NCUA Knew Of Seized CU’s Online Gambling Activities

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WASHINGTON – Vensure FCU, taken under conservatorship by NCUA two weeks ago, claims the federal regulator knew all along it was processing millions of dollars in online bets for the two biggest poker websites and had agreed at the agency’s behest to exit the business.


The Mesa, Ariz., credit union, which filed suit in federal court here yesterday challenging the NCUA action as “arbitrary and capricious,” claims it provided NCUA with as many as 50 legal opinions since starting to process online poker bets last year of the legality of providing automated clearinghouse services for Trinity Global Corp.


Trinity’s $2 million credit union account was seized by federal prosecutors along with funds at 32 banks on April 15 as part of a worldwide sting aimed at shutting down illicit gambling sites. Trinity was processing as much as $25 million a day through the credit union for bets made at the Poker Stars and Full Tilt Poker websites.


Lawyers for the credit union assert that NCUA’s assumption in taking over Vensure is wrong and the credit union would not be insolvent if federal prosecutors force it and the other banks to forfeit those funds. The Washington lawyers insist the credit union, which had 26% net worth at March 31, is financially stable, has strong management and significant resources, including its field of membership serving Arizona’s Vensure Employment Services and its 12,000 “participants.”


Vensure acknowledges that NCUA issued it a cease and desist letter on January 18 insisting it exit the online poker business, and says its board voted January 31 to do just that, notifying Trinity Global of a termination of its processing agreement in 180 days.


The suit says that publicity related to the NCUA conservatorship is already having negative affects on its business and has caused at least five members to close their accounts and could lead to a run on deposits. “An immediate injunction is necessary to return VFCU to the hands of its management, who can continue to implement VFCU’s business plan and restore confidence to members,” the suit says.


The credit union has a checkered past. It was chartered in 1955 in upstate New York as Grand Adirondack FCU, then moved briefly in 2009 to Florida, before relocating to Arizona later that year and reconstituting itself as Vensure FCU. At March 31 it had 144 members but no member loans and the vast majority of its business was the processing of online gambling bets, which allowed it to earn net income of $592,000 on just $2.7 million in assets for 2010.



The legal challenge to the credit union takeover has steep hurdles to overcome because NCUA has never lost a court challenge to one of its conservatorships.


An NCUA spokesman said the agency does not comment on pending litigation.





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