The chief executive of BetonSports was arrested on entry to the US yesterday and the company ordered to stop taking bets from Americans, as federal prosecutors took a major step towards shutting down the offshore internet betting industry.
David Carruthers was taken into custody in Texas, on charges connected with operating an illegal betting operation. And the founder of BetonSports, the maverick bookie Gary Kaplan, has been charged with running illegal gambling operations since 1992.
The US government is asking a court to seize $4.5bn of assets from BetonSports, the Kaplan family and other defendants.
Mr Carruthers took over at the head of BetonSports after Mr Kaplan stepped back from the business ahead of its flotation in London in 2004. He was picked up at Dallas airport, changing planes on the way to the company's headquarters in Costa Rica. He was last night in custody awaiting a bail hearing on Friday.
BetonSports said its US lawyers were last night studying the indictment against Mr Carruthers, Mr Kaplan and nine other individuals, plus BetonSports itself and three Florida companies which distributed marketing materials for Kaplan's gambling businesses. The charges include racketeering, fraud and tax evasion.
It was not immediately clear whether BetonSports would comply with a ruling to cease soliciting bets from American citizens and to return all the money currently in their accounts - a move that could devastate the business. Three hours after the ruling by a Missouri judge, no company websites were displaying the notice. A company spokeswoman said directors would "do what is right for the business".
News of Mr Carruthers' detention had sent a shiver through the online gaming industry, which makes most of its money from US citizens but where many of the biggest companies are listed in London. Online gambling is illegal in the US, so operations are often run out of offshore centres.
US attorney Catherine Hanaway said: "Illegal commercial gambling across state and international borders is a crime. Misuse of the internet to violate the law can ultimately only serve to harm legitimate businesses. This indictment is but one step in a series of actions designed to punish and seize the profits of individuals who disregard federal and state laws."
Mr Kaplan lives in Costa Rica and a warrant has been issued for his arrest. His brother Neil is in custody in Florida. The US will seek extradition of all defendants to St Louis, Missouri, for prosecution.
The charges are the result of a joint investigation by Internal Revenue Service and the FBI. The indictment alleges that Gary Kaplan and his new business partner Norman Steinberg, as the owners and operators of Millennium Sportsbook, Gibraltar Sportsbook, and North American Sports Association, took bets from undercover agents in St Louis who used pseudonyms to open wagering accounts.
News of Mr Carruther's arrest had earlier driven the whole London-listed internet gaming sector down, hitting sports betting companies particularly hard. Shares in BetonSports closed down nearly 17 per cent at 122.5p. Its sportsbook rival Sportingbet plunged 13 per cent to 282p, while the poker giant PartyGaming closed down 5.5 per cent at 103p.
Mr Carruthers has been one of the most outspoken opponents of new moves to toughen the laws against online gambling in the US. Last week, the House of Representatives overwhelmingly passed a bill that would update existing laws dating from 1961 to explicitly outlaw bets taken over the internet. Last Friday, Mr Carruthers told shareholders at his company's annual meeting that the chances of the bill becoming law were "remote". He has said the US should legalise and regulate internet gambling.