Black Friday and the aftermath: Online Poker Implications

[Simon Galloway]

Banks don't keep the full amount on deposit in liquid form.  They keep enough cash to comfortably cover whatever perceived call there will be an dinvest the rest in varying forms of illequidity.

[Simon Galloway]

So FTP weren't at fault for not having the full amount available in cash.  They are at fault for not having the full amount though!

[Graham C]

Poker rooms aren't banks though.  In my mind, player deposits aren't the poker rooms money.  Money taken in rake is the poker rooms money.  If it's not your money, don't spend it. 

[Simon Galloway]

Poker rooms aren't banks though.  In my mind, player deposits aren't the poker rooms money.  Money taken in rake is the poker rooms money.  If it's not your money, don't spend it. 

Deposits aren't the bank's money either??

But I guess that wasn't your point, you are trying to say that a poker room (or other business with customer money on account) isn't entitled to "borrow" it whilst it is sat there awaiting withdrawal?

For my money (and unfortunately, that can be taken quite literally) I believe just about all large scale businesses would choose to apply leverage to the deposits.  have it segregated and ring-fenced from operating capital?  Absolutely.  Have twice the cash reserves you could ever expect to be called on in any given period?  Sure, why not.  But to expect any large business to put the whole lot in an instant access savings account is a stretch too far.  At a minimum, the earn interest on your deposit.  What difference if they invest a portion of the deposits into something that bears higher interest (and tehrefore usually more illiquid) as long as they can cover the run on withdrawals. 

[mulhuzz]

banks don't, as Simon has been explained, but ofc banks are not only heavily licensed and regulated but guaranteed. Anytime you want your money from a bank it will always be available to you because of a guaranteed minimum liquidity.

comparing FTP to a bank doesn't make sense - especially as deposits held by the bank kinda are their money, because it performs an important economic function but it's defo not FTPs money. One example is, without savings, there would be no loaning of money/mortgages etc. The principle is basically that banks never lend their own money, only other peoples'. From that perspective, you can think of banks as having all the money, even though it's not really theirs.

that's quite confusing I guess....sorry

[mulhuzz]

So FTP weren't at fault for not having the full amount available in cash.  They are at fault for not having the full amount though!

yes, they were. They were required, as a term of their license, to have the money equating to the sum of all customer deposits available in cash in a segregated account.

[skolsuper]

banks don't, as Simon has been explained, but ofc banks are not only heavily licensed and regulated but guaranteed. Anytime you want your money from a bank it will always be available to you because of a guaranteed minimum liquidity government guarantee.

This, with a minor FYP.

Also, whilst you could argue that cash is an inefficient use of capital for a business*, what the previous owners of FTP appear to have done was pay all the cash out to themselves, not invest it in assets that generate a return. The owners and the business are separate legal entities; once the cash is out of the business, the players can't ever get it back. This seems to me to be the owners taking money from the players, I don't see how you can argue it any other way.

*However, a certain amount of cash is essential for a business to survive the inevitable swongs of the real world. Swongs like the DoJ banning you from operating in their country.

[Simon Galloway]

This isn't my understanding (but that could well be my fault...)


Segregation.  There subsequently was a wriggle from AGC on the definition of segregation (basically to get them off the hook for not making the simplest of checks that FTP did indeed have the money 'segregated' as you and I would understand the term to mean.  If it said somewhere that it had to be in cash, then fair enough.  Usually, there is some small print about money being in cash, or readily convertible into cash, etc.  But iirc, the AGC came out with some subsequent laughable clarification which basically said their definition of segregation allowed operating capital to be mixed in?

Account shortfall:  Was twofold: DoJ seizing some of it and also the not-so-smart decision to credit US players with phantom deposits without actually collecting the funds.  I don't have the numbers, but to what degree the DoJ return of funds would make things right again, I'm not sure.  FTP became criminally negligent in my eyes when they made a decision as bad as the US deposits (and then refused a massive window of opportunity/internal checks etc to rectify)  They knew they were creating a shortfall and at that point, every penny they paid themselves was in the knowledge that the company wasn't in the health they were reporting it to be ~ theft.

