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. Last Updated: 07/27/2016

U.S. Probe Hit Gaming Shares Hard

LONDON -- Shares in European online gaming firms tumbled by as much as 9 percent on Monday following news U.S. prosecutors had launched a probe into Internet gambling.

The U.S. Department of Justice has demanded information from some of the world's biggest investment banks in its probe into companies like Britain's PartyGaming, banking sources said.

The move is the latest in a U.S. crackdown on online gaming, which began with the arrest of BETonSPORTS' Scottish CEO David Carruthers in last July.

Analysts said U.S. prosecutors were now probably trying to target founders and senior executives of Internet gambling companies, just as they did with the arrests of two NETeller founders last week.

Canadians Stephen Lawrence, 46, and John Lefebvre, 55, have been charged with handling billions of dollars in illegal gambling proceeds. Both face a maximum sentence of 20 years in prison.

"They're trying to make the founders sweat, as well as current management," said analyst Tejinder Randhawa of Evolution Securities.

The legality of Internet gambling in the United States was ambiguous for many years, but it was effectively banned last October when U.S. President George W. Bush signed legislation outlawing gaming financial transactions.

The big stock market-listed companies pulled out just ahead of the ban, although some privately owned web sites such as are still flouting the law. But investors fear the listed gaming giants could be targeted for taking wagers before the ban.

Lawyer Clive Gringras, head of Olswang's e-commerce unit, said the move would probably have a "chilling effect" on the industry amid fears other countries would follow the U.S. lead.

"The only way an Internet company could really avoid risk and uncertainty would be to stop doing international business," he said.