But the judge did not throw out the case, and ordered government lawyers representing NCUA to appear on May 11 to defend the NCUA's actions and show why the Vensure conservatorship should go forward.

Vensure began its argument by acknowledging information the NCUA had not yet released: That it had made the majority of its money for the last two years by providing automated clearing house services to a business member who processed financial transactions for two of the largest online poker sites, PokerStars and Full Tilt Poker.

The CU also revealed in its filing that the business member, Trinity Global Corp., was its largest depositor, with roughly $2 million in the CU. It also claimed that having the business of such a large and robust depositor had helped it begin to expand its operations to resemble those of a more run-of-the-mill, albeit virtual, credit union.

“VFCU has used the revenues received from those ACH services to build its reserves and to open the credit union to a new field of membership–persons associated with Vensure Employer Services, Inc., a growing professional employment services company based in Mesa, Arizona, with over 12,000 participants,” the credit union wrote, adding in another part of the brief that it had added approximately 61 accounts this year as of March 31 for a total of 144.

In its filing, which the court had ordered sealed but Credit Union Times obtained, Vensure identified five reasons that it said the NCUA had provided for the conservatorship.

First, the seizure of the funds in the Trinity account meant the CU would no longer have access to “material sources of income” to be able to operate as a concern. Second, the extent of the relationship between the CU's leadership and the leadership of Trinity is not fully known, especially in light of the ongoing criminal investigation. Additionally, Vensure's alleged involvement in an illegal activity put the NCUSIF at risk for a loss, and the U.S. Attorney for the Southern District of New York will likely seek forfeiture of the fee income the CU made for its ACH processing for Trinity. Finally the CU faced a possible run from members whose confidence had been undermined by the CU's service of Trinity and possible losses “would destroy [Vensure's] ability to continue in operation as a going concern.”

Vensure strongly objected to each of these grounds, and suggested that the NCUA had no hard evidence to back any of them.

For example, Vensure sharply rebuffed the agency's first contention that all the CU existed to do was to serve Trinity and process transactions for Trinity. The CU pointed out that its membership had been growing steadily, although slowly, and that it had put in place marketing and loan programs aimed at growing its membership.

Vensure also pointed out that its leadership had already voted in late January to sever its relationship with Trinity as the agency demanded, and that the agency had not suggested then that the CU would not be able to support itself without Trinity's business.

The now $2.7 million CU reported fee income in 2010 of $1.8 million.

To answer the agency's second charge, that the CU might be involved in the gambling operation, Vensure highlighted that the NCUA was aware of the relationship and the credit union had provided the agency with “dozens of reasoned legal opinions attesting to the fact that online poker is not unlawful internet gambling” under the Unlawful Internet Gambling Enforcement Act and had obtained certifications required by the UIGEA that it was not processing transactions from states where Internet gambling or poker might be illegal. Vensure also noted that while one of the accounts had been named in the legal proceeding, the credit union itself was not named as a defendant.

The CU also argued that the NCUA had violated the CU's rights to due process.

“Neither VFCU nor its member Trinity have been indicted or sued, nor even accused by the [U.S. Attorney] of unlawful or wrongful behavior,” the CU argued. “Nor can NCUA seriously claim that VFCU was in violation of any law. Notwithstanding, NCUA–in a knee-jerk response to the indictment–immediately ordered VFCU into conservatorship without any prior warning, a hearing or even an opportunity to supplement the administrative record to rebut any of its far-fetched claims that VFCU either was or had the potential to become insolvent.”

With all that said, credit union legal authorities maintain that the CU faces a very high burden to see the conservatorship reversed. The last CU to have tried, the Kappa Alpha Psi Credit Union, another virtual credit union, saw its effort fail last year.

NCUA had not yet returned calls or emails for comment as of press time.