Money isn't always available from banks either.  Northern Rock a few years ago.  The guarantee is the BoE stepping in as the lender of last resort.  It isn't a comparison of poker v Bank per se anyway, it is simply that if a company receives a large amount of customer deposits, what they can/can't do with it.  Ofc that should be defined nicely by the regulator of that particular industry - I've worked in several industries and haven't yet met a regulator that is actually up to the job.

[paulhouk03]

Lol the doj banning a country playing on their site
Is a swong

[mulhuzz]

banks don't, as Simon has been explained, but ofc banks are not only heavily licensed and regulated but guaranteed. Anytime you want your money from a bank it will always be available to you because of a guaranteed minimum liquidity government guarantee.

This, with a minor FYP.

Also, whilst you could argue that cash is an inefficient use of capital for a business*, what the previous owners of FTP appear to have done was pay all the cash out to themselves, not invest it in assets that generate a return. The owners and the business are separate legal entities; once the cash is out of the business, the players can't ever get it back. This seems to me to be the owners taking money from the players, I don't see how you can argue it any other way.

*However, a certain amount of cash is essential for a business to survive the inevitable swongs of the real world. Swongs like the DoJ banning you from operating in their country.

yah, basically what I meant. but by 'gtd min liquidity', I meant what was gtd by law, not economics, so I guess the same thing

bt yerrrr, they paid $$ out of the business which is bad ofc. even if you were a non-famous shareholder!

[mulhuzz]

This isn't my understanding (but that could well be my fault...)


Segregation.  There subsequently was a wriggle from AGC on the definition of segregation (basically to get them off the hook for not making the simplest of checks that FTP did indeed have the money 'segregated' as you and I would understand the term to mean.  If it said somewhere that it had to be in cash, then fair enough.  Usually, there is some small print about money being in cash, or readily convertible into cash, etc.  But iirc, the AGC came out with some subsequent laughable clarification which basically said their definition of segregation allowed operating capital to be mixed in?

allowing operating capital to be a part of it would defeat the purpose. Imagine I said, here, I'm investing $1 in your business, but whilst I'm at it, hold on to this £1 coin for me. If you can't return me the $1, fine, I'm an idiot, but I should always expect the quid back. FTP decided, seemingly randomly, that all the quid coins belonged to them.

Account shortfall:  Was twofold: DoJ seizing some of it and also the not-so-smart decision to credit US players with phantom deposits without actually collecting the funds.  I don't have the numbers, but to what degree the DoJ return of funds would make things right again, I'm not sure.  FTP became criminally negligent in my eyes when they made a decision as bad as the US deposits (and then refused a massive window of opportunity/internal checks etc to rectify)  They knew they were creating a shortfall and at that point, every penny they paid themselves was in the knowledge that the company wasn't in the health they were reporting it to be ~ theft.

define criminally negligent pls. I think you'd find it hard, if not impossible, to accuse FTP of an actual crime in the UK. Ridic I know, but still, true.

Money isn't always available from banks either.  Northern Rock a few years ago.  The guarantee is the BoE stepping in as the lender of last resort.  It isn't a comparison of poker v Bank per se anyway, it is simply that if a company receives a large amount of customer deposits, what they can/can't do with it.  Ofc that should be defined nicely by the regulator of that particular industry - I've worked in several industries and haven't yet met a regulator that is actually up to the job.

that's not the gte at all. also the law (fine fine, equity, to be technical) provides that generally such deposits are held on trust for the customer, although this is usually a shield against bankruptcy/bustoville. Means: doesn't matter where it comes from, it's still yours. There was never a run on Nothern Rock - they couldn't pay other banks because they had bought (bet on the price of...) a lottttt of bad debt. There was never, and this is important, so I'll repeat it, never a suggestion that they couldn't have paid out all customer deposits.

[Simon Galloway]

allowing operating capital to be a part of it would defeat the purpose. Imagine I said, here, I'm investing $1 in your business, but whilst I'm at it, hold on to this £1 coin for me. If you can't return me the $1, fine, I'm an idiot, but I should always expect the quid back. FTP decided, seemingly randomly, that all the quid coins belonged to them.

We seem to have different views of what happened - fair enough.  The only bit we agree on is that that's how segregation should work.  In actuality, FTP didn't have it segregated properly, AGC hadn't sought sufficient evidence that this was the case either.  Then when DoJ seized funds, all of a sudden they found themselves in a situation where they had operating capital and player deposits cobbled together, lots of payments going from a to b, c to d etc that either didn't get sent or didn't arrive, and insufficient controls/capability in place to be able to unpick it.

