David Carruthers, chief executive of BetonSports, was making an airport connection en route from London to the AIM company’s headquarters in Costa Rica when he was arrested by US federal police and tax officials at Dallas-Fort Worth. An encyclopaedia of criminal charges against himself and others soon followed.

The US authorities seem to have abused an anti-terrorist deal, allowing them to vet passenger lists in advance, as objectors to the arrangement had feared. Misuse of the laws on federal racketeering, money laundering and extradition is a sadly routine feature of the US justice system. It is no consolation to holders of BetonSports shares, which have been suspended, that Mr Carruthers believes that the company was acting legally. Nor will blaming US practice help investors in larger rivals in the fast-expanding internet gambling sector. But it should make us more aware of catastrohpic risk.

PartyGaming, the premier counter, is a constituent of the FTSE 100 index, where it has, in effect, replaced the more solid onshore bookmaker Ladbroke. According to records kept by TD Waterhouse, the broker, PartyGaming has been one of the most widely traded shares among private investors during its brief, volatile life as a listed company. Its shares fell 22 per cent in the first two trading sessions after Mr Carruthers’s arrest.

The power of association cut the market value of PartyGaming, whose main business is poker and similar casino games, by nearly ten times the pre-arrest value of BetonSports. SportingBet was also a big loser.

Some recovery followed as it transpired that the US authorities had maintained a file on Gary Kaplan, the founding entrepreneur of BetonSports, for 13 years. Perhaps this was not quite the concerted attack on the offshore online gambling sector that was first assumed. By then, however, US investors, who can own shares in online casinos and bookmakers, had decided to cut their losses.

This was a panic waiting to happen. The offshore sector exists to avoid differing and often hostile laws or tax regimes in various countries. In the US, a key market for most offshore companies, gaming is viewed differently in different states but the industry has a notorious past and there is a Federal law against telephone betting on sports contests.

The sector is made for the internet but also for controversy. Mr Carruthers’s arrest came shortly after the US House of Representatives passed a law to starve online gambling of its US customers, though this law may not reach the statute book.

Investors should be wary by now of companies whose business has legal or political threats hanging over it. For instance, those of us who own tobacco shares, another currently popular cash-generating sector, need to remember that periods of calm are liable to be followed by storms. Well-run companies in vulnerable sectors should trade at a significant risk discount to those with similar financial qualities in more secure, fright-free trades. At least the risks to tobacco are known.

The most notorious warning to investors was the case of Polly Peck and Asil Nadir, its long-time fugitive boss. The former rag trade company’s operations were based in Northern Cyprus, where he finally fled by private plane. There was a tacitly accepted cloak of secrecy over its multimillion-pound profits, which seemed amazingly high for businesses it claimed to be in, such as packing lemons. When UK anti-fraud authorities mounted a raid on its West End offices, albeit over matters that were never fully settled in court, its thin film of credibility snapped and the multinational collapsed. Yet Polly Peck had been a punters’ favourite, frequently tipped for clients by second-rate brokers.

Slightly suspect arms contracts have been another source of grief, often because they lent themselves to false accounting in a world where “commissions” had to be hidden. Too many investors thought that the above-board benefits of BAE Systems’ Al Yamamah programme for Saudi Arabia could be repeated by lesser companies. When Ferranti bought one of these, however, it emerged that key contracts in Pakistan and other countries did not exist.

Companies operating in grey areas, not necessarily through their own choice, will produce winners and losers just like banks or retailers. If you want to gamble on flying high with them, watch for the insiders selling, as at PartyGaming and others, keep your finger on the ejector button and remember the old rule that if you do not understand how they are making so much money, it is time to sell.