Government Seizes Funds of Neteller Customers

The war on online gambling is hitting would-be bettors where it hurts the most - in the wallet.

According to wire reports, the FBI has seized the funds from tens of thousands of individual customer accounts from Neteller, a money transfer system popular among online gamblers.

Federal officials arrested Neteller founders Stephen Lawrence and John Lefebvre in January as part of a crackdown on Web-based betting.

Popular gambling hubs like BetOnSports, which accepts wagers on sporting events, and Neteller, which transferred funds between customers and gambling Web sites, stopped accepting wagers from U.S. customers. But those who still had funds in active Neteller accounts cannot recover those monies after the federal seizure.

According to the USA Today, about two-thirds of Neteller's business came from transferring funds from U.S.-based bettors to gambling companies based outside America. That amounted to $7 billion dollars of business in 2005.

Nevertheless, Neteller did serve as a money-transfer service between financial institutions and online merchants that had nothing to do with betting. In addition, some Web sites used Neteller to pay freelance writers and other contract employees for their services.

In the USA Today, FBI agent Neil Donovan told the USA Today that "funds from Neteller are being held in court as potential evidence. Some customers may get their money back."

On its Web site, Neteller declared that it had stopped transferring funds to and from online gambling sites for US customers as of Jan. 17. An FAQ on the same page as the notice said that the value of all customer funds was being held in independent trust accounts until withdrawal issues were resolved.

According to The Online Wire, attempts to reach Neteller spokespersons were unsuccessful.

The federal government has been trying for years to get a handle on online gambling, which revolutionized the sports betting industry as the Internet became an everyday tool for most Americans.