On June 16th, Subject: Poker reported that Full Tilt Poker had credited $60 million to players for deposits that never left their bank accounts.1 In fact, the total amount of still uncollected funds is $128 million.2 This new sum represents a very signficant portion of Full Tilt’s total obligation to players.
As we first explained in June, players who deposited by electronic funds transfer (also known as EFTs or “e-checks”) received the deposited funds instantly in their Full Tilt Poker accounts. Typically, these funds would be debited from the players’ bank accounts a few business days after their deposit.3 However, during the time period in question, many US players found that these funds were simply never taken from their bank accounts. Full Tilt had given them funds on their site for nothing.4
This was not simply an accident, as many had suspected. Full Tilt Poker was actually accepting deposits and crediting player accounts without payment processors in place to collect the money. Full Tilt had effectively given players loans without telling them, under the assumption that they could collect the debt later. According to numerous sources inside both Full Tilt and PokerStars, FTP viewed this as an opportunity to gain US customers who were unable to deposit on Stars.5
The shortfall was first mentioned publicly when the US Attorney of the Southern District of New York released a press release about Bradley Franzen’s plea bargain:
According to his plea allocution and the Superseding Information, FRANZEN admitted that in early 2011 he had been asked to help Full Tilt Poker deal with a $60 million shortfall created by the company’s inability to find a payment processor to process transactions involving U.S. player accounts. The company was facing the shortfall because it continued to credit funds to player accounts despite being unable to actually debit (or “pull”) funds from customers.
Franzen, a payment processing middleman, was indicted on April 15th for his role in processing payments and allegedly defrauding banks on behalf of PokerStars, Full Tilt Poker, and Absolute Poker. It is not clear at this time why Franzen’s allocution only mentioned a fraction of the total shortfall.
The new figure was first mentioned publicly by lawyers representing Full Tilt in Todd Terry et al’s class action lawsuit representing US players against many of the poker site’s companies and owners, and we have confirmed it with numerous reliable sources. Though Subject: Poker has been so far unable to learn exactly how much money Full Tilt owes its players, we have learned from many sources that the total debt to US players is roughly $150 million.6 (It is unclear whether this number includes funds that were in transit on April 15th.) This, combined with the fact that US players represented between 40% and 50% of Full Tilt’s total business, suggests that the $128 million shortfall represents over one third of FTP’s total debt to players.
It is extremely unlikely that Full Tilt Poker will be able to recover a significant portion of this money. Full Tilt’s lawyers also reported during the class action lawsuit that only $9 million of this $128 million is still recoverable by simply debiting players’ Full Tilt accounts.7 That money will likely be recovered.
However, the remaining $119 million is very unlikely to be returned. Full Tilt has made an explicit agreement with the Department of Justice not to accept deposits from US players. Even if that hurdle were overcome, these debts range from over four months old to over a year old, and most of the players are unaware that they even owe money to the poker site. Full Tilt Poker had serious troubles with reversed transactions, emptied bank accounts, and customer complaints trying to collect these debts four months ago. These problems would doubtless be worse now.
Footnotes
1. We recommend that interested readers read our previous article on this topic to get a better understanding of how this problem arose and the many troubles that it caused the poker site. ↩
2. We have unable to determine the total amount that was deposited in this way. We feel that the remaining uncollected amount is more relevant. ↩
3. This lag of a few days naturally leads to the possibility of fraud. This is a significant cost for poker sites. ↩
4. Subject: Poker reviewed the records of one such individual, who was immediately charged for only about two thirds of his dozens of deposits. We’ve heard from many US players who say that they made many more deposits and were charged for none of them. We’ve also heard a lot of anecdotal evidence about people who reportedly intentionally scammed this system for tens of thousands of dollars, depositing the maximum of $2,500 repeatedly. ↩
5. PokerStars was discouraged from accepting deposits without payment processors in place by its licensing agreement with The Isle of Man Gambling Supervision Commission, which requires it to keep player funds in a separate account. Subject: Poker has heard from many reliable sources that Stars never engaged in such activity to a significant extent. ↩
6. This number was also mentioned in the class action lawsuit. ↩
7. In other words, if a player deposited $1,000 and Full Tilt Poker never collected this money, Full Tilt could debit up to $1,000 from his account. ↩
http://www.subjectpoker.com/2011/08/ftps-60m-shortfall-actually-much-larger/
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