Cyberspace gambling operators cashing in
The Vancouver Sun
David Baines, Sun Business Reporter Vancouver Sun
While B.C. land-based
casinos are forced to run a
government and media
gauntlet, locally-controlled
cyberspace casinos are
operating with virtually no
regulatory or public scrutiny.
Bingo.Com Inc., GIC Global
Intertainment Corp., IGN
Internet Global Network Inc.
and Starnet Communications
International Inc. are all
Vancouver-based public
companies that are providing,
or propose to provide, internet
gaming services.
None has obtained regulatory approval from any local government agency to
offer games of chance to B.C. residents, who can play from the comfort and
privacy of their own homes.
The principals of these gaming companies have not been screened to ensure
they are of good character, and their games are not monitored to ensure they
offer players a fair and reasonable return on their wagers.
Three of these companies are quoted exclusively on the OTC bulletin board in
the United States, a virtually unregulated stock forum.
The bulletin board has no listing qualifications, no screening of officers and
directors and virtually no disclosure requirements. To date, bulletin board
companies have not even had to file financial statements.
Despite the potential jeopardy for gamblers and investors, all these
companies enjoyed sharp stock price increases. Some appear to have risen
on the hot air of internet stocks, and one has already collapsed.
- - -
The dateline on Bingo.Com's new releases is Tallahassee, Florida, but the
company is actually located on the seventh floor of 543 Granville Street in
Vancouver and its president is Darren Little of Vancouver.
The company purports to be developing "the world's first free Bingo-based
e-mail community" and is pursuing a gaming licence in Antigua. "Through an
extensive array of media partnerships, once every 24 hours, a surprise jackpot
Bingo will be announced," the company said in a release last week.
The company's shares are quoted on the bulletin board, where they have
enjoyed a meteoric rise from $2 US in January to $7 7Ú8 US at Friday's
close.
Whether the current share price reflects the company's potential worth is
impossible to determine.
Bingo.Com is not a reporting issuer in B.C. and has not made any filings
(including financial statements) with the U.S. Securities and Exchange
Commission. It is not clear who controls the company or whether any of the
insiders have taken advantage of the run-up to dump their stock.
During a visit to the company's office Friday, investor relations employees Rob
Riker and Chris Sargent refused to answer any questions about the company
or its affairs. Little could not be reached for comment.
- - -
Until recently, Sargent and Little were promoting GIC Global Intertainment
Inc., which offers internet gaming through its website, www.cyberbetz.com.
The dateline on GIC's news releases is Las Vegas, but the company is run
out of 885 West Georgia. Its president is James Chu of Vancouver.
Like Bingo.com, this company is listed on the bulletin board where its stock
has rocketed from eight cents US in November to a high of $4 US in January.
It is now trading at $2.50 US.
Chu appears to be enjoying the fruits of this share price increase. The
Vancouver Sun's Town Talk columnist, Malcom Parry, recently reported:
"Carey Pinkowski, the Canaccord [Securities] broker, and a dozen other
young Howe Street Surfers puffed $100 Cuban cigars in Fereydoun Manavi's
Uforia eatery Tuesday as stock darling James Chu celebrated his 37th
birthday a day early. Chu seems to be on a roll with his NASDAQ
over-the-counter traded Global Intertainment Corp."
The company operates its gambling business out of the Republic of Dominica.
According to investor relations person Keith Linquist, the company is "not
restricting anyone from making bets."
He said Internet gambling laws are unclear: "It's called a grey area, no one
has been taken to task on this issue . . . . We're giving our premier grief about
gambling applications, but you could be gambling next door on the Internet."
Linquist said total wagering through GIC's betting system has increased from
$3 million in November, when the company started operations, to $7 million
last month. There are, however, no audited financial statements to back up
these figures.
Meanwhile, the company has made some ambitious projections.
In December, it predicted bettors would place $500 million US worth of wagers
through its system during the second year of operation, and generate $77
million US in gross profits.
The company also announced that a stock tout service called the Wall Street
Research Group had recommended the stock, describing it as "tremendously
undervalued" relative to other Internet stocks.
