Friday was a day that will live in infamy for online poker players. The U.S. Department of Justice (DOJ) issued indictments against 11 men including the founders of the three largest U.S.-facing poker rooms, PokerStars, Full Tilt, and Absolute Poker/Ultimate Bet (AP/UB). They are facing charges of bank fraud, money laundering, and illegal gambling offenses. In a press release from the DOJ, Manhattan U.S. Attorney Preet Bharara said, "As charged, these defendants concocted an elaborate criminal fraud scheme, alternately tricking some U.S. banks and effectively bribing others to assure the continued flow of billions in illegal gambling profits. Moreover, as we allege, in their zeal to circumvent the gambling laws, the defendants also engaged in massive money laundering and bank fraud. Foreign firms that choose to operate in the United States are not free to flout the laws they don't like simply because they can't bear to be parted from their profits."
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In addition, 75 bank accounts utilized by the poker companies and five domain names were seized, including PokerStars.com and FullTiltPoker.com. Those sites continue to display an FBI warning letter stating the charges being brought against members of the company. The indictment and civil complaint are seeking at least $3 billion in civil money laundering penalties from the companies and the defendants. The Justice Department is working with foreign law enforcement agencies and Interpol to apprehend the defendants who reside outside of the U.S.
The news immediately sent shock waves through the poker community. Within a few hours, PokerStars discontinued servicing American customers. Full Tilt followed suit much later Friday evening. At the time this article was written, AP/UB were still allowing Americans to sit in their real-money games which prompted poker pro Tom Dwan to comment on Twitter, "Ub apparently still taking players. Pretty sick cashgrab, goodluck if u have $$ on there- wouldn't buy for 40c per dollar."
Customers of the poker rooms affected by these charges are now facing worries regarding whether or not they will receive the funds held in their accounts. Some high stakes players have reported that PokerStars has called them to reassure them their funds are safe. Player consensus seems to indicate that money on Full Tilt is probably safe as well but that it could take months before cashouts can be processed. As Dwan's comment indicated, there is much less faith in AP/UB money due to the company's shady history.and the fact that they are not nearly as large of an international presence as PokerStars or Full Tilt.
For now, online poker is effectively inaccessible for Americans. As legal proceedings against the three companies and some of the payment processors associated with them unfold, Americans are only being serviced by smaller, less-reputable sites than those brought down by the DOJ. Some players will likely migrate to these sites while others will, understandably, be too spooked to play online poker in the U.S. until some type of legislation is passed which legalizes it. It's really too early to tell exactly how Friday's news will affect U.S. online poker players in the long term.
There is a lot of chaos and confusion in the poker world right now. Players are still waiting to see what Friday's news means for them. In an attempt to clear up some of this confusion, here is our take on a few of the questions that are commonly being asked right now. Please note that these views are only our non-expert opinions and should not be viewed as advice on how an individual should act:
Full Tilt/PokerStars already got rid of US players. Doesn't this mean the situation is pretty much cleared up for them?
Absolutely not. To the government, that is like a bank robber saying, "I stopped robbing banks, so you'll leave me alone right?" The situation is not over for PokerStars/Full Tilt (and AP/UB) until the case is settled, meaning the defendants and companies settle with the DOJ or the DOJ prosecutes, convicts, and they serve their sentence. What occurred over the weekend is merely the beginning. Things will get worse for PokerStars and Full Tilt before they get better in our opinion. These people were bribing financially strapped U.S. banks into processing illegal transactions on their behalf. It highly unlikely that these firms will service U.S. players anytime soon, if ever.
I am in the U.S. and I have money at these poker rooms. When will I get my money back?
Who knows? It could take months, years, or it may never happen. No one knows for sure and it may differ from poker room to poker room based on the actions they take. The only thing that is clear is that there's nothing you can really do about it besides watch, wait, and cashout when you have the ability to.
I am not in the US and I have money at these poker rooms. Is my money safe? Should I continue to play?
This is up for debate, and no one really knows for sure. Our opinion (and it's only an opinion) is that players should act on the safe side by ditching these rooms and getting their money out as fast as possible if they still can. The situation is not over yet and there is a non-zero chance these poker rooms go bankrupt trying to fight the DOJ. Players are in a situation where they are waiting months (or years) to get their money back. PokerStars and Full Tilt are unlikely going to be able to pay a $3 billion judgement, run profitably, and pay everyone back completely. In our opinion, it is just not possible.
Continuing to play at these places puts a lot of confidence in people who quite frankly don't deserve it. PokerStars and Full Tilt claim your money is in a separate account. Is there enough money in there to cover all player withdrawals? When was it last audited? These guys thought what they were doing was purely legal and that they wouldn't get indicted by the US. That has proven to be very naive. What makes you think their knowledge of international banking is anything but naive as well? They fooled most US poker players into thinking their US operations were completely stable, who says they are not fooling you that their financial situation can withstand continued DOJ pressure? While there's certainly a chance PokerStars and Full Tilt will get through this and continue to service the non-U.S. world, our opinion of the moment is: why risk trusting them with your money?