As DoJ had apparently seized funds pre April also, I wonder what difference it would have made if the company had correctly segregated their money?  There would still be a massive shortfall due to seizure, which FTP would either have to cover from operating capital or email a player saying "thanks for your cashout request, unfortunately DoJ seized it, have a nice day."

define criminally negligent pls. I think you'd find it hard, if not impossible, to accuse FTP of an actual crime in the UK. Ridic I know, but still, true.

I didn't mean it in such a way that I was going to charge them with a crime in a UK court of law.  But my definition is that they were reckless in the extreme, making a decision that any qualified person in that position could have reasonably expected to have predicted the consequences would put the customer at a serious and unnecessary risk.  I.O.W anyone qualified to make the decision would have been so hard pressed to arrive at such a terrible decision that it is undefendable that they did.

My understanding of FTP was that Bita was a micro manager in the extreme, insisting on control of every decision that took place, down to who was hired and what biscuits should be in the tea-room.  Employees consistently moaned about the lag involved in getting everything done, because every action had to get "royal assent" from Bitar, so trivial decisions got gunked up in the backlog.  It is fine to run a fledgling company in that manner, but as it grows, it becomes impossible to do it.  You have to devolve authority and ensure that qualified people are in situ to make those decisions.  Employing friends and family to perform important tasks would be an example of criminal negligence (where they are clearly unqualified to perform the role) as well as, of course, nepotism.

that's not the gte at all. also the law (fine fine, equity, to be technical) provides that generally such deposits are held on trust for the customer, although this is usually a shield against bankruptcy/bustoville. Means: doesn't matter where it comes from, it's still yours. There was never a run on Nothern Rock - they couldn't pay other banks because they had bought (bet on the price of...) a lottttt of bad debt. There was never, and this is important, so I'll repeat it, never a suggestion that they couldn't have paid out all customer deposits.

Err, not sure what to say on this one.  Unless I am really missing something, Bank of England absolutely is the lender of last resort.  It underpins the banking system by allowing banks that run into liquidity problems to lend from them to ensure the bank can pay out whatever it needs to.  If there was no suggestion that they couldn't pay out all their customer deposits, I am struggling to understand why they requested (and received) payment from the BoE when this is the last thing any commercial bank would choose to do if there was any other option.  The got cleaned out in the sub-prime markets and became unable to pay the money markets for their liabilities.  The public got wind of it and every NR branch had 100 yard queues outside it.  If that's not a run on the bank, I don't know what is.

[neeko]

I see FTP as more like a Lettings Agent. If someone rents a flat they provide a deposit, the agent should keep this in a separate account. The agent can't take money from it to pay a wage, it is held untouched until repaid to the rentor.

[TightEnd]

Full Tilt Poker’s unique “Rush Poker” innovation, which allows a pool of players to play quickly and to continuously be rushed to a new table upon folding their cards at their previous table, is a concept that is neither exclusive nor patentable, according to Per Hildebrand, chairman and vice president of sales at InstaDeal Poker Network.

Following several years of product development, InstaDeal has rolled out its own version of Rush Poker that is targeting both mobile poker and online poker players after consulting with legal experts and concluding that Rush Poker does not establish the required criteria to be granted a patent.

Full Tilt has applied for patents for the fast-paced poker concept in several global markets, including the United States, Australia, Canada and Europe. The shuttered poker site has vowed to protect its creative software invention, stating, “Full Tilt Poker, its Affiliates and/or its Parent Company will take vigorous legal action against any infringement of their patent rights.”

Hildebrand, the former CEO of the Entraction Network, considers the intellectual property of the pending patents unenforceable and claims that feedback he received from his attorneys regarding Rush Poker’s chances of success in acquiring patent rights was “fairly negative, even from the start, as FTP only met one of the three criteria required to be granted a patent.”

“From that time on we were confident they were never going to get a patent for it and so we felt it was safe to start moving forward with InstaDeal,” Hildebrand added.

Hildebrand readily admitted that the 10-year application process for securing a patent is “ridiculous considering how quickly today’s market is moving,” but was thankful that Full Tilt’s warnings to competitors may have scared off some of his rivals and allowed InstaDeal to get a jump on offering the product to poker players before other operators could do so.

