Full Tilt Poker Sold, But Americans Still Wait

Poker’s 15-month nightmare could be over, as long as the 1.3 million players across America reclaim their respective chunks of $159 million – money that was siphoned off from the depths of the Full Tilt Poker servers located in Ireland.

Or it could just be the start of a new period of resentment if the United States government chooses to withhold a portion of the account balances for whatever reason.

Since Black Friday, the online poker player has learned to remain skeptical.

In late July, the U.S. Department of Justice and PokerStars both announced that they reached a deal to reimburse Americans.

PokerStars settled its civil case with the government and in the process acquired defunct Full Tilt and its debts to former players. The $731 million total settlement will be used by the Feds to compensate Americans who have money stuck on Full Tilt.

However, if Americans get far less than their entire Full Tilt balances, a possibility reported by Forbes shortly after the settlement, things could take a nasty turn once again.

Black Friday was cataclysmic for the poker community, and the trust in the virtual game hasn’t been restored. It remains to be seen if Americans will ever feel 100 percent secure about online poker again. Retrieving Full Tilt funds would be part of the healing process.

In the wake of April 15, 2011, a message on Full Tilt’s software told Americans that “Players located within the United States will temporarily be restricted from withdrawing,” and that “We would like to assure you that your funds are safe and secure.”

That turned out to be a lie. Full Tilt, according to court documents, “used the funds it claimed it was holding on account for its players to cover business expenses and to pay hundreds of millions of dollars in distributions to professional poker players affiliated with Full Tilt Poker.” As a result, the site owed players worldwide more than $340 million but had far less in the bank. The U.S. government called it a “global Ponzi scheme.”

Site owners, according to court documents, used player deposits to live fairy tale lifestyles by withdrawing more than $443 million. Former Full Tilt CEO Ray Bitar received approximately $41 million, Howard Lederer, who had gone from sleeping on park benches earlier in his “career,” approximately $42 million, Chris Ferguson approximately $25 million, and Rafe Furst approximately $11.7 million. The graft also trickled down to many other well-known poker personalities affiliated with Full Tilt.

Fifteen months after Black Friday, players were still holding out hope for a miracle. That came, thanks to PokerStars attempting to clear up its own Black Friday case and, thinking in terms of its own self-interests, positioning itself to possibly one day re-enter the lucrative American market.

The first rumor of a deal to bail out Full Tilt – by a group of “European investors” – hit headlines the day after the site closed its doors completely. Just as negotiations with a French firm – Groupe Bernard Tapie – fell through in late April 2012, it was revealed that instead PokerStars was looking to acquire the rubble. Three months later, on July 31st, a deal was done.

PokerStars’ takeover of Full Tilt was completed August 9th, after it made its initial payment to the U.S. government – the $225 million first installment. The U.S. government has the money to pay back Americans, but what will certainly be a long and complex process has just begun.

Here, Card Player analyzes the ins and outs of the settlement, talks to some of Black Friday’s victims and look at how 1.3 million U.S. players might be repaid.

Why $731 million?

PokerStars settled for a total of $731 million. With about $334 million going toward players around the globe, there’s still $397 million leftover. Jeff Ifrah, an attorney for Full Tilt who helped broker the deal, said that there is no cost breakdown to explain why the total settlement is nearly three quarters of a billion dollars.

The $159 million to Americans and $184 million to all other jurisdictions made sense, however the remainder doesn’t “connect to anything logically,” Ifrah said.
“How did they arrive at the number?” Ifrah asked. “Who knows?”
He called it an “ambiguous amount.”

In the DOJ’s press release on July 31, it said the money will “cover the litigation of claims by other parties asserting interests in the Forfeited Full Tilt Assets.”
PokerStars Wanted to Repay Americans, but DOJ said ‘Nope’

After the sweeping indictments in April 2011, PokerStars swiftly cashed out its U.S. players. The DOJ allowed the company to do so, and the process was successful. According to Ifrah, PokerStars wanted to pay Americans again – this time what they are owed by Full Tilt.

Having PokerStars handle it would “have been much faster,” Ifrah said. “If the DOJ told PokerStars to [repay Americans] tomorrow, then I think they would. I don’t know that officially, but it would be my guess.”

