martin loftus guilty plea

u.s. Department of Justice

United States AttorneyDistrict of MarylandNorthern Division

Rod 1. RosensteinUnited States Attorney

Richard C. KayAssistant United States Attorney

36 South Charles StreetFourth FloorBaltimore, Maryland 21201

November 9, 2010

410-209-48007TY/TDD:410-962-4462

410-209-4850FAX 410-962-3124

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Dale P. Kelberman, EsquireMiles & Stockbridge10 Light StreetBaltimore, Maryland 21202-1487

Re: United States v. Martin Loftus,Criminal No. Cc.I$- /0- O?t'..2-

Dear Mr. Kelberman:

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This letter, together with the Sealed Supplement, conf irms theplea agreement that has been offered to the Defendant, MartinLoftus, by the United States Attorney's Office ("this Office"). Ifthe Defendant accepts this offer, please have him execute it in thespaces provided below. If this offer has not been accepted byNovember 24, 2010, it will be deemed withdrawn. The terms of theagreement are as follows:

Offense of Conviction

1. The Defendant, Martin Loftus, agrees to waive indictmentand to plead guilty to a one count Information charging him withmoney laundering in violation of 18 U.S.C. section 1956(a) (2)(A).Your client admits that he is in fact guilty of that offense andwill so advise the Court. The Defendant expressly agrees to waivehis right to challenge the venue of this prosecution and herebyconsents to prosecution of the charge in the Information in theDistrict of Maryland.

Elements of the Offense

2. The elements of the offense to which your client hasagreed to plead guilty, and which the government would prove ifthe case went to trial, are as follows:

GOVT. EXH IBIT NO ._-:1::"'---0-=-::-:-::-CASE NO. <: Co"g - 10 - 0"1 S".z...IDENTIFICATION: _ADMITIED: _

Case 1:10-cr-00752-CCB Document 5 Filed 01/19/11 of 10

a)

b)

that the Defendant transmitted or transferredfunds to a place in the United States from orthrough a place outside the United Statesj and

that the Defendant did so with the intent topromote the carrying on of specified unlawfulactivity.

Penalties

(b) The Defendantpresented to a grand jury,

3. The maximum sentence provided by statute for the offenseto which your client is pleading guilty is as follows: imprisonment'for twenty years without parole, followed by a term of supervisedrelease not to exceed five (5) years and a fine of $500,000 ortwice the value of the property laundered. In addition, your clientmust pay $100 as a special assessment under 18 U.S.C. Section 3013,which will be due and should be paid at the time of sentencing. Ifa fine is imposed, it shall be payable immediately, unless,pursuant to 18 U.S.C. section 3572(d), the Court orders otherwise.!The defendant understands that if he serves a term of imprisonment,is released on supervised release, and then violates the conditionsof his supervised release, his supervised release could be revoked- even on the last day of the term - and the defendant could bereturned to custody to serve another period of incarceration and anew term of supervised release. The Defendant understands that theBureau of Prisons has sole discretion in designating theinstitution at which the Defendant will serve any term ofimprisonment imposed.

Waiver of Rights

4. The Defendant understands that by entering into thisagreement, he surrenders certain rights as outlined below:

(a) If the Defendant had persisted in his plea of notguilty, he would have had the right to a speedy jury trial with theclose assistance of competent counsel. That trial could beconducted by a judge, without a jury, if the Defendant, thisOffice, and the court all agreed.

has the right, to have his casewhich would decide whether there is

1 Pursuant to 18 U.S.c. S 3612, if the Court imposes a fine in excess of$2,500 thatremains unpaid 15 days after it is imposed, the Defendant shall be charged interest on that fine,unless the Court modifies the interest payment in accordance with 18 U.S.C. S 3612(f)(3).

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probable cause to return an indictment against him. By agreeing toproceed by way of Information, he is giving up that right, andunderstands that the charges will be filed by the United StatesAttorney without the grand jury. If the Defendant elected a jurytrial, the jury would be composed of twelve individuals selectedfrom the community. You and the Defendant would have theopportunity to challenge prospective jurors who demonstrated biasor who were otherwise unqualified, and you would have theopportunity to strike a certain number of jurors peremptorily. Alltwelve jurors would have to agree unanimously before the Defendantcould be found guilty of any count. The jury would be instructedthat the Defendant was presumed to be innocent, and thatpresumption could be overcome only by proof beyond a reasonabledoubt.