There are plenty of poker rooms that did not accept American players post-UIGEA and thus have a near zero risk of having their operations interrupted. At the moment, there is just very little good reason to play at PokerStars or Full Tilt. Your money, in our opinion, is much safer in the hands of a publicly traded company like Party Poker or 888 Poker whose future as an online poker operator is not in doubt.
Once this case is over, meaning once the DOJ settles with the poker site and the fines and jail time are served and paid, then it will probably be safe to play there. But that is months or years away, and these rooms may not survive it.
Isn't this situation very similar to Neteller? Neteller had their founders arrested suddenly, Neteller ceased operating with US residents, it took US residents about 6 months to get their money, Neteller paid a fine, but their non-US operations were pretty much unaffected. What's the difference between Neteller and PokerStars/Full Tilt?
A Neteller-like outcome is probably the best possible scenario for these sites and poker players with money at these sites. However, it is not the only possible outcome. First, Neteller quickly cried Uncle and settled with the DOJ (as well as their founders taking a guilty plea), so they quickly worked out a deal. That appears to be unlikely in this case. Full Tilt has already released a statement saying that a.) they believe online poker is legal and b.) they look forward to being exonerated. It seems possible that these guys are naive enough to believe that they can beat the DOJ on charges of bank fraud and money laundering. That's pretty unlikely. The DOJ has probably been putting this case together for years and wouldn't have unsealed the indictment if they thought there was a reasonable chance they would lose.
Second, in our non-expert opinion, the DOJ's case is stronger against these poker sites than Neteller. Against Neteller, they used the Wire Act, which many view as outdated and beatable in court. The DOJ's case against the three poker sites does not rely on the Wire Act at all and instead relies on the UIGEA (which the DOJ didn't use against Neteller even though it passed a few months before the arrest) as well bank fraud charges.
This is not just an illegal gambling case. The charges of bank fraud and money laundering are very, very serious.
Not only is the UIGEA specific to internet gambling (unlike the Wire Act), the UIGEA in effect created the environment where these sites were forced into the banking fraud charges. The only way to get US player deposits approved was to trick banks into believing the transactions were for non-gaming merchants (which the DOJ details quite extensively). In contrast, Neteller did not need to disguise its transactions; it was pretty upfront with what it was doing.
Furthermore, Neteller's case often relied on a conspiracy charge: that they somehow aided and abetted online gambling. In contrast, these poker sites ran the gambling directly.
Finally, the DOJ has been building this case for years and is likely out for blood. Neteller didn't extensively advertise on US national TV and walk around like they owned the place. PokerStars and Full Tilt did. The two sites (as well as AP/UB) directly and majorly benefited from the passage of the UIGEA and their blatant disregard for the potential effects of that law. They're unlikely to walk away with a slap on the wrist.
What are we likely to see in the coming weeks?
It's hard to tell what exactly will happen and if there will be any major developments. Since the arrests happened after regular business hours European time, one thing we are likely to see are more reactions from European-based companies. Party, 888, and the other non-US poker rooms will likely start aggressively advertising to pickup PokerStars's/Full Tilt's European business. It's possible European payment processors (Neteller, Moneybookers, etc.) will cease doing business with PokerStars/Full Tilt/Absolute since they may not want to have anything to do with these companies, even if these firms only processed payments for non-Americans in the past.
Is there any silver lining to this debacle?
Since the passing of the UIGEA, poker players in the U.S. have been very optimistic that the game will soon be legalized through federal legislation. For years, we have repeatedly said that it's not going to happen and have been dead-right about that. But after Black Friday, we are officially changing our tone. The climate for legal online poker's chances in the U.S. has warmed up substantially over the past year. Several bills have been introduced at the state level to try to capitalize on the revenue opportunities from legalizing online poker. A push last December by Senator Harry Reid to legalize it on the federal level almost worked. Black Friday should serve as a major impetus to once and for all stop with the nonsense and legalize online poker. People want to play cards on the Internet.
Poker players are going to be more pissed off now. Average Joe poker player really didn't care before if poker was legal since he could play online whenever he wanted. Who really cared or really wanted regulation? Now, a sizable percentage of the US population may be legitimately pissed off and will push much harder for regulation.
Regulation probably wouldn't have been successful in the past. If you're an American, why would you want to play at some smaller, higher-hassle, regulated poker room when you could just play at PokerStars or Full Tilt? The only way regulated online poker could work was if American players' access to PokerStars and Full Tilt was destroyed, and Friday that happened.
This is a crucial time, however. Other sites that accept U.S. players but were not affected by the DOJ's actions on Friday are chomping at the bit to fill the void in the market. Now is the time to legalize and regulate online poker before other sites such as Cake Poker simply replace the role PokerStars and Full Tilt played up until Friday. Unfortunately, legislation doesn't happen that fast in the U.S. It's much more likely that a site like Cake Poker will establish a sizable American player base before any type of legislation gets passed. But as painful as Black Friday has been for the online poker world, it will hopefully prove to be a good thing in the long run. That outlook is a pretty hard one for American players to take right now, but a few years from now we may regard Black Friday as the final straw that was needed to spark change in U.S. law.