Ifrah added that he was never given a specific reason why the DOJ chose to handle U.S. funds.

While the civil case was under the jurisdiction of the Attorney’s Office for the Southern District of New York, the DOJ’s Washington Asset Forfeiture and Money Laundering Section will process player reimbursement.

PokerStars Benefit

Even if Americans are reimbursed 100 percent, the real winner is PokerStars.

As part of the settlement, the industry giant hasn’t admitted to any wrongdoing in connection with Black Friday in April 2011. This should make it easier to re-enter the U.S., which the deal with the DOJ explicitly allows, as long as the company finds a jurisdiction that will license them.

The U.S. lays dormant as the most lucrative online poker market in the world. Nevada and Delaware are the only states, at the moment, where web poker is allowed.

Additionally, PokerStars will move to re-starting Full Tilt in most foreign jurisdictions by Nov. 6. Players overseas can either chose to keep playing or cash out.

It’s unclear at the present time on how the synergy between PokerStars and Full Till will work.

The end of an era for Raymond Bitar

Former Full Tilt CEO Ray Bitar, the man who many say is most responsible for the “Ponzi scheme,” finally said goodbye to the company he founded in 2004 and built to prominence with the help of a number of poker’s biggest names.

Over the years, the company grew to one of the most popular online poker sites in history. However, its finances began to unravel at around the end of the decade.

The charges have piled on for the 40-year-old since April 2011, resulting in a possible prison sentence of 145 years, if convicted of defrauding former customers – and he won’t have Rush Poker to pass the time.

Bitar remained the CEO while being a fugitive in Ireland. After being apprehended in early July and pleading not guilty, Bitar was still the leader of the defunct company, allowing him to sign papers facilitating its sale to former rival PokerStars.

In a statement released by his lawyer, Bitar said finalizing the deal was “a very long road, with lots of bumps along the way.” He added that he’s “glad that this chapter has closed.”

While Bitar is facing possible life in prison, Howard Lederer, Chris Ferguson and Rafe Furst, who were named in the amended civil complaint that alleged Full Tilt was a Ponzi scheme, are still facing litigation, but not criminal charges. Nelson Burtnick, who was in charge of payment processing for Full Tilt, was named in the Black Friday indictment and is still awaiting his fate in court.

A look at a few of the biggest victims of Full Tilt

Everyone who has money on Full Tilt is a victim. However, there were some horror stories of players having massive sums on the site.

With the death of Full Tilt Poker last year, so went one of the greatest upswings in the history of the online game. Daniel Cates, known by his former Full Tilt screen name Jungleman12, was up about $7 million on the site between fall 2009 and Black Friday.

Cates said that he has about 80 percent of his entire bankroll stuck on Full Tilt.
Cates said he was “sad” at times while waiting for some sort of resolution to the scandal, but that “those emotions were pointless.” He was prepared to move on regardless of what happened to his millions existing in a defunct online poker account.

Cates considered legal action against Full Tilt at one point, but decided against it as the possibility of the case resolving on its own and his money being returned always existed.

For the 22-year-old from Bowie, Maryland, it wasn’t only about the money. He was crushing his competition when the site went down. “It hurt my momentum,” Cates said. “Full Tilt was where I had my success.”

His rapid ascension to an elite nosebleed-stakes player landed him a spot in the Durrrr Challenge, once a marquee competition promoted by Full Tilt. Former Full Tilt sponsored pro Tom “durrrr” Dwan laid odds that he would be in the black after 50,000 hands of heads-up play. Cates took him up on the offer, and Jungleman12 was up $1.2 million by the end of March 2011.

Cates said he’s in talks with Dwan about resuming their heads-up duel.

Despite the ordeal, Cates has managed to continue playing at the highest level, thanks to setting up residence in the United Kingdom. He said he’s looking forward to playing legal high-stakes online poker in America once again.

High-stakes cash game professional Ashton Griffin, also an American, potentially won more freedom with the settlement.

According to HighstakesDB, he was up nearly $5 million on Full Tilt over his three-year career on the site, which makes him one of the most profitable players in web-poker history. He had several hundreds of thousands on the site.

The anxiety that he endured at times while his money was locked up on Full Tilt has also forced him to be more skeptical of his surroundings. He said he’s not as “naive” as he once was.