(c) If the Defendant went to trial, the government wouldhave the burden of proving the Defendant guilty beyond a reasonabledoubt. The Defendant would have. the right to confront and cross-examine the government's witnesses. The Defendant would not haveto present any defense witnesses or evidence whatsoever. If theDefendant wanted to call witnesses in his defense, however, hewould have the subpoena power of the court to compel the witnessesto attend.

(d) The Defendant would have the right to testify in hisown defense if he so chose, and he would have the right to refuseto testify. If he chose not to testify, the court could instructthe jury that they could not draw any adverse inference from hisdecision not to testify.

(e) If the Defendant were found guilty after a trial, hewould have the right to appeal the verdict to see if any errorswere committed which would require a new trial or dismissal of thecharges against him.

(f) By pleading guilty, the Defendant will be giving upall of these rights, except the right, under the limitedcircumstances set forth in the "Waiver of Appeal" paragraph below,to appeal the sentence. By pleading guilty, the Defendantunderstands that he may have to answer the court's questions bothabout the rights he is giving up and about the facts of his case.Any statements the Defendant makes during such a hearing would notbe admissible against him during a trial except in a criminalproceeding for perjury or false statement.

(g) If the Court accepts the Defendant's plea of guilty,there will be no further trial or proceeding of any kind, and theCourt will find him guilty.

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(h) By pleading guilty, the Defendant will also begiving up certain valuable civil rights and may be subject todeportation or other loss of immigration status.

Advisory Sentencing Guidelines Apply

5. The Defendant understands that the Court will determinea sentencing guidelines range for this case (henceforth the"advisory guidelines range") pursuant to the Sentencing Reform Actof 1984 at 18 U.S.C. ~H~ 3551-3742 (excepting 18 U.S.C.~~ 3553(b) (1) and 3742(e» and 28 U.S.C. ~~ 991-998. The Defendantfurther understands that the Court will impose a sentence pursuantto the Sentencing Reform Act, as excised, and must take intoaccount the advisory guidelines range.

Factual and Guidelines Stipulation

6. This Office and the Defendant understand, agree andstipulate to the following statement of facts, which this officewould prove beyond a reasonable doubt, and to the followingapplicable sentencing guideline factors:

Statement of Facts

If this case had gone to trial, the government would produceevidence to prove the following:

Full Tilt Poker is a company that offers online gambling onthe internet; it is located in Dublin, Ireland, and has severalhundred employees that conduct, manage, and direct the onlinegambling activity. During at least 2008 and 2009, Full Tilt Pokeraccepted funds from people located in Maryland and elsewhere("gamblers") to open accounts.

These gamblers then played games, including Texas Hold \Empoker, online with other gamblers and, as each game was played,gamblers won money that was credited to the winner's account.Gamblers with a positive account balance that included winningsroutinely requested a payout of funds by check or by electronicfunds transfer. Because most gamblers play online poker with thehope of winning money, the movement of winnings to online gamblersis essential to the success of the gambling business.

From at least in or about 2008 through August 2009, Daward LeeFalls owned and operated a company, based in California, known asElectracash Inc., that was organized to facilitate financialtransactions. During the period December 2008 to June 2009, MartinLoftus was an independent sales operator and reseller of payment

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and collections services who placed such business for Poker Starswith Electracash for a fee.

From at least in or about June through August 2009, JamesDavitt operated a company, based in California, known as HMD Inc.,that was organized to make payments by checks to individuals. Inor about June 2009, James Davitt, Martin Loftus, and Daward LeeFalls made arrangements with representatives of Full Tilt Poker tomake payments by checks to gamblers in Maryland and elsewhere,through HMD Inc., knowing that the transactions would promote thecarrying on of the gambling business.

From June through August 2009, approximately $15 million wastransferred from off-shore accounts to HMD accounts, eitherdirectly or through Electracash. These funds were then paid out byHMD Inc. to individual gamblers in Maryland and elsewhere. Inparticular, on August 17, 2009, $1,499,983.58 was wired from anaccount in Switzerland into Citibank account *****4851 in the nameof HMD Inc. for payment to Full Tilt gamblers.

APPLICABLE GUIDELINE FACTORS

The parties stipulate that the base offense level is twelve(12) pursuant to section 2S1.1(a) (1) and section 2E3.1(a) (1)(A)because the offense level for the underlying offense from which thefunds were derived (engaging in a gambling business) can bedetermined. The parties further stipulate that a two (2) levelincrease is appropriate pursuant to section 2S1.1(b) (2)(B) becausethe offense to which the Defendant will .plead guilty is inviolation of 18 U.S.C. section 1956. The parties further stipulatethat a two (2) level increase is appropriate pursuant to section2S1.1 (b)(3) because the offense involved sophisticated laundering.The parties further stipulate that no other specific offensecharacteristics are applicable. This yields an adjusted offenselevel of sixteen (16).

