How The Legal Sports Betting Giants Fit In NBA Betting Scandal

Betting scandals are not new in sports.

Just last year, MLB was rocked by a gambling scandal involving MVP Shohei Ohtani; his interpreter eventually pleaded guilty to stealing nearly $17 million to fund debts he ran up while gambling illegally in California, which does not permit sports betting.

The NBA gambling scandal that exploded last week came with a twist: The bets were placed using legal apps, made using information that prosecutors say the bettors obtained illegally. The federal government says that the victims in this case include the sportsbooks themselves, which were defrauded out of money in what FBI director Kash Patel called “the insider trading saga for the NBA.” Though the indictment does not name which sportsbooks, their identities are clear.

Who were the betting companies?

Four unnamed legal betting companies were listed in the 23-page indictment. The companies were known only as “Betting Company” labelled from 1 to 4, though the grand jury that delivered the indictment was aware of the identities of each company, the indictment says. 

One “unlicensed bookmaker,” meaning an illegal bookie, was also mentioned in the indictment as used by a defendant for a single bet.

“Betting Company 1” and 2 are clearly industry giants FanDuel and DraftKings, in some order, as they were referred to as “co-official sports betting partners of the NBA” since 2021. The league announced FanDuel and DraftKings as its co-official sports betting partners in November 2021.

Both companies released statements immediately following the arrests.

FanDuel: “Today’s events are deeply disturbing, and should concern fans, athletes, and everyone who loves sports and values integrity and fair play. They also illustrate the stark contrast between legal and illegal betting markets. At FanDuel, we use advanced technology and real-time monitoring to identify suspicious activity and work closely with leagues, data monitoring groups, and law enforcement. We are unwavering in our commitment to rooting out abuses by those who seek to undermine fair competition and the games we love.”

DraftKings: “We fundamentally believe that regulated online sports betting is the best way forward to monitor for and detect suspicious behavior while offering consumer protections backed by advanced technology, neither of which exist in the pervasive illegal market. While regulation cannot eliminate all concerns related to game integrity, it significantly reduces risks by enabling collaboration between operators, leagues, teams, and relevant authorities to identify and hold accountable anyone engaged in illegal behavior. We know our fans value the authenticity of competition, and we take the responsibility of reporting suspicious activity seriously. As a proud partner of the NBA, DraftKings remains committed to working closely with the league to ensure the continued integrity of the game.”

How do betting companies flag betting irregularities? 

NBA commissioner Adam Silver said in his first public interview Friday that sports betting companies alerted the league league to “aberrational” betting behavior immediately after the March 23, 2023 game between the Hornets and Pelicans involving then-Hornets guard Terry Rozier. 

Fanatics betting CEO Matt King tells Front Office Sports that aberrational betting behavior is defined as a “big deviation” for a certain bet compared to what is expected. (Fanatics did not comment on whether it was one of the four sportsbooks in the case, but it’s unlikely given that its online sportsbook only went live in August 2023. The games included in the case ran from March 2023 to 2024.)

Another industry source tells FOS that an example of aberrational behavior would be a “high handle on an under” for a “role player,” similar to the case of Rozier. (A handle is defined as the total amount of money wagered.)

These irregular betting patterns are first flagged by algorithms or AI models, then assessed by humans, generally on risk management teams. The human assessment considers the background and historical behavior of the customer. 

One source says an example of suspicious behavior is when a new account is created on the day of the aberrational bet. Such was the case during the March 23, 2023 game when, according to the indictment, a relative of defendant Deniro Laster created a profile with Betting Company 1 to place a bet.

Once a betting company suspects aberrational behavior, it raises it to other stakeholders, including leagues, data companies like SportRadar, and monitoring firms like IC360. Sports betting companies don’t necessarily talk to each other, the industry source said, but alerting integrity monitors is a way to see whether the irregular betting behavior is widespread. 

Like sports betting companies, the NBA also has its own internal teams for sports betting investigations, led by a legal department that works with its basketball operations team and security department. It also works with monitoring firms including US Integrity, Swish Integrity Services, and Sportradar, alongside its official sports betting partners.

Silver said the NBA conducted an initial investigation of Rozier, who cooperated. The league cleared him of any wrongdoing and he returned to action last season. 

“The federal government has subpoena power, can threaten to put people in jail, can do all kinds of things that a league office can’t do,” Silver said.

In a memo sent by the NBA to teams on Monday, the league said it is looking for ways to improve how it monitors sports betting.

“We also are exploring ways to enhance our existing internal and external integrity monitoring programs to better utilize AI and other tools to synthesize all available data from betting operators, social media, and other sources to identify betting activity of concern,” the memo said.

