Why It Has Been Unable to Pay Back Players...
Full Tilt Poker, which was the world’s second-biggest online poker company until two of its founders were indicted by the U.S. government in April, on Tuesday released its most detailed explanation for why it has been unable to pay back poker players who bet on its site.
“As is obvious from the events that have transpired since April 15th, Full Tilt Poker was not prepared for the far-reaching, US government enforcement effort of Black Friday,” Full Tilt said in a statement. “Full Tilt Poker never anticipated that the DOJ would proceed as it did by seizing our global domain name and shutting down the site worldwide.”
Full Tilt Poker did reach an agreement in April with the Justice Department that was supposed to help facilitate the return of funds to players who had large cash balances with the company, but Full Tilt’s inability to pay money back has infuriated its players and the poker world at large. In its statement Full Tilt said that U.S. Justice Department actions over the last few years against online poker payment processors resulted in the U.S. government seizing $115 million of player funds located in U.S. banks. In addition, the company claims it was the victim of a massive heist in which one of its key payment processors stole $42 million from the company. “Until April 15th, Full Tilt Poker had always covered these losses so that no player was ever affected,” the company said, adding that it experienced “unprecedented issues with some of its third-party processors that greatly contributed to its financial problems.”
For years the Department of Justice took the position that online poker violated U.S. law while online poker firms like Full Tilt that built massive online businesses claimed online poker was not prohibited by anything that was on the books. In April the cat-and-mouse game that had been going on came to a head when federal prosecutors in Manhattan indicted founders of Full Tilt and its biggest rival, PokerStars, while launching a $3 billion civil lawsuit against the companies and shutting down their U.S. facing web sites.
The Justice Department’s recent actions against the online poker industry have indeed caused big problems for Full Tilt, a company that was clearly taking big risks. According to the plea agreement entered into with the U.S. government by one payment processor, Bradley Franzen, Full Tilt was dealing with a $60 million shortfall earlier in 2011 that was created by crediting player accounts despite not being able to debit funds from customers through financial transactions. In late June the Alderney Gambling Control Commission suspended Full Tilt’s main egambling licenses because of issues that arose as part of a special investigation.
Since the indictment Full Tilt has been trying to find investors who could put some cash into a business that desperately needed some. Full Tilt now says that six investment groups, including hedge funds and operators of other Internet firms, have visited Full Tilt’s Dublin headquarters and that the company has hired an unnamed financial advisor to “assist us in our search for an infusion of cash as well as a new management team to restore the site and repay players.”
Nathan Vardi, Forbes Staff
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