Action 24/7 sued the Tennessee Education Lottery on Monday for what it feels to be an improper suspension of its Tennessee sports betting license.
The company wants its license reinstated immediately after “TEL unlawfully disabled Action’s ability to operate despite the fact its license had not been lawfully suspended.”
The lawsuit stems from whether TEL Board Chair Susan Lanigan had the authority to suspend Action 24/7’s license Thursday evening. Her decision was eventually upheld and extended by the full board at an emergency meeting Friday.
The payday loan company turned sportsbook operator is the first US sports betting company to have its license suspended since PASPA fell in May 2018.
Action 24/7 suspended over money laundering, fraud claims
The Board heard a report from TEL sports betting investigator Danny DiRienzo that outlined multiple instances of alleged money laundering and credit card fraud.
Action 24/7 submitted 23 incident reports concerning similar activity on March 17. DiRienzo gave the sportsbook credit for catching it but noted the activity started March 9.
DiRienzo noted he only had time to look at a handful of the incidents but said there appeared to be “tens if not hundreds of thousands of dollars” of damages.
He also explained this wasn’t the first time Action 24/7 was outside of the law. Someone under contract with the company helped facilitate proxy betting for at least 40 accounts before the Super Bowl, he said.
Lawsuit: DiRienzo’s report included ‘wildly inaccurate’ claims
The lawsuit disputes how much the fraudulent accounts were able to get out of those debit cards:
Mr. DiRienzo’s statement was wildly inaccurate as documented in the 23 incident reports he had been provided by Action. In fact, as documented in the incident reports, the total amount of fraudulent deposits was approximately $37,362. Of that amount, Action currently has recovered and is in possession of $14,701, meaning that only $22,661 in fraudulent withdrawals were successfully made by seven individuals to four bank accounts.
Later in the lawsuit, Action 24/7 questioned DiRienzo’s experience:
Mr. DiRienzo heavily faulted Action for not identifying that debit card holders’ names were different from the names on players’ accounts. However Action only has the information entered by the player, which does not include the card holder’s name. … Mr. DiRienzo’s statements show that he lacks sufficient understanding of such transactions and has unreasonable expectations regarding the level of diligence expected of Action and the other licensees in combating player debit card fraud.
DiRienzo opened his remarks at Friday’s meeting explaining he previously worked 25 years in federal law enforcement including 22 years as a US Secret Service special agent. In that role, he investigated illegal gambling operations and “many money laundering cases.”
Suit claims TEL didn’t follow procedures
Action 24/7 says Lanigan’s suspension of its TN sports betting license without meeting with the full board or the smaller Sports Wagering Committee was illegal:
Despite these clear requirements, on the afternoon of March 18—the same day Mr. DiRienzo had reviewed only three or four of the 23 incident reports that Action voluntarily provided—the Chair of the Board elected to attempt to suspend Action’s license without convening the full Board or even the Sports Wagering Committee.
Action 24/7 also said the suspension because of emergency circumstances is unfounded, as the sportsbook already took steps to enhance its anti-money laundering controls.
The lawsuit warns “catastrophic effects” to Action 24/7 from the suspension:
The purported suspension of Action’s license thus has already had, and will continue to have, catastrophic effects on Action’s ability to continue as a business.
A TEL spokesman declined comment Tuesday, saying it would be “inappropriate” to comment because of pending litigation.