Neteller On Probation

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Settlement with US authorities by e-wallet is going to be expensive

Press releases from the embattled Isle of Man-based e-wallet Neteller today (Wednesday) offer some hope that US players may at last see some of their funds frozen since January this year. In a settlement with Department of Justice officials, the e-wallet acknowledges wrongdoing in regard to online gambling financial transactions in the USA, and agrees to provide information to US authorities, and to a two year "probationary" period in return for deferred prosecution on federal offences. The company will have to part with a hefty $136 million cash forfeiture to the United States government.

With the American legal issue apparently under control, the e-wallet can now move forward with plans to publish its delayed annual accounts for 2006, hopefully leading to a re-listing of its shares on the AIM.

Most important of all, however: the company says that US players will soon be able to withdraw funds from frozen Neteller accounts, although no comment is made on the question of interest accrued.

The statement advises that Neteller is using its best efforts to allow withdrawal requests as soon as possible, and that US customers will be able to sign in to their accounts to request the withdrawal of their funds by no later than 30 July 2007. The exact date upon which US customers will be able to make requests will be communicated to US customers via email and through the Neteller website.

Ron Martin, Neteller President & CEO, said "This agreement resolves the USAO's investigation relating to the Company's former US business activities. We believe that this settlement is in the best interests of Neteller and its shareholders.

"Our customers, employees and shareholders have all patiently waited for this resolution. We anticipate within the next few weeks that we will have fully implemented the plan for the return of funds to our US customers and are hopeful that, by that time, we will have restored the company's shares to trading on AIM.

"We can now begin to refocus our efforts on building and strengthening the Neteller business in the growing markets of the European and Asia Pacific regions. I look forward to sharing further information about the Company's progress over the coming months."

In its public statement, Neteller reveals that it has entered into a Deferred Prosecution Agreement ("DPA") with the United States Attorney's Office for the Southern District of New York ("USAO") which represents the resolution of the USAO's investigation into the company.

Neteller has therefore consented to the filing of a criminal information relating to transactions between Internet gambling merchants and persons located in the United States.

The statement specifies that the USAO has agreed to defer the prosecution of any federal charges and, as a consequence, Neteller will not be convicted of any federal crime, as long as it fulfils the set conditions of the Deferred Prosecution Agreement during the two year term that has been negotiated. At the conclusion of the two year term, the criminal information will be dismissed.

The United States District Court for the Southern District of New York has approved the deferral of the prosecution. As part of the DPA, Neteller has also agreed to forfeit US$ 136 million to the United States. This amount includes the approximately US$ 60 million that the USAO has previously seized.

The company will now seek to publish its audited annual accounts for 2006 and have its shares restored to trading on AIM as soon as practicable thereafter.

Key terms of the Deferred Prosecution Agreement

The settlement takes the form of a two year Deferred Prosecution Agreement with the USAO. In the DPA, Neteller has consented to the filing with the United States District Court for the Southern District of New York of a criminal information charging the e-wallet with participating in a conspiracy in violation of certain US laws. If Neteller fulfils its obligations under the DPA, the criminal information will be dismissed, following the two year term.

Specifically, the DPA contains the following main points:

Neteller, as detailed in the "Statement of Admitted Facts" attached to the DPA, admits that it had operated in the US an unlicensed money transmitting business and had participated in the performance of financial transactions for the purpose of promoting unlawful transactions between internet gambling merchants and persons located in the US.

Neteller agrees that it will pay an amount to the United States totaling US$ 136 million which is disgorgement of certain profits received from the activities described in the Statement of Admitted Facts. This amount includes the approximately US$ 60 million that the USAO has previously seized. Neteller agrees that it will satisfy the remaining portion of its forfeiture obligation with a payment of US$ 40 million to be paid on or before 15 October 2007, and the remaining balance (approximately US$ 36 million) to be paid on or before 17 January 2008.

Neteller agrees to cooperate fully with US authorities in all matters relating to the ongoing investigations by the USAO.

Neteller agrees to fully implement procedures and controls to prevent illegal transactions between internet gambling merchants and persons located in the US and to continue to retain Navigant Consulting Inc., a forensic accounting firm, to monitor its compliance with these procedures and controls.

Restoration of trading to AIM

Further to the Neteller announcement of 13 July, the company informs that it continues to make progress regarding the ongoing suspension of its shares from trading on AIM. Discussions with its advisers and AIM continue, and the understanding is that the admission of the e-wallet's ordinary shares to trading on AIM has not to date been cancelled.

The statement ends with the assurance to investors that: "With today's announcement of a resolution of the USAO investigation, the Company is now focused on finalising and publishing its audited annual accounts for 2006. The Company will endeavour to post the 2006 accounts to its shareholders as soon as practicable following which the Company anticipates that trading in the Company's ordinary shares on AIM will be restored."

Simultaneously, the US authorities issued a statement with the same information.