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LONDON – UK online payment processor NETeller said it would shed 250 jobs, mostly in Calgary, Canada, following its withdrawal from the U.S. market.

“Staff reductions will total around 220 employees across all levels, from the group’s contact centre and security teams as well as related support functions in marketing, processing and IT,” NETeller said on Friday of its Calgary-based operations.

NETeller quit the United States last month after U.S. authorities arrested its two founders and charged them with handling billions of dollars in illegal gambling proceeds.

“The events of the past months have led to challenging times for the group, and the board has taken these measures to ensure the group has a sustainable business going forward,” said President and Chief Executive Ron Martin.

Internet gambling in the United States was effectively banned last October when U.S. President George W. Bush signed legislation outlawing online gaming transactions.

Last week prosecutors seized some company funds, stopping U.S. customers from accessing their money, the latest move in the online gaming crackdown.

A spokesman for the firm said customers were still unable to access funds worth up to $55 million, and he could not say when the cash would be returned.

NETeller is cooperating with an investigation by the Attorney’s Office for the Southern District of New York. Founders Stephen Lawrence and John Lefebvre no longer work for the firm but still have significant shareholdings.

“Its (the company’s) hands are tied by the Department of Justice … This is a probe into the two founders of the business, so it is not in any way affecting NETeller Plc,” the spokesman said.

“But clearly at the same time, the DOJ has taken a very firm stance by saying you can not gamble online if you are a U.S. citizen. It is illegal, and you guys (the accused) have built a platform for many people in the U.S. to do that,” he said, explaining the background to the seizure.

NETeller said rationalisation would also include a review of the group’s property requirements and may involve the sale or partial lease of some of its Calgary-based facilities.

It reiterated that total cash costs associated with staff restructuring were expected to be around $1.1 million in 2006 and a further $3.7 million in 2007.

NETeller said its shares would continue to be suspended from trading on AIM in view of the continuing uncertainty. It requested its shares be suspended in January, just after the arrests.