MONTREAL - Confidence in the ability of Mohawk regulators to police lucrative online gambling operations on the Kahnawake reserve has been shaken following the second cheating scandal in less than a year.

UltimateBet.com, which is owned by a company controlled by former Kahnawake grand chief Joe Norton, acknowledged on Thursday that unnamed insiders had altered its poker software to allow them to see opponents' hidden cards.

"The individuals responsible were found to have worked for the previous ownership of UltimateBet prior to the sale of the business to Tokwiro [Mr. Norton's company] in October 2006," the site said in a statement. "Tokwiro is taking full responsibility for this situation and will immediately begin refunding UltimateBet customers for any losses that were incurred as a result of unfair play."

The company refused to disclose the amount of fraudulent winnings, but poker observers have said it runs into the millions. An analysis of the scandal on the online poker forum twoplustwo.com found that one of the cheaters won more than $600,000 in the space of four months last year. The software glitch was in place for at least 15 months, UltimateBet said.

In January, Absolute Poker, also owned by Tokwiro Enterprises, was fined $500,000 by the Kahnawake Gaming Commission for a similar cheating scam, which was also blamed on rogue employees. The commission, first created in 1996 when Mr. Norton was grand chief, has three members from the community, which is just south of Montreal.

Bobby Mamudi, an industry analyst and managing editor of the London-based Gaming Intelligence Group, said the new cheating incident is another blow to the reputation of Kahnawake's gambling industry. "They definitely do seem to be losing credibility and not doing too much about it," he said. He called the cheating uncovered in Kahnawake "quite unique" in the global online gambling world. Sites taking bets on sporting events have been shut down for failing to have sufficent funds to pay winners. "There's never been something like this to do with poker and this kind of overt cheating," he said.

The federal government considers the 400 or so poker and sports-betting sites operating from Kahnawake to be illegal, but, fearing a confrontation, both the federal and provincial governments have been reluctant to intervene. Last March, however, an aide to Justice Minister Rob Nicholson said the government was studying ways of shutting down the gambling, possibly by targeting financial transactions with illegal Internet operators.

Murray Marshall, legal counsel to the gaming commission, said that Kahnawake's regulation is among "the tightest in the world" and said similar frauds have occurred in casino gambling and banking. "We would obviously prefer to prevent all possibilities of this kind of thing happening, but no system is infallible," he said.

UltimateBet, one of the most popular online poker sites, identified six player accounts that took part in fraudulent activity. They used 18 different online aliases, including NioNio, flatbroke33, ilike2win, UtakeIt2, FlipFlop2, WhackMe44 and RockStarLA. It said the "security hole" that allowed the fraud has been plugged and all of the individuals associated with the cheating have been permanently banned. It also promised to increase security.

In an interview yesterday, Mr. Ware said stricter oversight is needed of the Kahnawake gambling sites.

"Online poker is a billion-dollar-a-year industry, and it's unfathomable that companies in this industry would operate with a total lack of transparency, beyond the reach of the law," he said. "Kahnawake and the online gambling sites that it runs have shown time and time again that they are not willing to keep their games fair or protect the players."

UltimateBet officials declined to be interviewed yesterday. In an e-mailed statement, the company said the "perpetrators" of the fraud left the company "well before the fraudulent activity was uncovered." Asked whether the matter has been referred to the police, the company said only that it is in the hands of the gaming commission.