Questioned by The Sun, Linquist allowed that Wall Street was paid for its
recommendation. "We tell all our shareholders that," he said.
However, the company's news release, which was circulated through
Bloomberg Financial Services, makes no mention of any payment.
- - -
IGN Internet Gaming Corp. is based in Vancouver and is listed on the bulletin
board and the Vancouver Stock Exchange, which means it must file routine
disclosure documents including financial statements and insider trading
reports with the B.C. Securities Commission.
It runs its gambling business from St. Kitts in the Carribean through its
Website, www.casinosoftheworld.
Its principals are Raj Chowdhry and Hari Varshney, two long-time Howe Street
promoters whose companies are characterized by murky offshore dealings
and dubious business ventures.
One such company was Wall Street Ventures, a VSE company that placed
blocks of cheap stock with a Swiss bank, then announced it would acquire a
multimillion-dollar collection of Middle East stamps.
The stock soared to $65Ú8 by March 1989, then the stamps were exposed as
worthless and the stock collapsed.
In 1993, Chowdhry and Varshney acquired control of a shell company and
sold large blocks of relatively cheap stock to two Swiss companies.
They changed the company's name to International Thunderbird Gaming Inc.
and placed hundreds of gaming machines on Indian reservations in California
over the objections of state authorities. The stock soared to more than $6 per
share.
By the spring of 1998, the game was over. Federal attorneys in California
commenced legal action to seize the gaming devices. The company suffered
massive losses and the stock is now trading at 55 cents.
IGN has followed the same pattern. Its share price ran to nearly $5 in March
1997 on the basis of its proposed gaming business. In April 1998, it opened
its on-line casino with a full range of games.
Results were hugely disappointing, however. Gross revenues during the six
months ended December 1998 were only $165,000 and the net loss was $2.1
million. The share price has slumped to 75 cents.
- - -
One of the highest flying on-line gambling companies is Starnet
Communications, which is based in Vancouver and listed on the bulletin
board.
It offers on-line gambling from Antigua and "on-line adult entertainment" from
its office on Carrall Street where it employs 100 people. Gambling now
represents about 65 per cent of its business.
Early shareholders were Steve Ng, who was a co-applicant with Dimitrios
Pilarinos for the North Burnaby Inn casino licence.
Other shareholders included Tony Ricci and Chuck Choo, co-owners of
Number 5 Orange, where Starnet broadcasts live strips shows.
In May 1998, Starnet granted Ricci options to buy 75,000 shares at 74 cents
US each. Since then, Starnet's stock price has soared to $75Ú8 US, making
his options worth more than $500,000 US.
Although it is listed on the bulletin board, Starnet is a fully reporting company
and regularly provides financial statements.
Unlike the other three companies, it is generating real profits. During the nine
months ended Jan. 31, it reported net sales of nearly $6 million and net
income of $1.2 million. Another difference, says investor relations officer
Carey Nelson, is that "Starnet does not knowingly accept wagers from
Canada or the U.S."
Nelson said Starnet's system, which can be accessed through
www.worldgaming.net, identifies internet service providers from Canada and
the United States and automatically defaults to a "fun site," where no real
money can be wagered.
- - -
The B.C. government is currently struggling with the whole issue of Internet
gambling.
Mike Farnworth, the minister in charge of gambling, has publicly opposed
Internet gambling.
As one government bureaucrat said: "It's unregulated. You don't know the
people you are giving your credit card number to. You don't whether the
games have any integrity. Basically it's caveat emptor."
The problem is vexing, not only because of the inherent problems of regulating
the Internet, but also because of overlapping jurisdictions.
"To date, Canada has adopted a passive approach to the development of
Internet gaming, preferring to wait until the international legal landscape is
settled," states the B.C. government white paper on gambling, released in
January.
"The legalization of Internet gaming in some jurisdictions has made it virtually
impossible to contain the spread of on-line gaming. In the absence of a global
convention banning Internet gaming, or technology preventing access to
gaming web sites, any government regulation of Internet gaming will be
effective only temporarily and locally."
Comments about this article? Send mail to David Baines |