With the possible return of his money and the wisdom he has gained since April 2011, Griffin has the freedom on multiple levels to pursue other things that interest him. He has been trying to decide if he’ll go back to school at the University of Central Florida. Griffin has one year of eligibility left for wrestling. He has two years worth of courses left, if he wishes to continue.

He’s also pondering a nomadic lifestyle. He said he’s “ashamed” that he doesn’t have a higher level of knowledge of the world. He wants to grow culturally, as well as spiritually.

Despite his love for flexibility and adventure, Griffin aspires to one day settle down and start a family – plans that also became more realistic after the announcement from the DOJ.

“I’m at a point where the only value in making money is to provide freedom for future me and my future children,” Griffin said. “It’s a duty and desire of mine to raise talented, disciplined children of character. However, the dust hasn’t settled enough for this to happen just yet.”

Griffin is highly respected within the poker community. He’s selfless and honorable, and he had the plight of others on his mind, more so than himself, in the wake of the settlement news.

“Ultimately, I’ll be most happy to see all my friends get paid,” Griffin said. According to Griffin, dozens of players have six-figure sums on Full Tilt.

Poker pro Blair Hinkle, another American, had been suffering through rumor after rumor for more than a year, but on the morning of the deal he woke to the best news of his life – that the site that holds $1 million of his money was sold.

While Hinkle is still awaiting more details, this marks the end to a rough year. “I’m really emotional right now,” Hinkle said. “I’m in a complete state of shock. This is such a big relief.”

The 26-year-old from Missouri got $1 million on the site in one giant chunk. He finished second in a massive tournament in February 2011, just two months before the site was closed off to U.S. players. According to prosecutors, Full Tilt Poker was falling into insolvency at the time and had no ability to pay players their account balances. Not surprisingly, none of Hinkle’s efforts to withdraw some of his money shortly after his score were honored by the site.

Hinkle is one of the game’s best young players, but had to find investors for his play at this summer’s World Series of Poker. He has had the bankroll before to compete on his own, but with his money being stolen and online poker disappearing in the U.S., Hinkle had to make drastic changes to the way he pursued his career.
In the near future, he hopefully should be able to go back to the way things used to be. ♠

Have money stuck on Full Tilt?

Here is what you can do to start the repayment process.

Having the Department of Justice handle American cashouts has raised many questions, some of which are still unanswered as of early August.

For up to date information on the repayment process, be sure to visit the United States Attorney’s Office Victim and Witness Services website at http://www.justice.gov/usao/nys/victimwitness.html

Could Americans get anything less than their account balances?

As reported by Forbes, there’s speculation that the DOJ could compensate players by some other means than what is in their accounts. Some in the poker community are worrying, but Ifrah isn’t too concerned.

“Given the fact that the government allowed PokerStars to pay back its customers 100 cents on the dollar after Black Friday, I’m kind of surprised to see the poker community jumping to that conclusion so quickly,” Ifrah said. “I understand that the community is very vulnerable. They were victimized by what happened to them with Full Tilt. We worked very hard over the past 15 months to make sure there’s enough deposited into the [DOJ’s] remission fund to cover reimbursements at 100 percent. That’s what I expect to happen.”

According to the Forbes article, authorities could pay Americans what they deposited on the site over the years, instead of account balances. Ifrah said that he has never heard of such a possibility during his time working on the Full Tilt sale.
However, Ifrah admitted that the government has never guaranteed that it will repay Americans 100 percent. “It’s really their call in Washington,” he said.

With the money being in the government’s hands and precedence (PokerStars timely repayment post Black Friday) for U.S. player repayment, Ifrah said “it’s difficult to see a scenario where those things don’t rule at the end of the day.”

U.S. player bonuses on Full Tilt

The $159 million owed to Americans is a sum that not only includes account balances, but also bonuses (Frequent Player Points, for example) converted into real money.

“The way the calculations were computed included a value for those types of things,” Ifrah said. “So when you hear the number $184 million on the foreign side and the $159 million on the American side, those numbers take into account a value for bonuses, points and promotions.”

