7 Years Removed – A Look Back At Black Friday – Part 2

Uncategorized

This segment of a look back at Black Friday takes us back to what actually transpired a little over seven years ago on April 15, 2011. It takes a detail look at what really happened that day and in the few months following it, and a look into what actually caused poker’s Black Friday.

April 15, 2011 – Poker’s Black Friday

The morning of April 15, 2011, started out like any other normal Friday morning. With regard to online poker, everything seemed like just another normal day. No one had any idea that within just a few hours, everything related to online poker in the U.S. was about to change.

By early afternoon on the east coast, not yet lunchtime out west, first reports of the indictments and civil complaint began to surface. The sites themselves were not only being charged with violating the Unlawful Internet Gambling Enforcement Act (UIGEA), but additional charges of bank fraud, money laundering and illegal gambling made it clear as to the severity of the actions being taken, especially when coupled with restraining orders placed against 75 bank account used by the sites and the seizure of five related domain names.

That morning two of the eleven named defendants in the indictment had been arrested. They were John Campos, who was part owner of a bank that was involved and Ched Elie, who was a payment processor. Bradley Franzen, who was also a payment processor, who was also named in the indictments indicated his intentions to turn himself in early the following week. The other eight defendants that were named in the indictments, Ryan Lang, payment processor; Ira Rubin, payment processor; Ray Bitar, CEO of Tiltware; Nelson Burtnick, payment director at Tiltware; Scott Tom, part owner of Absolute Poker; Brent Beckley, payment director at Absolute Poker; Isai Scheinberg, PokerStars founder; and Paul Tate, payments director at PokerStars, were all outside the U.S.

Immediate Impact to Online Players

Online players using the dot.com sites were greeted with a seizure notice appearing under the FBI and DOJ seals.

Poker Black Friday DOJ Notice

PokerStars had blocked U.S. players from real-money games by mid-afternoon. A few hours later Full Tilt Poker had done the same. Later that evening PokerStars and Full Tilt Poker both issued statements explaining that even though U.S. players were shut out, they would continue business as usual for players who played on their sites from countries outside the U.S. PokerStars included in its statement for players to “please be assured player balances are safe,” In contrast to PokerStars and Full Tilt Poker, both Absolute Poker and Ultimate Bet remained silent, with U.S. players in fact able to continue to play on their sites. By April 21, those sites to would no long be available to U.S. players.

In a matter of just a few hours on what started as a normal Friday, online poker and the world of poker in general were changed forever.

The True Cause of Black Friday

Las Vegas StripEverything ties back to Senator’s Frist and Kyl ties to the casino lobbyist, and the fact that the UIGEA was unhanded passed into law. Add that to the fact that the FBI and DOJ had effectively completed building their entire case over a prior to the indictments being unsealed, one has to only look at the timing of Black Friday to understand it had become a case of either now or never for the Federal Government. Several states were in the process of aligning with well-established online sites timing those agreements to coincide with for passage of online gambling legislation that was working its way to vote that was assured to pass. This reality became the final push for the Fedeal Government to act. The timing of the indictments being unsealed clearly meant that the competition was no longer welcome.

Soon after Black Friday a spokesperson from Feritta announced that it had ended its partnership with Full Tilt Poker, this announcement was soon follow by an Associated Press report that Wynn Resorts had ended its alliance with PokerStars. This was followed by ESPN ceasing all their poker related advertisements, and canceling their coverage of the North American Poker Tour (NAPT) events. Shortly after ESPN’s announcement, PokerStars canceled the NAPT.

The Charges Actually Hinged on Fraud

Bank SymbolIn reality it is interesting to note that Federal prosecutors actually had no grounds to go after online poker. Under the Wire Act, which was the only act that they could even possibly use in regard to the indictments, online poker was not covered. The UIGEA didn’t make anything illegal. It is a punitive measure adding a layer of enforcement against individual and companies processing payments for illegal internet gambling, which was not defined by law.

There were a few state acts that the Federal Government could use, but these acts alone were not enough. Plus, any particular state law would not reach beyond the state’s own borders. What the Federal Government ended up doing was going after the websites based on the misdemeanor gambling statutes of New York.

