How Online Gamblers Unmasked Cheaters

<b>60 Minutes/Washington Post</b> Joint Investigation Questions Honesty, Security Of Gambling Sites

This story was first published on Nov. 30, 2008. It was updated on June 25, 2009.

In the wild, wild west, when a poker player was caught cheating it was a capital offense, with the punishment quickly dispensed right across the card table. But today if you're caught cheating in the popular and lucrative world of Internet poker, you may get away scot-free.

At least that's what seems to be happening in the biggest scandal in the history of online gambling.

As 60 Minutes correspondent Steve Kroft first reported last November, a small group of people managed to cheat players out of more than $20 million.

And it would have gone undetected if it hadn't been for the players themselves, who used the Internet to root out the corruption. As a joint investigation by 60 Minutes and The Washington Post revealed, it raises new questions about the integrity and security of the shadowy and highly profitable industry that operates outside U.S. law.



WashingtonPost.com: Click here to learn more about online gambling.



If you had to pick the moment that the poker boom began, it was probably the day an unknown accountant named Chris Moneymaker won $2.5 million at the 2003 World Series of Poker.

Suddenly every amateur with a hat, sunglasses and a stack of chips saw themselves as the next big money maker. Nearly 7,000 competed in last year's tournament for $180 million in prize money. But the fever has spread far beyond Las Vegas.

It is the richest sporting competition in the world. And yet all this pales in comparison to the half million people who are playing on the Internet right now in the unregulated world of online poker.

As we learned in a tutorial, all you have to do to play is log on to the Web, click your way to an online gambling site, open an account with your credit card, choose your game and pull up a seat at a virtual table.

"These people could be playing from anywhere in the world. They could be here in the United States. They could be, you know, in India. They could be in South Africa," Australian computer security expert Michael Josem tells Kroft.

We should tell you that this $18 billion industry is illegal in the U.S., but the ban is almost impossible to enforce since the Internet sites and the computers that randomly deal the cards and keep track of the bets are located offshore, beyond the jurisdiction of U.S. law enforcement.

And unlike land-based casinos, there is almost no official regulation, enforcement or supervision. But it hasn't stopped thousands of mostly young men from making this their livelihood. Todd Witteles, a former computer scientist-turned-poker pro, says you no longer have to go to Vegas to find a high stakes game.

"You could do it from your own living room," he says. "You don't have to get dressed. You don't have to anything. It's right there on your computer."

Witteles says online poker is much different - faster, more aggressive and less personal.

"You're not lookin' at somebody sittin' across the table. You're just playing the cards that tumble out of the computer," Kroft remarks.

"Not only are you not looking at your opponents, you're not looking at the cards being dealt, you're not looking at who's dealing them to you. So, you don't know if the whole thing is legitimate, even if all the players sitting with you are just as legitimate as you are. Maybe the whole game isn't," Witteles says.

And as Witteles found out, it wasn't, at least on a popular Internet site called "Absolute Poker." His suspicions were first aroused in a high stakes game of Texas Hold 'Em, against what he thought was an incompetent, and lucky, amateur using the screen name "Grey Cat."

"This Grey Cat person was new. And at first, he seemed like a live one. He seemed terrible," Witteles remembers. "He seemed to play crazy. It seemed like he was giving his money away. Except the only thing was, he wasn't losing. He was playing in a style that was sure to lose, but he was killing the game day after day."

While Witteles was losing $15,000 to the apparent novice, other high stakes players began to notice improbable and endless winning streaks on Absolute Poker's sister site, "Ultimate Bet."

David Paredes, a Harvard grad who has made enough money playing poker to pay off his law school loan and live in an expensive New York apartment, got fleeced by a player called "Nio Nio."

Asked how much he lost, Paredes tells Kroft, "I'm probably down somewhere in the range of $70,000 to that particular player."

Paredes says there were other players who lost higher sums. "In the range of $250,000, $90,000, $70,000, $210,000."

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