The parties stipulate that the defendant should be given thebenefit of a two (2) level reduction based upon the Defendant'sapparent prompt recognition and affirmative acceptance of personalresponsibility for his criminal conduct. This Office agrees tomake a motion pursuant to guideline section 3El.l (b) for anadditional one (I) level reduction in recognition of theDefendant's timely notification of his intention to plead guilty.This yields a final offense level of thirteen (13). This Officemay oppose any adjustment for acceptance of responsibility if theDefendant (a) fails to admit each and every item in the factualstipulation; (b) denies involvement in the offense; (c) gives

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conflicting statements about his involvement in the offense; (d) isuntruthful with the Court, this Office, or the United StatesProbation Office; (e) obstructs or attempts to obstruct justiceprior to sentencing; (f) engages in any criminal conduct betweenthe date of this agreement and the date of sentencing; or (g)attempts to withdraw his plea of guilty.

7. The Defendant understands that there is no agreement asto his criminal history or criminal history category, and that hiscriminal history could alter his offense level if the instantoffense was a part of a pattern of criminal conduct from which hederived a substantial portion of his income.

8. This Office and the Defendant agree that, with respect tothe calculation of the advisory guidelines range, no other offensecharacteristics, sentencing guidelines factors, potentialdepartures, or adjustments set forth in the United StatesSentencing Guidelines, which are not mentioned in this agreement orthe sealed supplement, will be raised or are in dispute. Thedefendant has reserved the right to argue, pursuant to 18 U.S.C.section 3553(a), for a sentence outside of the advisory guidelinerange, but has agreed to notify the Court, the United StatesProbation Officer, and government counsel at least 30 days inadvance of sentencing of the facts and issues he intends to raisein accordance with this paragraph.

Obligations of the United States Attorney's Office

9. At the time of sentencing, this Office will recommend asentence at the low end of the applicable sentencing guidelinerange. The government agrees that the defendant will not becharged by this Office or the U.S. Attorney's Office for theSouthern District of New York with any other offenses, or seekfurther civil forfeitures other than those that are pending, basedupon the circumstances set forth in the statement of facts in theplea agreement.

10. The parties reserve the right to bring to the Court'sattention at the time of sentencing, and the Court will be entitledto consider, all relevant information concerning the Defendant'sbackground, character, and conduct.

Forfeiture

11. (a) The Defendant agrees to forfeit all of his rights,title, and interest in the defendant property in the related civilforfeiture under Civil Number CCB-10-774, and the contents of any

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bank account that is presently frozen. The defendant furtheragrees that he will not assist any third party in asserting aclaim, a challenge, or review in those cases.

(b) The government agrees not to seek forfeiture, basedupon the statement of facts above, of any other property owned bythe Defendant that is known to the government as of the date ofthis agreement.

(c) The Defendant agrees that there are sufficientfactual and legal grounds to support the forfeiture under CivilNumber CCB-10-774. The Defendant knowingly and voluntarily waivesall constitutional, legal, and equitable defenses to the forfeitureof these assets in any proceeding. The Defendant agrees that acopy of this agreement may be submitted to the Court in connectionwith any proceedings in civil case CCB-10-774.

(d) The parties agree to jointly request at sentencingin this case that the forfeiture outlined in this paragraph will bein lieu of, and will satisfy any criminal fine applicable to theoffense of conviction.

Waiver of Appeal

12. In exchange for the concessions made by this Office andthe Defendant in this plea agreement, ~his Office and the Defendantwaive their rights to appeal as follows:

a) The Defendant knowingly waives all right,pursuant to 28 U.S.C. ~ 1291 or otherwise, toappeal the Defendant's conviction;

b) The Defendant and this Office knowingly waiveall right, pursuant to 18 U.S.C. ~ 3742 orotherwise, to appeal whatever sentence isimposed (including the right to appeal anyissues that relate to the establishment of theadvisory guidelines range, the determinationof the defendant's criminal history, theweighing of the sentencing factors, and thedecision whether to impose and the calculationof any term of imprisonment, fine, order offorfeiture, order of restitution, and term orcondition of supervised release), except asfollows: (i) the Defendant reserves the rightto appeal any term of imprisonment to theextent that it exceeds the final guidelinerange; (ii) and this Office reserves the right

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to appeal any term of imprisonment to theextent that it is below the final guidelinerange.

c) Nothing in this agreement shall be construed toprevent the Defendant or this Office from invokingthe provisions of Federal Rule of CriminalProcedure 35(a), or from appealing from anydecision thereunder, should a sentence be imposedthat resulted from arithmetical, technical, orother clear error.

d) The Defendant waives any and all rights under theFreedom of Information Act relating to theinvestigation and prosecution of the above-captioned matter and agrees not to file any requestfor documents from this Office or any investigatingagency.

