5dimes Taxes
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ByThe news of a settlement between 5Dimes and United States Department of Justice was surprising to some in the online sports betting and gambling industry.
The 5Dimes brand became a popular site for US players after Black Friday. The major sports betting and internet gaming operators departed the US market after that April 2011 bombshell of indictments and seizures, so 5Dimes stepped in. Whether characterized as brazen or opportunistic – or both – 5Dimes moved into a market that craved an option.
However, the US government didn’t begin its investigation into 5Dimes until May 2016. From there, the Justice Department built its case, which resulted in a settlement on September 30. The company and its owner’s widow agreed to pay $46.8 million.
Further, 5Dimes is preparing to enter the American market.
Did we mention that the owner died under mysterious circumstances in a kidnapping and murder ordeal in 2018?
Let’s take a closer look at 5Dimes and how the company came to settle with the DOJ.
Brief History of 5Dimes
The name may be a familiar one because 5Dimes was one of the very first online sports betting websites in the world.
William Sean Creighton was born in America but relocated to Costa Rica in the 1990s. A sports betting fan, he wanted to create an online space for bettors to place wagers online…before most other companies were doing so. So, he founded 5Dimes in 1996.
The primary focus of 5Dimes was to be a premier online sportsbook, though it also offered online casino games and even online poker for a time. Creighton aimed his business at players in countries like the United States, which had no legal online sports betting options and seemed intent on keeping it out of the American market.
Players seemed to love the no-frills 5D product with lucrative promotions and less juice than most of its competitors.
Mysterious End for 5Dimes Founder
Creighton was a hands-on CEO of 5Dimes. For more than two decades, he took a front seat in the company, becoming involved in aspects of the business like customer relations and promotions. Creighton well known amongst people in his industry and customers alike as “5Dimes Tony.”
In October 2018, when Creighton was 43 years old, Costa Rican media outlets reported him as a missing person. He had, in fact, disappeared on September 24, several weeks before the Costa Rica Star first reported the story. When he left his office that evening, he drove a coworker to the Curridabat area and then disappeared.
The country’s Judiciary Investigative Police (OIJ) began an investigation. The law enforcement body admitted they had limited information but said Creighton had been kidnapped and was being held for ransom.
Authorities investigating the disappearance of owner of offshore sportsbook in Costa Rica: https://t.co/9ov0a8Sqx1 via @CostaRicaStar
— David Payne Purdum (@DavidPurdum) October 16, 2018
Details came slowly in the days that followed. Creighton disappeared after dropping off his coworker on the evening of September 24. His wife reported him as a missing person the following day. Police found Creighton’s Porsche Cayenne crashed in Heredia.
Rumors swirled. One was that his wife showed up at the police department to report her husband missing, and she was accompanied by two men she claimed were “American investigators.” Another was that she paid a ransom of nearly $900K in cryptocurrency but did not receive information about her husband’s whereabouts.
By October 20, 2018, the Costa Rica News reported that the September 24 incident had been much more detailed. Another car forced Creighton’s Porsche off the road, and four men abducted him. They called his wife that night with a demand for approximately $750,000 in bitcoin. She paid.
Even so, the men killed Creighton, and the OIJ found his body on October 20.
The Body of US Expat and Sportsbook Owner “5Dimes Tony” Found in Costa Rica https://t.co/LwtKCX23PL#CostaRica
— Costa Rica News (@CostaRicaStar) October 21, 2018
Some Answers in Year that Followed
In January 2019, authorities arrested 12 people in connection with Creighton’s death. Costa Rican police found nine of them in a house in Costa Rica. The other three had been hiding out in Cuba but then flew to Spain, and they were arrested at the Madrid airport and extradited back to Costa Rica.
The suspects included men in their 20s, one of whom masterminded the crime. His mother and his wife were also participants in the plan.
Nearly one year after the date of Creighton’s disappearance, ESPN reported that Creighton’s body had been found in a Costa Rican cemetery in Quepos, a small fishing town three hours from the site of the alleged abduction. Despite some reporting in late 2018 that his body had been located, the US State Department issued a statement in September 2019 about the discovery of Creighton’s body.