“We are a small company that has developed a great product so we’re happy with others thinking the FTP patent applied for so long,” he said.

Speaking of rivals, the scuttlebutt in the industry is that the world’s largest poker site is currently developing its own Rush Poker concept to offer its loyal players.

“PokerStars has suggested launching something similar and no one really knows what they’re up to but we gather that they’re looking into the legals. In all honesty I’m a little surprised that they haven’t launched anything yet,” Hildebrand said.

In September, a post made on a popular online poker forum from an individual using the name “Pokerstars Stefan”, who claimed to be affiliated with the management team at PokerStars said, “PokerStars is developing a fast moving ring games product. We expect it to be available for public beta testing in a few months.”

Full Tilt introduced Rush Poker in early 2010 and it became quite popular among a certain faction of players from the start. “Online poker on steroids” and “an amazing concept,” were some of the opinions expressed by poker forum regulars. However, some hardcore online pros weren’t as easily impressed. One of the drawbacks mentioned by the more experienced players was that if you spotted a fish or poor player during Rush Poker play, it could be a while before you found yourself seated at the same table with him.

The recent acquisition agreement between Groupe Bernard Tapie (GBT) and the U.S. Department of Justice (DoJ) in which Full Tilt Poker will forfeit its company assets to the DoJ, who, in turn, will sell the assets of Full Tilt to GBT for $80 million, is believed to include the Rush Poker software.

InstaDeal touts its speed-style poker as being geared toward the casual player. The thinking is that the more experienced players will not bust the casual players in the fast-paced game because with quicker action available, the lesser players will not be inclined to play as many weak starting hands. Also, the pros will not be able to track or find the fish or weaker players as easily with the constant table-changing.

Hildebrand believes that playing poker on a mobile phone is well-suited to a fast poker style such as Rush Poker, InstaDeal and other models expected to be launched soon by competitors.

“We started looking at Rush Poker before the smartphone market was so big and at that time we were targeting terminals for after we’d build up liquidity through online operators,” Hildebrand said.

“Now we think mobile suits us well, and we think we have a very good solution there as it works without going through the app store. It might not be operable in more than one table at a time on mobile but for rush players that’s often enough.” Hildebrand added. “The growth of mobile might be what encourages other companies to decide to make their entry quickly.”

The next step for InstaDeal is targeting online dot.com operators and markets that are regulated. “Of course, I am a little concerned about the appeal in regulated markets in terms of liquidity and ring-fenced player bases,” Hildebrand said. “But in the future that shouldn’t be an issue as we can offer the product in terminals.”

An online review of InstaDeal concludes, “The software is pretty fast. A few people seem to not like the bet-slider but if you understand that it was designed for ipads, tablets and pub gaming machines then the design makes sense.” The review also makes note of the fact that the rake may be “a little high at micro-stakes (6% with usual cap) but currently this is more than compensated for by very good bonus/rakeback deals designed to attract regular players to the site.”

A quick glance at the InstaDeal site shows that poker players can log on via Android, iPad or iPhone and can expect to play at a pace “up to 5 times faster than regular poker” and that “this unique Texas Hold’em and Omaha Poker software is available as an online network to be integrated directly into an existing back office to perfectly complement a sports betting, casino or poker offering.”

/www.pokernewsreport.com

[tikay]

Another one bites the dust, though gotta wonder how bad a Room needs to be to get it's Licence suspended by KGC!

This, from e-Gaming Review.....


Microgaming network site 24 Poker has seen its client provider authorization (CPA) suspended by the Kahnawake Gaming Commission.

A statement from the network operator revealed that: “Both Microgaming and the Kahnawake Gaming Commission have tried without success to contact the 24 Poker Management Team.” All play on the site has been blocked as a consequence of the licence suspension.

24 Poker is one of more than 25 sites on the Microgaming poker network, along with the poker offerings of Ladbrokes and Unibet and (in selected markets) Victor Chandler, giving the network the sixth-highest traffic of all dot.com networks and standalone poker rooms according to Pokerscout.

The site, registered with UK-based company BPR-services Ltd, is not to be confused with Scandinavian-facing Entraction network site 24hPoker.com.