Obstruction or Other Violations of Law

13. The Defendant agrees that he will not commit any offensein violation of federal, state or local law between the date ofthis agreement and his sentencing in this case. In the event thatthe Defendant (i) engages in conduct after the date of thisagreement which would justify a finding of obstruction of justiceunder U.S.S.G. ~ 3C1.1, or (ii) fails to accept personalresponsibility for his conduct by failing to acknowledge his guiltto the probation officer who prepares the Presentence Report, or(iii) commits any offense in violation of federal, state or locallaw, then this Office will be relieved of its obligations to theDefendant as reflected in this agreement. Specifically, thisOffice will be free to argue sentencing guidelines factors otherthan those stipulated in this agreement, and it will also be freeto make sentencing recommendations other than those set out in thisagreement. As with any alleged breach of this agreement, thisOffice will bear the burden of convincing the Court of theDefendant's obstructive or unlawful behavior and/or failure toacknowledge personal responsibility by a preponderance of theevidence. The Defendant acknowledges that he may not withdraw hisguilty plea because this Office is relieved of its obligationsunder the agreement pursuant to this paragraph.

Court Not a Party

14. The Defendant expressly understands that the Court is nota party to this agreement .. In the federal system, the sentence tobe imposed is within the sole discretion of the Court. In

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particular, the Defendant understands that neither the UnitedStates Probation Office nor the Court is bound by the stipulationset forth above, and that the Court will, with the aid of thePresentence Report, determine the facts relevant to sentencing.The Defendant understands that the Court cannot rely exclusivelyupon the stipulation in ascertaining the factors relevant to thedetermination of sentence. Rather, in determining the factualbasis for the sentence, the Court will consider the stipulation,together with the results of the presentence investigation, and anyother relevant information. The Defendant understands that theCourt is under no obligation to accept this Office'srecommendations, and the Court has the power to impose a sentenceup to and including the statutory maximum stated above. TheDefendant understands that if the Court ascertains factorsdifferent from those contained in the stipulation set forth above,or if the Court should impose any sentence up to the maximumestablished by statute, the Defendant cannot, for that reasonalone, withdraw his guilty plea, and will remain bound to fulfillall of his obligations under this agreement. The Defendantunderstands that neither the prosecutor, his counsel, nor the Courtcan make a binding prediction, promise, or representation as towhat guidelines range or sentence the Defendant will receive. TheDefendant agrees that no one has made such a binding prediction orpromise.

Entire Agreement

15. This agreement supersedes any prior understandings,promises, or conditions between this Office and the Defendant and,together with the Sealed Supplement, constitutes the complete pleaagreement in this case. The Defendant acknowledges that there areno other agreements, promises, undertakings, or understandingsbetween the Defendant and this Office other than those set forth inthis letter and the Sealed Supplement, and none will be enteredinto unless in writing and signed by all parties.

If the Defendant fully accepts each and every term andcondition of this agreement, please sign and have the Defendantsign the original and return it to me promptly.

Very truly yours,

Rod J. RosensteinUnited States AttorneyDi. rict a Maryland

C. /Richard C. Kay.Assistant United States Attorney

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I have read this agreement, including the Sealed Supplement,and carefully reviewed every part of it with my attorney. Iunderstand it, and I voluntarily agree to it. Specifically, I havereviewed the Factual and Advisory Guidelines Stipulation with myattorney, and I do not wish to change any part of it. I amcompletely satisfied with the representat'on of my attorney.

I am Martin Loftus I s attorney. I have carefully reviewedevery part of this agreement, including the Sealed Supplement, withhim. He advised me that he understands and accepts its terms. Tomy knowledge, his decision to enter into this agreement is aninformed and voluntary one. (,)~ Ih.,\. 1./10/.

~rL "fI j 11) V V ~_t'1_17UWAft--_~__Date DaleP. Kelberman, Esquire

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martin loftus guilty plea

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