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Risky financial tactics allegedly deployed by Full Tilt Poker to work around a US processing problem may have been short circuited with serious consequences by Black Friday's enforcement actions, according to an absorbing article on the Subject:Poker news website this week.
Apparently the story is well known in player circles, although it has yet to fully surface in mainstream media reports on the US enforcement actions against individuals associated with the US closure of major sites like Full Tilt, Pokerstars and Absolute Poker.
The Subject:Poker article reveals that from around September 2010 to February 2011 Full Tilt Poker was accepting player deposits and crediting the amounts to their Full Tilt accounts, but not drawing the funds from the players' bank accounts.
In other words, as the report succinctly summarises, Full Tilt gave its players funds to use on its site for nothing.
Although the phenomenon was widely discussed and speculated upon in player circles, the extent of the practice was not appreciated until one of the Black Friday indictees, Bradley Franzen, pleaded guilty, and the enforcement authorities issued a press release that appears to confirm the tactics used by the online poker provider.
Subject:Poker points specifically to one paragraph in the release which claims:
"....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."
Subject:Poker notes: "In other words, 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....effectively (it had) given players loans without telling them, under the assumption that (it) could collect the debt later.”
Around March 2011, and with some processing power perhaps in place, Full Tilt apparently decided to recoup the amounts it had credited to its players' Full Tilt accounts.
The company began emailing thousands of players, advising them in advance that due to processing delays their deposits had been credited to their FT accounts to allow them to play, but that these deposits were not actually recovered from their bank accounts, and that as this was now about to take place, the player should ensure that funds were available in his or her bank account.
The article relates the various reactions of players to this announcement; some thought it was a scam and ignored it; others thought it a mistake; some "...changed their bank account details, reversed the transactions, or emptied their bank accounts before Full Tilt was able to remove the funds. Others thought that they had been hacked when they saw the money removed from their bank accounts."
The resultant barrage of financial enquiries, complaints and instructions created serious administrative problems for Full Tilt, an unidentified inside source told Subject:Poker, necessitating the involvement of other departments within the company to deal with the sheer volume of correspondence.
More alarmingly, the recovery effort was apparently less than successful, with the source claiming to Subject:Poker that only 70% of recovery attempts had been fruitful.
Then Black Friday dawned, completely dislocating the process. The report admits that the percentage of unprocessed deposits the company had managed to clear by then is unknown, but the recovery exercise had not been completed.
Following the enforcement action, the federal authorities have said that the withdrawal of funds from Full Tilt is allowed, but deposits by US players are prohibited. FTP has apparently agreed that any financial transactions with players located in the United States are strictly limited to the return of those players’ funds held in account with FTP.
The enforcement action included the seizure of bank accounts that may have included millions of dollars, further complicating the financial situation of the companies involved.
Read the full article here: http://www.subjectpoker.com/2011/06/ftps-60m-shortfall/
Source: InfoPowa News