How much were the payouts? 

Prosecutors say that “the defendants turned professional basketball into a criminal betting operation, using private locker room and medical information to enrich themselves and cheat legitimate sportsbooks.” While it’s not clear how much the major sportsbooks paid out in total, the defendants are alleged to have bet hundreds of thousands of dollars on the NBA, which, if they are found guilty, they will have to pay back.

Here is the breakdown of the bets placed in each of the seven games mentioned in the indictment, most of which were successfully paid out, though the winnings were not mentioned:

March 23, 2023: Hornets vs. Pelicans 

Scheme: Rozier informed Laster that he was going to “prematurely remove himself from the game” due to an injury.

All fraudulent wagers placed were either straight or parlay bets on Rozier unders, and all were paid out successfully, according to the indictment.

Bets: 

• $107,000 bet placed by co-conspirator 2 through Betting Company 1
• $63,000 bet placed by defendant Shane Hennen through Betting Company 3
• $41,000 bet placed by defendants Timothy McCormack and Long Phi Pham through Betting Company 1
• $20,000 bet placed by co-conspirator 3 through Betting Company 1
• $17,000 bet placed by co-conspirator 4 through Betting Company 1
• $12,500 bet placed by co-conspirator 5 through Betting Company 4
• $4,000 bet placed a relative of defendant Deniro Laster, funded by co-conspirator 7 through Betting Company 1
• $800 bet placed by co-conspirator 6 through Betting Company 1

March 24, 2023: Trail Blazers vs. Bulls 

Scheme: Co-conspirator 8 informed defendant Eric Earnest that the Trail Blazers were tanking and that several of its best players would not be playing in the game. (While co-conspirator 8 is not named in the indictment, he is described as an “NBA player from approximately 1997 through 2014, and an NBA coach since at least 2021,” which matches the résumé of Trail Blazers head coach Chauncey Billups.)

The players were not named in the case, but Trail Blazers stars Damian Lillard, Jusuf Nurkić, Jerami Grant, and Anfernee Simons did not play in the game. 

All fraudulent wagers placed were against the Trail Blazers, and all were paid out successfully, according to the indictment. 

Bets: $100,000 in total bets “placed or caused the placement” by defendants Marves Fairley and Shane Hennen.

Examples of bets placed include:

• $20,000 bet placed defendants McCormack and Pham through Betting Company 1
• $12,000 bet placed defendants McCormack and Pham through Betting Company 2

April 6, 2023: Magic vs. Cavaliers 

Scheme: Co-conspirator 1 learned from Player 2, who is one of the Magic’s “regularly starting players,” that Orlando’s entire starting lineup would not be playing in the game.

The fraudulent wager was placed against the Magic, and was paid out successfully, according to the indictment.

Bets:

• $11,000 bet placed by defendant Fairley co-conspirator 2 through an unlicensed bookmaker

February 9, 2023: Lakers vs. Bucks

Scheme: Defendant Damon Jones, an ex-NBA player, was an unofficial assistant coach with the Lakers during the 2022–23 season. Jones learned from Player 3, a “prominent” player on the Lakers, that he would not be playing in the game. (The unnamed player is clearly LeBron James.) Jones passed the information over to multiple people, including Earnest and Fairley.

The fraudulent wagers were placed against the Lakers, and were paid out successfully, according to the indictment. The bets were placed by defendants Earnest and Fairley, but the amount and medium used to place the wager were not mentioned. 

January 15, 2024: Lakers vs. Thunder (Bets against Lakers)

Scheme: Jones learned that Player 4, another Lakers player, was expected to see limited game action due to an injury. The fraudulent wagers were placed against the Lakers, but they lost, because the Lakers won the game with Player 4 playing his regular minutes.

Fairley paid Jones $2,500 as a “fee” through a peer-to-peer mobile payment platform for information on the game, which he received through Earnest. After Fairley’s bet lost, Fairley instructed Earnest to tell Jones to return the fee. Jones assured the bettors that he “received credible non-public information regarding Player 4.”

Bets:

• $100,000 bet placed by defendant Fairley through Betting Company 2

January 26, 2024: Raptors vs. Clippers and March 20, 2024: Raptors vs. Kings

Scheme: Jontay Porter—since banned from the NBA—informed Pham that he was going to leave both games early due to injury. The fraudulent wagers were under bets on Porter, and were successfully paid out, according to the indictment. The bets were placed by defendants Hennen and Fairley, as well as a number of Hennen’s “associates.” 

Bets: The total amount wagered is not mentioned in the indictment.