Knowing that they were treading one what was a very slippery slop at best, not even knowing for sure if the state statues could even be used since they were not sure if online poker was actually covered by the “game of chance” prerequisite found in the statutes, the prosecution tried to include the “fraud” part as much as possible to make things sounds as bad as possible.

The said “fraud” was meant to cover the part where banks were “defrauded” into facilitating online gambling, with the reality being there was no actual fraud to speak of. The banks that were involved were not misguided for the most part at least. Even if they were, they did not lose anything from the so called “fraud”. The DOJ did all they could to make these charges sound as scary as possible, even though the ground they stood on was shaky at best.

Mission Accomplished

The indictments lead to all but three having convictions.  All the convictions were guilty pleas to lesser charges and to settlements with agreements to pay fines and restitution. The main targets of the all out attack on the online poker industries was the three largest poker sites. The goal was to force the online sites out of the U.S. market and to rid the casino industry of the competition that they found themselves unprepared to face. Efforts of the FBI and DOJ were successful to that point. With the three largest sites agreeing to leave the U.S., Black Friday left very few options for online poker players.

Part 3 of 3 covers the aftermath of Black Friday, and the recovery to date. If you have any questions, please email me direct at ted@findbestonlinecasinos.com and as always I welcome your comments below….

 

Tagged

4 thoughts on “7 Years Removed – A Look Back At Black Friday – Part 2

    1. Hey Michael, The answer to your question isn’t short, but here is an explanation. The he only site that truly survived on its own merrit was PokerStars. They actually worked out an agreement with U.U. officials, paid a substantial fine and shut down the site to U.S. players. They were the largest site in the U.S., but also one of the largest outside the U.S., and they didn’t want to risk losing that traffic. Full Tlit had poorly managed the funds, they had failed to keep player funds separate and in secured accounts, over a period of 4 years, management and payments to poker pros involved with the site had been disbursed $440M. When the site was shut down they worked out an agreement to reimburse players, but were over $300M short of what was needed. PokerStars eventually purchased Full Tilt, and the poker pros and members of Full Tilt management worked out a deals repaying money ranging from $12M to over $42M to avoid jail time and admitting wrong doing. Absolute Poker and Ultimate Bet stayed on line for a short while, and then shut down their sites without paying out player funds.

      In reality, the players hadn’t violated a single federal law. None of the poker sites had violated a single federal law, especially after the ruling of District Judge Jack B. Weinstein who’s ruling stated that poker was more skill than a game of chance (which is covered in part 3). The banking issue for the site deposits, were questionable because the government would have to prove they were knowingly taking funds for gambling, which according to Weinstein poker was more skill than a game of chance. It was the fact that the full weight of the U.S. government was being used and none of the sites or individuals could afford to gamble and take them head on. That was the final payoff to the ery powerful and cash flush casino Lobbyist.

  1. Very interesting information. For someone that doesn’t play online, I had no idea. I’m just curious how they could put the top 3 sites out of business completely if they we’re able to keep the business of people outside the US? Will part 3 on your site fill in some more of the answers?

    1. Hey Lis, thank you for reading this part of the article, hopefully you enjoed it, part 1 discusses online poker prior to Black Friday, and part 3 updates it to today. They went after the top 3 sites because that was 85%+ of the online poker market. All of this was pushed buy the brick and mortar casinos. They had underestimate what online poker would become (most of that is laid out in part 1). What they were after was time…time to trybti catch up so they could try to get control of the U.S. market. It was all about the money. By Black Friday, online poker was a billion dollar plus industry, and they got left out in the cold. The Fed’s actual entire case was flimsy, but they were able to apply enough pressure to force the sites to leave the U.S. market as they worked our plea deals and financial arrangements. Site’s international platforms and players with international IP address were not impacted. How ever, Absolute Poker and Ultimate Bet after keeping their sites open immediately following Black Friday, shut their sites down a few weeks later with players never recovering their funds. The top 2 sites each had issue that ended up being worked through. Hopefully this answers some of your questions. Please let me know if you have additional questions…thank you again, Ted

Leave a Reply

Your email address will not be published. Required fields are marked *