I had met you in the courtroom, as he was leaving the bench, he made some comment that it would be pretty funny to try to find a jury that didnt think that poker was gambling.  Certainly he didn’t say that from the bench, but

CE: Right, as he was walking out.

DF:  He did say it as he was leaving the bench and it turned out to be an argument that was given some bones and certainly had some meat on it by the time motions  and back up were filed for it, so it became pretty interesting.

I doubt that there is anyone that would have to to believe that guns are necessary when dealing with a payment processor, and my journalist hat aside, I will say just as a poker player that it’s ridiculous that anybody is  going to prison for even one day just for legitimately processing poker, not stealing, not doing anything else, just for processing online poker, which should be legal in this country and anywhere else where adults are allowed to do what they please with their own money. I do appreciate very much everything that you have been through, and I will offer you the opportunity to say anything else you would like to say that maybe we didn’t cover.

CE:  First, I appreciate you taking the time to do the interview, and getting the facts out there. Your investigational skills are unbelievable and being there, you are the only reporter I know from the poker industry that doesn’t copy and paste things from other articles or whatnot. You actually were there at every single hearing, except for my plea! (laugh)

DF:  Aw, because I had it down for the next day! I apologized immediately, before you even left New York. I did call you to say I was so sorry! You said you looked for me, and I am so sorry about that, and ty for the nice words. And its an important case, and again if there is something you would like to say that I didn’t cover…I mean we didn’t get into the gossipy type things, that might make headlines, the silly type things. We have gone over them before, we know those facts and maybe they can be told a different way, a different day. But I wanted this story to be about you and your story, and what you went through and how the correct way to process for poker can happen in a transparent way. I appreciate your time for doing that. I hope that your time goes very quickly and that you get your life back. And again. thank you very very much for your time Chad.

CE:  Thank You. There is one small thing that I did want to throw out there. When I did become public on my twitter, I did get a phonecall.  I had this number for years, couple years, and I got a phonecall, and I was told I better “keep my mouth shut”. It was a cut and dry phonecall, it doesn’t scare me. The facts are the facts and people need to be told what the truth is and who stole the money and who is lying and then it’s time to put all that stuff aside and move forward as a poker industry. It’s the only way we are going to get everythign licensed and regulated, to put this all behind us, but it has to be settled. Who stole, who lied and they won’t scare me. They can show up at my house and they won’t scare me.  I changed my phone number but I am going to continue to tell the truth and put it all out there.

DF:  I appreciate you saying that. You had told me, but I didn’t know whether you wanted that to be out there.  Just to make it a little more clear now that you’ve shared it, after you started posting on twitter that you were going to tell the truth, people are able to go look at those tweets that you made within the last two weeks and see what you were talking about, you received a phone call, with a blocked caller ID, telling you to keep your mouth shut. It was in a male voice, you told me, correct?

CE: Correct

DF:  And in a voice that you did not recognize, but it could have been anybody. And they hung up real quick and they have not called back since. But you did change your phone number. I appreciate it, and I don’t think the public realizes that certain people maybe have a vested interest in seeing that the truth does not come out and I appreciate you helping the cause to see that it does.  Thank you again.

The above report is an accounting of the interview with Chad Elie that took place on November 15, 2012. It has some, but little, editing, and no material facts were deleted.  To not take away from the important information in the text of this article, I decided to hold some photos and documents that are supportive of some of the claims made here. Those documents will be published in a separate article on Monday morning.

This interview will be reposted on QuadJacks.com in its audio form during the next few days as well.

 Edit: 11/18/12  Date typo changed in text.
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10 Responses to Payment Processor Chad Elie Speaks Out

  1. Eddie says:

    DF is telling us most of what Howard said is to make him sound like the good guy yet that same thing doesn’t stand true for Chad’s story? Can someone please tell me how you decide which criminal’s words you take to be the truth?

    • Diamond Flush says:

      There is a very big difference between one person saying things to “look like a good guy” when it’s to distance oneself from any responsibility of, at the very least, a missing $ 330+ million and to stay out of jail, and another person telling their story, who didn’t have any relationship to missing player funds and is going to federal prison for processing online poker.

      • @lostinpoker says:

        Eddie and others are quick to slag Chad,only wish they were read your interview first as clearly they have not.Chad is very open about his involvement.It is also clear that he did not conspire in any way to steal anything or anyones money.It is a matter of record that he took advice from more than one legal firm that advised him he was operating in a legal way.This now appears not to be so BUT his intent was not to work outside of the law. First class interview Diamond Flush. And as always thank you Chad for trying to lift the veil on the real crooks.

  2. Nos Adel says:

    Very well done DF. Keep bringing the facts out like this….where is CF these days? We never hear from him. Whats happening with RB and RF, HL? Love to get an update. Keep up the good work!

  3. Pat says:

    The above report is an accounting of the interview with Chad Elie that took place on November 15, 2011

    think you meant 2012

    great article

  4. Roger Crane says:

    In your second to last paragraph you write “It has some, but little, editing, and no material facts were deleted.” Shouldn’t you term this as “material information” rather than “material facts”? Are you deciding the information in the interview is a “fact”? This statement shows you have a bias that what you report is fact and that interviewing a subject by yourself determines that what has been said is a fact.

    • This statement shows that you have very little understanding of what ‘material fact’ means. It’s a standard term that does not imply a belief by the author in whether they are true or not just because the word ‘fact’ is in it. You seriously think you can’t talk about the ‘facts’ of the case as presented by someone without implying that they are 100% accurate? Get give me a break.

  5. Cheehc says:

    Fully appreciate the work that has gone into this reporting. Independent journalism at its best. Looking forward to more, maybe the DOJ is listening as well..

  6. Will says:

    Great interview. Thank for all of your effort to get to the bottom of everything that happened with Full Tilt and the various roles that payment processors played. You have been very thorough in your research of the entire matter. That said, I’m surprised that you did not delve further into Chad’s decision to end the legal fight and plead guilty. That is probably one of the most important decisions that he made in this whole affair and it was glossed over in the interview. Why was this subject not discussed in further detail? Thanks again.

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