Investigators: Body of American offshore bookmaker known as 5Dimes Tony found in a cemetery in Costa Ricahttps://t.co/U7iFdhcDSI w/ @TishaESPN
— David Payne Purdum (@DavidPurdum) September 17, 2019
The story was a mess from the start, ripe with rumors and unconfirmed details, false reports and misrepresented activities. In defense of American journalists, though, it can be difficult to obtain accurate information and backup materials from a foreign government. And Costa Rica isn’t known for its – ummm – transparency.
Regardless, the story of 5Dimes Tony was a tragic one.
US Investigations Already Underway
By the time Creighton was kidnapped and murdered, the United States government had already been investigating 5Dimes.
The Department of Homeland Security (DJS) was already working with the US Attorney’s Office for the Eastern District of Pennsylvania to target 5Dimes and its business with US customers.
In March 2016, DHS applied for the court’s permission to seize more than $150K in a total of 15 Amazon accounts. In doing so, they admitted that $1.9 million had passed through those accounts to that point in time.
To make it easier for US-based players to place their sports wagers on 5Dimes, the operator instructed players to buy Amazon gift cards, provide the information to 5Dimes, and the site would pay out winnings to those cards. Players were even offered bonuses for using this method of payment processing.
The DHS seized those Amazon accounts connected to 5Dimes. However, that seemed to only be the start of the investigation into the sportsbook and online gambling operator.
DOJ Digs Deeper
Two months after that reported Amazon account seizure, the US Attorney’s Office for the Eastern District of Pennsylvania worked with the Department of Homeland Security Investigations (DSI) to look into Creighton and 5Dimes for violating US criminal laws, including “illegal gambling, money laundering, wire fraud, and other related offenses.”
US Attorney William M. McSwain revealed this on September 30, 2020, when he announced a settlement with 5Dimes to resolve said criminal investigation into 5Holdings, the company’s official name.
The settlement also included Laura Varela, Creighton’s widow and Costa Rican citizen. While she never worked at 5Dimes or assumed day-to-day control of the company after her husband’s murder, she did step up to seek a resolution with the US government. The primary reason was that she wanted to operate the company in compliance with US laws to possibly enter the US market.
As for the US Attorney’s findings, the office determined that Creighton operated the company in violation of US laws from 2011 through the date of his death in 2018. However, he did so through an alias and several shell companies. He also used third-party payment processors to accept payments from US bettors. Besides the aforementioned Amazon gift card scheme, 5Dimes also used credit card transactions but misrepresented the nature of the charges so US banks would process them. Further, Creighton laundered gambling proceeds via “bulk cash transportation and the purchase of gold bars, gold coins, and expensive collective sports cards.”
In total, McSwain alleged that 5Dimes transferred more than $46.8 million in illegal gambling proceeds “in such a manner as to attempt to hide the nature, location, source, and control of the funds.”
Seizures and Settlements
At an unknown time during the HSI investigation, those authorities seized $3,376,189 in cash and other assets from Creighton. This included more than $715K worth of rare coins, and two high-dollar baseball cards, one of which was the 1948 George Mikan rookie card worth approximately $400K and now on display at the Smithsonian Institute.
Costa Rican police also seized approximately $2 million through its investigation, though the time of that seizure is not specified.
What is known is that McSwain and Varela agreed to a settlement to close the case.
Varela agreed to forfeit all HSI-seized assets to the US government and the $2 million seized in Costa Rica. She agreed to help the US Attorney’s Office collect and 5Dimes to forfeit more assets that will total more than $26 million. And she will forfeit another $15 million as a part of the Costa Rican investigation.
In total, Varela and 5Dimes forfeit $46,817,880.60, which reportedly equals the amount of traceable transactions that violate US laws pertaining to wire fraud, conspiracy to commit wire fraud, money laundering, and the illegal transmission of gambling information.
Online sportsbook 5Dimes has agreed to $46.8 million settlement with US authorities, plans to enter American betting market. Story to follow.
— David Payne Purdum (@DavidPurdum) September 30, 2020
In return, the United States will not prosecute Varela or 5Dimes for heretofore stated crimes prior to September 30, 2020.
What the Parties Said
HSI Special Agent in Charge Brian Michael noted that the 5Dimes investigation “illuminated a massive global network of criminals whose profession was to launder proceeds for drug cartels, kleptocratic regimes, illegal mining operations, and fraudsters.
