Update 6:00 pm ET: On Tuesday afternoon, TN Action 24/7 processed a withdrawal for nearly $5,000 for the bettor referenced below (funds deposited less the vig on one losing wager), plus $100 as part of a deposit promotion. The sum is expected to be transferred to the bettor’s funding account within 24-48 hours after processing.
A sports bettor in Tennessee deposited $5,000 into a TN Action 24/7 account on the day the NCAA men’s basketball tournament began last week — and now he’s not sweating any game, but the fact that his funds are inaccessible in the wake of the sportsbook’s suspension on Friday by state regulators.
Separate from the numerous apparent victims of widespread credit card fraud and money laundering occurring on TN Action 24/7’s sportsbook platform, there’s a class of account holders who did lawfully deposit into accounts. But as of Tuesday morning, they cannot log into the sportsbook or otherwise access account funds.
Late March 18, the Tennessee Education Lottery Corporation (TELC) suspended TN Action 24/7 after reviewing self-reported evidence of widespread financial crimes. According to the TELC’s internal investigator, basic internal controls could have prevented the activity — controls that the sportsbook represented to the TELC it had in place during the licensure process. On March 19, the TELC board convened for an emergency meeting and voted to suspended TN Action 24/7 indefinitely, until such time that Tennessee Action 24/7 could demonstrate it had implemented proper internal controls.
According to the Tennessee resident who discussed his account with Sports Handle on condition of anonymity, the TELC advised him on Monday that TN Action 24/7 was “authorized to allow withdrawals upon the request of a player under certain conditions,” and further that “players should contact the operator for further information.”
In an email on Tuesday, TELC spokesman Dave Smith told Sports Handle, “Action 24/7 can authorize withdrawals provided the player can prove they are the owner of the account and there is no suspicious activity on the account.”
Meanwhile, the bettor contacted Action 24/7’s support team and received the following reply:
“We are working to make the site accessible for withdrawals. As soon as we are able to do so, we will contact you directly. I apologize for this inconvenience, especially such a short time after your deposit. We will be in contact as soon as the site is available.”
As of 9 a.m. CT on Tuesday, the bettor had not heard anything additional from the sportsbook or the TELC. A support address for the sportsbook did not respond to Sports Handle’s inquiry on Monday evening about withdrawal processing.
“I just wanted to play around with a different sportsbook and check out the features during March Madness,” the bettor said of his deposit. “This is concerning, and inconvenient timing, to say the least.”
‘Clearly fraud’ and the not the first set of offenses
So how bad is the breach? The lack of transparency is very concerning
— kenny (@Ewaardt) March 19, 2021
The jarring scope and depth of the troubling transactions that occurred on TN Action 24/7’s platform were highlighted by the TELC’s internal investigator during Friday’s emergency meeting.
“This is clearly a case of credit card fraud,” said investigator Danny DiRienzo, who worked for the Secret Service for 20 years. “Clearly a case of money laundering. Clearly a case of wire fraud. There are tens if not hundreds of thousands of dollars of damage done here to many victims.”
DiRienzo discussed his findings regarding just one of the compromised accounts he reviewed: 184 deposits were made on the platform using seven different credit or debit cards with seven different names, and 124 of those deposits were successful in making thousands in deposits. Subsequently, funds fraudulently deposited, or stolen, were withdrawn.
And this is all separate from the earlier instances of criminal activity that occurred at TN Action 24/7 around the Super Bowl, when DiRienzo says he found evidence of illegal proxy betting in connection with the sportsbook. This was accomplished, he said, through a person associated with the sportsbook located in Tennessee creating accounts for more than 40 out-of-state bettors. Such activity is a blatant violation of the federal Wire Act.
How much knowledge officials at TN Action 24/7 had of the activity, if any, probably has already become a subject of state and/or federal investigations. Credit card fraud and money-laundering violations fall under he FBI’s jurisdiction, especially as these transactions may have crossed state lines. The proxy betting, if it indeed involves out-of-state residents, could be a federal crime as well.
Response from sportsbook
Meanwhile, TN Action 24/7 CEO Tina Hodges has blasted the TELC board’s decision and is seeking to have the company’s license to operate restored as soon as possible. Hodges issued the following statement on Friday:
The Board today indefinitely suspended Action 24/7’s sports betting operator license for suspicious player deposit activity. This suspicious activity was detected quickly by Action staff and Action swiftly suspended the involved player accounts. Action instituted additional controls to curb the activity, and no further such activity has occurred since. Yet, the Board relied upon unfounded fears of future speculative recurrences of the activity, and took draconian action just as the NCAA Tournament is beginning. Obviously, we are disappointed in the Board’s decision, but will continue to work with TEL staff and seek all other avenues of relief to have the suspension lifted quickly so that the people of Tennessee may continue to enjoy wagering on the Action 24/7 sportsbook
In an appeal from the TELC’s administrative hearing, TN Action 24/7 has also now filed an action against Lanigan et al. as it seeks a restraining order against the TELC, that would provide temporary and permanent injunctive relief, to allow the sportsbook to resume operations while both sides address the underlying allegations and issues. The Nashville Chancery Court has set a hearing on the matter for 2 p.m. CT on Wednesday. Action 24/7’s memorandum in support of emergency motion for temporary injunction can be viewed here.