For Americans, the government would have to decide how much extra on top of cash balances would, if any, be awarded to each person. The money is there to pay Americans their bankrolls plus whatever they accumulated in Full Tilt extras.

According to Ifrah, the DOJ knows that these types of bonuses were earned by customers.

Possible tax implications

According to Ifrah, the Internal Revenue Service was not at the table in the negotiations for the Full Tilt sale and PokerStars settlement. However, the agency could very well enter into the mix soon.

“Who’s to say that they aren’t going to know about [player reimbursement]?” Ifrah asked.

Ifrah said that it isn’t the obligation of Full Tilt or PokerStars to repay players, American or otherwise, in a way that allows them to avoid tax obligations. “It never occurred to anyone that we needed to structure the reimbursement process in a way that would allow players with larger balances to avoid recording their compensation to the U.S. government.”

It’s unclear whether or not the IRS will get notices from the repayment process, according to Ifrah. When asked if the money could be taxed prior to entering the hands of the player, Ifrah said he hasn’t been told that this could happen.

However, there’s a lot of discretion in the repayment process, Ifrah admitted, and it makes it impossible to know for sure how it will all unfold. There’s no review or appeal on what the government decides to do with player repayment. To put it simply: Its word is final.

“Theoretically, the administrator of the funds could decide that anyone with a last name that begins with ‘S’ will get zero, and there would be nothing anyone could do about it,” Ifrah said. “So, does that mean we should all start worrying about that? No.”

Just like right before Black Friday, U.S. players will have to react to what the government does.

Not remembering your Full Tilt balance: Is this a problem?

The short answer, for now, is no.

The deal closed on Thursday, Aug. 9, and immediately after PokerStars was given the keys to start digging through player information on the Full Tilt servers, Ifrah said. Members of PokerStars are currently in Dublin, Ireland analyzing all Full Tilt data.

“Their top priority, as it has been expressed to me, is to get these player records and ensure that no one hears that, during the remission process, a claim was denied or reduced because of poor record keeping,” he said.

As for Americans, the DOJ already has had access to what is owed to each player. There has been no indication that players must remember how much they had when filing for remission.

Small account balances on Full Tilt: If uncollected, where does the money go?

A player will need to fill out paperwork to recover his or her Full Tilt money. For those with tiny sums stuck on the site, the hassle might not be worth it.

Ifrah said that if the Full Tilt remission fund is not all used up by former American customers, the leftovers would go to victims of other federal cases or go straight to the U.S. Treasury. In other words, the government could pocket the unclaimed Full Tilt money.

He added that leftover Full Tilt money could go to compensate former Absolute Poker players, or those of other sites the government has cracked down on.

The DOJ Needs Help

About a week after the deal, DOJ released an employment opportunity notice on its website. The position is for a third-party “Claims Administrator” for the Full Tilt remission process.

According to the DOJ, there are about 1.3 million “potential U.S. victims” – those with money stuck on Full Tilt. Compensating such a huge number of people will be a challenging process.

Ifrah said that the goal of the hiring is to “improve processing time.” The DOJ is asking to have applications for the position submitted by the end of August.

Ifrah said the decision is “consistent” with what the DOJ has said throughout the negotiations. It’s an “indication that everything is on track,” he added.

The party responsible for administering claims will, according to the job posting, “[i]n consultation with the United States Attorney’s Office for the Southern District of New York and the Asset Forfeiture and Money Laundering Section of the United States Department of Justice, […] design and execute a process to solicit, receive and evaluate claims, and to process payments, for losses incurred by U.S. victims that are attributable to the fraud alleged in the [Full Tilt complaint]. In so doing the Claims Administrator will obtain and evaluate information, such as financial transaction records, from claimants, and analyze information contained in user account records provided in database and other format by Full Tilt Poker.”

Among other things, the application requires interested parties to disclose any prior contacts with any online poker site or gambling company that could “be viewed as affecting independence.” The government is also asking for a “fee schedule” for the job, which would be deducted from the $159 million.

The Poker Players Alliance, a Washington D.C-based lobbying group, released a letter last week regarding player funds, which mentions that it “stands ready to assist the [DOJ] in creating a streamlined and accessible process to help reunite players with their seized funds.” There are about 20 firms nationwide qualified to help cash out former American Full Tilt customers. ♠