Internet gaming group BETonSPORTS, which removed its chief executive from his job following his detention in Texas last month on racketeering charges, said on Friday it was closing down the U.S. business, which drives the vast majority of the company's profits.
The company said it would cease operations in Costa Rica and Antigua, where its U.S. operations are based, because they were no longer viable amid a restraining order on the business and the charges faced by former Chief Executive David Carruthers.
BETonSPORTS said it would also pay any liabilities to staff and creditors and repay balances due to U.S. customers. Its ability to do this would partly depend on whether it could persuade banks and other intermediaries to release its funds, the company added.
Management were taking steps to make sure the company did not knowingly accept any wagers form U.S. customers, it added.
Altium Securities analyst Greg Feehely described the company's decision as the worst outcome for shareholders given the U.S. accounts for around 95 percent of profits. He said BETonSPORTS may have to sell its Asian business to settle its outstanding liabilities, leaving nothing for equity investors.
Today's news does at least draw a line under the situation and of course removes a significant competitor in the U.S. market ahead of one of the busiest periods of the year, he said in a research note.
Feehely added that online gaming firms with significant U.S. business like Leisure & Gaming and online bookmaker Sportingbet were likely to be beneficiaries of BETonSPORTS' U.S. closure.
He said, however, that short-term sentiment across the UK online gaming sector was likely to take a fresh hit.
In mid-morning trading shares in Sportingbet were 4.3 percent lower at 258-1/2 pence, while Leisure & Gaming was unchanged at 77 pence. Shares in PartyGaming were down 0.5 percent at 110-1/2 pence. Internet casino and poker room 888 Plc was a rare sector riser, up 1 percent at 153 pence.
Carruthers and seven others have already pleaded not guilty to racketeering and other charges and a U.S. court has extended to August 14 an order barring the online bookmaker from taking U.S. bets.
Carruthers was arrested by U.S. authorities in July while passing through a Texas airport. He was en route from the United Kingdom to Costa Rica.
The charges allege the company failed to pay U.S. excise taxes on more than $3.3 billion in wagers taken from U.S. gamblers. The government seeks forfeiture of $4.5 billion, removal of access to BETonSPORTS's Web sites in the United States, and the return of money held for U.S. account holders. The United States is the bookmaker's biggest market.
Shares in BETonSPORTS were suspended on July 18.