Among other things, the sportsbook alleges that in issuing the suspension, the board “lacked a clear understanding of its statutory mandate and admitted they were not operating within the framework of their own rules.”
The memorandum also alleges that “DiRienzo’s statements show that he lacks sufficient understanding of such transactions and has unreasonable expectations regarding the level of due diligence expected of Action and the other licensees combating player debit card fraud.”
TN Action 24/7 describes a haphazard meeting on Friday, writing that one board member was driving in his car and hadn’t read Hodges’ declaration, while at one point a voice on the call “can be heard on the audio recording state, “I think it’s time to go get drunk.”
Ultimately, attorneys for the plaintiff sportsbook conclude:
Swift injunctive relief is necessary to prevent a manifest injustice to Action. TEL has violated Action’s constitutional rights and threatens its very existence with a suspension that is indefinite pursuant to a decision made in defiance of the facts and the law. If Defendants are allowed to continue this indefinite suspension, Action will suffer immediate, irreparable harm including financial ruin. Accordingly, the court should grant a temporary injunction requiring Defendants to immediately reinstate Action’s license and notify any third parties as necessary for the operation of Action’s platform.
Response from legislature
Elsewhere, there are two separate bills, both related to sports gambling regulation, currently on committee schedules Tuesday in the Tennessee legislature. One involves the TELC’s recent approval for Advance Financial locations to transact deposits and withdrawals for TN Action 24/7 account holders.
The impetus for a change of policy is the proximity of gambling to high-risk lending. Advance Financial deals loans akin to payday loans at interest rates of up to 279.5%. The newly filed bill would prevent Advance Financial locations from processing deposits and cash withdrawals at its storefronts, of which there are over 100 in Tennessee. The other bill would empower the state’s nine-member appointed Sports Wagering Advisory Council to have some actual muscle in the regulatory rule-making process, with say in disciplinary matters as well, such as this one.
Currently, the sports wagering committee of the TELC board consists of just three people: board chair Susan Lanigan, attorney Will Carver, and an accountant for Advance Financial, John Crosslin, who has abstained on certain votes that would impact TN Action 24/7. Hodges, whose Twitter handle refers to herself as “TN Rookie Bookie,” is the the CEO of Advance Financial as well as the CEO of TN Action 24/7.
While Crosslin sought advice during the hearing to help TN Action 24/7 get back online, TELC CEO Rebecca Hargrove noted that a gap in timing between discovery of malicious activity on March 9 and self-reporting on March 17 did not reflect well on the sportsbook in that regard.
“[The sportsbook] has known about the suspicious activity since March 9,” Hargrove said. “Had they told us March 9 instead of waiting until March 17, maybe we could have worked through all this before the [NCAA basketball] tournament. I feel bad for them, but that’s the timeline.”
DiRienzo is more focused on the individual victims like the bettor who has $5,000 currently held up with no sense of when it may return to his possession. It’s unclear just how many bettors are in similar situations. As of Tuesday morning, TN Action 24/7 either cannot release funds through its back-end technical mechanisms, or it simply has not processed withdrawals under the conditions it is permitted to do so.
“When I reference protecting Tennessee players, I’m talking about protecting citizens of Tennessee,” DiRienzo said on Friday. “If this is truly debit cards, which is all that’s supposed to be processed — not credit cards — it’s people that hold those accounts, they’re the real victims here.”
This is quite a fluid and unique situation, as TN Action 24/7 is a local sportsbook that’s not competing anywhere else nationally. It is also now the recipient of the dubious distinction of being the first sportsbook to have its license suspended in the U.S. following the fall of the federal ban on full-fledged wagering outside Nevada in May 2018.
“Action 24/7 really carries the burden at this point to have some sort of independent analysis done and to show us that the internal controls they’ve represented were in place are now in fact in place,” said DiRienzo, in offering his assessment during Friday’s hearing. “If they can do that, let’s get them up and running. But if we don’t take a holistic approach to this, lord knows what the next round is going to entail. The internal controls in place right now, in my opinion, will not prevent future criminal activity from occurring on this website.”
This article has been updated with portions of plaintiff’s memorandum seeking a TRO.