On Monday, the US Department of Justice announced that a federal grand jury in the Eastern District of Missouri had returned a 22-count indictment charging 11 individuals and four corporations with various charges of racketeering, conspiracy and fraud.

Gary Stephen Kaplan, 47, the founder of BetonSports, a publicly-traded holding company that owns a number of Internet sportsbooks and casinos, was charged with 20 felony violations of federal laws including: the Wire Act, Racketeer Influenced and Corrupt Organizations (RICO) Conspiracy, interstate transportation of gambling paraphernalia, interference with the administration of Internal Revenue laws and tax evasion.

Other defendants in the racketeering conspiracy included: Kaplan’s siblings, Neil Scott Kaplan and Lori Kaplan Multz; Norman Steinberg; David Carruthers, chief executive officer of BetonSports.com; Peter Wilson, media director for BetonSports.com; and Tim Brown, Steinberg’s son-in-law.

Carruthers was arrested at Dallas Forth Worth airport whilst en route from the United Kingdom to Costa Rica. A bail hearing has been set for Friday.

The three other charged companies, all Florida-based, were Direct Mail Expertise, Inc., DME Global Marketing and Fulfillment Inc. and Mobile Promotions Inc.

“Illegal commercial gambling across state and international borders is a crime,” stated US Attorney Catherine L. Hanaway of the Eastern District of Missouri.

“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," she added.

The indictment alleges that Gary Kaplan started his gambling enterprise via the operation of a sportsbook in New York City in the early 1990s. After Kaplan was arrested on New York state gambling charges in May 1993, he moved his betting operation to Florida and eventually offshore to Costa Rica. According to the indictment, BetonSports.com, the most visible outgrowth of Kaplan’s sports bookmaking enterprise, misleadingly advertised itself as the “World’s Largest Legal and Licensed Sportsbook”.

Kaplan is also accused of failing to pay federal wagering excise taxes on more than $3.3 billion in wagers taken from the United States and forfeiture of $4.5 billion is sought by the US authorities from Kaplan and his co-defendants, as well as various properties.

The indictment also alleges that Gary Kaplan and Norman Steinberg, as the owners and operators of Millennium Sportsbook, Gibraltar Sportsbook, and North American Sports Association, took or caused their employees to take bets from undercover federal agents in St. Louis who used undercover identities to open wagering accounts.

In conjunction with the indictment, the US authorities have filed a civil complaint in federal court to obtain an order requiring BetonSports PLC to stop taking sports bets from the United States, and to return money held in wagering accounts to account holders in the United States.

The charges are the result of a joint investigation by Internal Revenue Service Criminal Investigation and the Federal Bureau of Investigation. The prosecution is being conducted by the Organized Crime and Racketeering Section of the Justice Department’s Criminal Division and the US Attorney’s Office for the Eastern District of Missouri. A number of other law enforcement agencies, including the Florida Department of Law Enforcement and the Tampa Police Department also assisted in the investigation.

The company has been forced to suspend access to its website as a result of the indictment. A statement on the site read: "In the light of court papers filed in the United States, the company has temporarily suspended this facility pending its ability to assess its full position. During this period no financial or wagering transactions transactions can be executed."

Unsurprisingly, investors in online gaming companies have reacted badly to the news. Shares in BetonSports lost almost a quarter of their value on the London Stock Exchange on Monday, and trading was suspended in the stock by the LSE on Tuesday. Meanwhile, shares in SportingBet lost almost 3.5% of their value, and PartyGaming's shares also declined.

It is thought that these companies rely on the United States for as much as 80% of their turnover.

Online betting and gambling has been something of a growth industry in Europe recent years, as the proliferation of the internet allowed companies to reach an ever-expanding audience. Most of these companies are listed in London but based in offshore centres such as Gibraltar, Antigua & Barbuda and Costa Rica.

Until now, many of these companies had largely ignored the thorny question of the legality of their operations in the US, despite numerous attempts by lawmakers to tighten legislation. However, the writing was on the wall that the US was becoming more intolerant of offshore-based online gambling firms when the House of Representatives passed the Internet Gambling Prohibition and Enforcement Act by a substantial majority last week.

This bill would update the 1961 Wire Act by adding an “enforcement mechanism” to address the situation in which a gambling business is located offshore but uses bank accounts in the United States.

According to the bill's sponsor, Republican Representative Bob Goodlatte, online gambling sucks billions of dollars per year out of the US economy and serves as a vehicle for money laundering.

Goodlatte estimates that half of the $12 billion online gambling industry is accounted for by bettors in the United States.

The accused BetonSports executives have so far declined to comment on the indictment to the press.