McSwain declared the settlement a victory for the United States and the stop of illegal activity and numerous crimes, “including a sophisticated money laundering operation.” He added, “It is also a testament to the dedication of the investigators and prosecutors who doggedly pursued this case even after the primary target was kidnapped and murdered.”
Varela commented in a press release:
“It has been a very difficult two years for me and my family. But 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. Now his spirit will be able to live on as the 5Dimes brand begins this new chapter.”
— 5Dimes (@5DimesSB) September 14, 2020
Rumors to Reality Regarding US Market Entry
In early September, 5Dimes posted a message on its social media pages and the website itself. “Immediate action required from all U.S. customers,” it read. While the next sentences announced a new business venture “with the evolving legal landscape in the United States,” many American players only saw the next line about suspending services to the US market.
“We will stop offering online betting for U.S. customers at 12am ET on September 21, 2020.”
“All U.S. customer balances should be requested between now and 12am ET September 25, 2020.”
A claims administrator would take over funds on September 30. Accounts unclaimed by one year from that date – by September 30, 2021 – would be abandoned.
Your questions answered: https://t.co/dg3jCinZBspic.twitter.com/swrFDfinMN
— 5Dimes (@5DimesSB) September 8, 2020
Players who requested payouts found they were handled expeditiously. Some chose to transfer their account balances to a site called BetAnySports.eu, an offshore sportsbook and online gambling site based in Costa Rica.
It didn’t take a scholar to figure out that 5Dimes likely worked some type of deal with the US government to enter the market. But to have operated offshore for so many years and then gain entry with one settlement seemed odd.
However, Creighton’s death paved the way for Varela to do it on her own terms, separate and apart from the 5Dimes run by her husband for decades. Talks may have begun as soon as Creighton disappeared but definitely after Costa Rican authorities found his body. The DOJ memo noted that Varela “fully cooperated with the investigation by identifying criminal assets, implementing compliance procedures, and reorganizing the 5Dimes corporate structure into a transparent one.
Varela is now consulting with “a team of trusted advisors” to find the best way to relaunch the sportsbook and online casino in states wherein those activities are regulated by the state governments.
More Details: https://t.co/ghQjR5e0Jlpic.twitter.com/zkw5fLISI2
— 5Dimes (@5DimesSB) September 30, 2020
What’s Next for 5Dimes?
There are many possibilities for the company, the first of which will likely be to apply for licensing in a state like New Jersey or Michigan, West Virginia or Pennsylvania. Those states offer online casino games as well as online sports betting.
Varela could run the company or sell it and retire to a very comfortable life.
The company also recently pulled out of other markets, as Online Poker Report explained. However, regulations and requirements differ from country to country, and 5Dimes must still prove itself to be a now-compliant and law-abiding company.
Related Articles
Receiving permission to enter legal gambling markets after years of black market operations is extremely difficult. But that hasn’t stopped one of the world’s largest offshore sportsbooks from trying.
5Dimes, formerly based in Costa Rica, has just scored a massive victory in that effort. The company announced on Wednesday that it has received a gaming license from the Isle of Man Supervision Commission.
It will now relaunch its international product from that jurisdiction. The Isle of Man itself is a tiny market, with a population of less than 100,000. However, its Supervision Commission has international recognition. Whereas Costa Rican sites are effectively unregulated, an Isle of Man license is an assurance to other countries that the operator is playing by the rules.
“This licensure is an exciting milestone for the 5Dimes brand,” said Laura Varela, speaking for the company’s board of directors. “The Isle of Man is a Tier-1 jurisdiction, known for its advanced approach to gambling and e-gaming legislation and its exceptional reputation in the international gaming community. The Isle of Man sets high standards for its gaming operators and players, and we look forward to upholding the same level of principles and innovation with the launch of 5Dimes.”
Varela is the widow of the company’s founder, William Sean “Tony” Creighton. Tragically, he was kidnapped in 2018 and later found murdered.
Creighton’s death left the company in Varela’s hands. It’s under her leadership that 5Dimes began to try to clean up its act. This began with a settlement made with the USAttorney’s Office for the Eastern District of Pennsylvania, to the tune of $46.8 million.
