Denver Man Convicted of Illegal Gambling Racket that Used Sham Crypto

A federal jury in Denver has convicted a local man of running an illegal gambling business that employed a fake cryptocurrency to conceal the exchange of gambling credits for cash.

Jonathan Arvay, 38, was found guilty of one count of conducting an illegal gambling business and one count of conspiracy to conduct an illegal gambling business in connection to his operation of the Player One Arcade in Denver.

The arcade was one of a network of businesses throughout Colorado raided by federal agents in February 2022, each offering popular “fish-shooting”-style arcade games and other slot-style machines, according to court documents.

Obsidian Digital Asset Coin

Wagers at all these businesses were placed using a proprietary “cryptocurrency” known as “Obsidian Digital Asset Coin (ODAC),” which could be purchased and sold on the premises. The network of dens was linked through the common use of the ODAC cryptocurrency, as well as through management and ownership, prosecutors said.

Casino-style gambling in Colorado is confined to three Rocky Mountain gambling towns — Black Hawk, Central City, and Cripple Creek — and two Native American casinos, both in the Four Corners region.

The defendants argued that the use of ODAC legitimized the businesses because of a 2018 Colorado law that banned gaming machines from paying out cash prizes. ODAC’s sole function could be exchanged for cash at an ATM-like “cryptocurrency teller machine” inside the arcade.

Veneer of Legitimacy

“These gambling dens masqueraded as arcades with a veneer of legitimacy,” said Acting United States Attorney for the District of Colorado Matt Kirsch. “I am grateful to law enforcement for digging beneath the veneer and finding that these establishments were causing real harm in our communities.”

These defendants created a large, complex illegal gambling operation, both online and in person in Pueblo, Colorado Springs, Lakewood, Denver, Aurora, and Greeley,” added FBI Denver Special Agent in Charge Mark Michalek. “Their illicit proceeds led to crimes involving money laundering and fraud against the US government, among other violations.”

Arvay is scheduled to be sentenced on December 12. He and Walker face up to five years in prison and a $250K fine. Because of the money laundering charges, Sugar could face a term of more than 20 years.