Haden Ware, one of the founders of the pioneering World Sports Exchange (WSEX) website, appeared in a federal court this week to plead guilty to violating the Wire Act.
Ware, an American citizen, has been a fugitive from the United States government for over 13 years. He was indicted in 2002 for his involvement with WSEX, one of the first-ever online sports books, and later a rake-free poker site.
What began almost 20 years ago as an entrepreneurial adventure into an innovative new technological space has ended miserably, with one custodial sentence so far, plus company liquidation, stiffed players, and an apparent suicide.
Ware told US Magistrate Judge James C. Francis IV this week that he “took wagers over the internet and over interstate lines,” in violation of the Wire Act. He was reunited in the courtroom with his parents, whom he had not seen since he left the US for Antigua to start WSEX in 1996. According to court reporters, he hugged his mother and shook his father’s hand.
His lawyer told the court that Ware was “no bigshot” and that he had returned because he no longer wanted to be a fugitive from his homeland.
WSEX was one of the most successful and respected online sports books of the early days of online gambling, at a time when operators genuinely believed that what they were doing was legal. WSEX argued that because it was based in Antigua, where sports betting was not prohibited, it was not committing a crime.
The federal government begged to differ, and in 1999 indicted WSEX co-founder Jay Cohen on charges of violating the Wire Act.
Cohen returned to the United States in 2000 to face the charges, believing that he could successfully prove his case and strike a blow for the online gambling industry in the US.
He was wrong.
He was sentenced to 17 months in prison, becoming the first online gambling operator to be prosecuted by the United States under the Wire Act.
Ware and the third founder of WSEX, Steve Schillinger, who had also been indicted, carried on with the business, but the passage of UIGEA in 2006 made it increasingly difficult for the company to process transactions.
Its rake-free poker room, designed to attract players to gamble at the sportsbook, began to fail because the WSEX was unable to police it adequately and it was reportedly rife with bots.
Soon the site began to lag behind on paying out player withdrawals and concern about the business mounted.
On April 19, 2013, WSEX ceased operations. A message posted on the website said, “We have been forced to halt business activities at this time due to inadequate capital resources.”
That day, Steve Schillinger was found dead with a bullet through his head, an apparent suicide.
Ware has been released after posting bond on a $150,000 bail and will be sentenced in May.