Initial skepticism may still prove warranted
The key in all of this is that Varela herself hasn’t been accused of any wrongdoing. In fact, an investigation by US authorities found that she had no part in the company’s black market operations while Creighton was at the helm. Moreover, she entered into the settlement arrangement with the Pennsylvania authorities of her own volition.
That fact forms the basis on which Varela is attempting to steer the company toward legitimacy. Regulatory bodies vary in the extent to which they separate companies from the people who run them. Some take the position that a company’s misdeeds will follow it no matter who is at the helm. However, others are more receptive to the idea that a change in leadership can wipe the slate clean.
5Dimes suddenly stopped taking bets from US customers at the beginning of September 2020. This turned out to be related to the settlement the company paid to the Pennsylvania authorities. In return for admitting to the company’s misdeeds and paying the fine, Varela received immunity from further prosecution — for herself and the company — for any crimes committed prior to Sept. 30, 2020. US customers received instructions to withdraw their funds prior to that date.
There are still causes for concern, however. Back in September, there were reports from some US-based customers that 5Dimes representatives had directed them to another offshore site, BetAnySports. This company offers a near-identical set of products, right down to a large portion of the copy on its website. Meanwhile, 5Dimes continues to serve many gray market countries, despite having pulled out of the US and a handful of other regulated jurisdictions.
These residual stains don’t seem to have impacted its ability to get a license in the Isle of Man. Other regulators may see things differently, however.
Not all offshore regulators are equal
To someone unfamiliar with the industry, switching from Costa Rica to the Isle of Man may not seem like a big deal. Both are, in some sense, offshore regulatory jurisdictions. Neither can serve US customers legally, as states require companies to host their servers locally.
However, when it comes to offshore regulators, there is enormous variation in terms of level of oversight.
Costa Rica falls at one end of the spectrum. Though many companies claim to be licensed in the country, there is in fact no such thing as a Costa Rican gaming license. Companies will pay a small amount — $4,500 up front and $1,950 per year — to register in the country. However, they have no oversight whatsoever, and pay no taxes as long as they don’t serve Costa Rican customers.
5dimes Taxes Online
At the opposite extreme are the Isle of Man and Malta. They have each made a commitment to providing strict oversight to online gambling companies. That, combined with favorable tax rates, has turned international online gambling into a major industry for them. In September 2012, they pushed further in establishing their trustworthiness by entering a mutual data-sharing agreement. Through this, they’ve each improved their regulatory standards and developed the ability to assist each other in investigations.
Not every legal online gambling country insists that servers be hosted locally. Those that allow reputable, regulated offshore sites to operate tend to look for licenses from the Isle of Man and Malta. Virtually every company you’ll see operating legally in the US will have a license in one or both of these places if it serves international customers. This includes Flutter, Entain, 888 Holdings, and their various brands, among others.
PokerStars was the exception to the rule
After settling with US authorities, 5Dimes claimed it would apply for a New Jersey license. It hasn’t received one yet, but it hasn’t been formally rejected either. It’s unclear whether the application was ever filed, if it is still pending, or if it has been withdrawn.
5Dimes is popular because it has favorable lines and a good reputation compared to other offshore sites. US sports bettors are therefore hopeful about its chances. Those without a personal stake in the matter are more skeptical, however, and for good reason.
We know that it’s not impossible for a company to clean up its act and make it into legal US markets. There is exactly one example of that, namely PokerStars. It served US customers illegally from the 2006 passage of the Unauthorized Internet Gambling Enforcement Act (UIGEA) to the 2011 crackdown known as Black Friday.
That illegal activity has prevented PokerStars from getting licensed in Nevada. Other state regulators, however, have been more charitable. PokerStars is currently active as a poker room in New Jersey, Pennsylvania, and Michigan, while its associated sportsbook Fox Bet is in all of those plus Colorado.
However, PokerStars’ entry to the US demonstrated the effort required to go straight. It transformed its corporate identity and went public via a reverse merger with a much smaller company. It distanced itself not only from its original owner, Isai Scheinberg, but also all its executives from that era. Finally, it spent years bending over backward to show a proactive attitude toward compliance. That’s an effort that continues to this day.
5dimes Taxes 2019
If 5Dimes has to go to similar lengths, then its Isle of Man license is only the first of many hoops. It is, however, an important step. Moreover, the speed with which it managed it should give doubters at least a little pause.