Garden City Group’s Repayment of Full Tilt Funds Infuriates Many

The good news, Americans owed money from Full Tilt Poker can now submit claims for repayment of funds. the bad news, amounts being paid back could be under scrutiny and some are excluded from the payback process.

First the good news, Americans owed money from Full Tilt Poker can now submit claims for repayment of funds and apparently Garden City Group (GCG) will begin the remuneration process almost immediately. Now the bad news, amounts being paid back could be under scrutiny and affiliates, professionals and employees are excluded from the payback process. The initial notice on the website (the site created by GCG for repayment) seems pretty tame, but the devil is in the details. At first glance it appears that Americans can simply begin applying for repayment starting today (September 18) and have until November 16th to make the claim and that all funds will be returned but the section about the repayment formula has many fuming. This is from the GSC website:

"It has been determined that the calculation formula to be used for the Petition for Remission process will be based on players' final balances with FTP as of April 15, 2011 (the "FTP Account Balances")... Petitioners must also meet all other requirements outlined in 28 C.F.R. § 9.8 to be considered eligible for remission."

Looking at the link they provided to 28 C.F.R. § 9.8  it's clear that GSC is going to make it as difficult as possible for anyone who has profited from FTP to actually receive any compensation and employees and affiliates are completely out of luck. As far as GSC and apparently the DoJ who appointed them is concerned, employees and affiliates are part of "the crime" and hence aren't eligible to receive any funds.  Here are the relevant 3 paragraphs from 28 C.F.R. § 9.8 :

(a) Qualification to file. A victim, as defined in § 9.2(v), of an offense that as the underlying basis for the criminal, civil, or administrative forfeiture of specific property, or a victim of a related offense, may be granted remission of the forfeiture of that property, if in addition to complying with the other applicable provisions of § 9.8, the victim satisfactorily demonstrates that:

(1) A pecuniary loss of a specific amount has been directly caused by the criminal offense, or related offense, that was the underlying basis for the forfeiture, and that the loss is supported by documentary evidence including invoices and receipts;

(2) The pecuniary loss is the direct result of the illegal acts and is not the result of otherwise lawful acts that were committed in the course of a criminal offense;

(3) The victim did not knowingly contribute to, participate in, benefit from, or act in a willfully blind manner towards the commission of the offense, or related offense, that was the underlying basis of the forfeiture;

Not surprisingly this has made many people upset. Point 3 is what excludes affiliates from seeking compensation and the owner of one affiliate site that is owed over $5,000 from FTP told me that he categorically disputes the assumption that he isn't entitled to compensation because he wilfully benefited from the commission of an offense.

"How is what we did wrong? The affiliate said to me. "We simply provided some information about several poker sites including FTP and provided a link for players for them to sign up. We had no ownership of FTP in any way, we didn't take bets from them and we had no interest or say on how much players actually wagered there. Our website was just paid an advertising fee for our services.  If advertising is illegal on the Internet than you may as well shut down any information based website because that's how we all make our money."  The affiliate added that he doesn't understand how it was ok for PokerStars to repay affiliates what they were owed if they were located outside the U.S. but he and American affiliates are being treated differently. (Just a note: I have received no indication if overseas affiliates owed money were ever really remunerated).

"The area of affiliate advertising is always a touchy area . . . "

Another affiliate stated something similar although he did acknowledge he was operating in a grey area and knew full well it could be an issue at some point.

I spoke to a California attorney who has a long history in online gambling and he was less forgiving to the affiliates although he did concede that the jury was still out on its legality.

"The area of affiliate advertising is always a touchy area," the lawyer told me. "Most affiliates are compensated with a percentage of the profits or commissions that their referrals make for the site they are promoting and in that case they are clearly a part of the business. Those affiliates really can't argue that they haven't profited from an illegal activity if indeed poker is illegal. That may be their only salvation. When the DoJ gave its opinion that the Wire Act only applies to sports betting it provided a reason for percentage based poker affiliates to say that they weren't operating in violation of the law because there is no law on the books that makes online poker illegal. And if the activity isn't illegal there is nothing wrong with profiting from that business.

Unfortunately the affiliates really can't rely on that opinion in this instance since it was given after Black Friday, and decisions aren't retroactive. Up until the day the DoJ changed its opinion, it was the stated belief of the DoJ and the courts that the Wire Act applied to all forms of online gambling including poker."  The attorney did indicate that not all affiliates operate in that manner though.  "There are some affiliates who receive a set fee for advertising. I have no idea if Full Tilt Poker used any of those websites but if the affiliate received say $2,000 for one months advertising and didn't get a penny extra from the commissions their referrals generated then they can make the argument that they were simply an advertising site and not a real affiliate and thus qualify for compensation. I doubt very much the DoJ or the company they hired on (GSC) will agree but if they want to pursue it they can use that argument. The one type of affiliate that should have no concern and should receive money back are those who were advertising" (Note that the sites that generally advertised were magazines, newspapers and other media sources but they almost always demanded payment up front so there is no reason to suspect they need to be compensated. Moreover many of those advertisers are located in Europe so if they were owed money they would have likely been compensated by PokerStars from the other repayment money not given to the DoJ)."

Asked whether he believes the affiliates should challenge GSC and the DoJ over compensation, the attorney laughed and said, "Why don't you ask Jay Cohen, David Carruthers or Peter Dicks that question?" Clearly what the lawyer was insinuating is that when anyone challenged the DoJ on matters relating to the legality of their operation, the DoJ tended to take it personally and charged that person for breaking the law. It's doubtful the DoJ would really seek prosecution against a small affiliate based website but it's probably not worth the risk. When I asked whether state laws were important in determining the legality of affiliate advertising especially considering Kentucky's attempt to seize the FTP website prior to Black Friday, because the state attorneys said FTP and other sites were operating illegally by taking bets from Kentucky residents, he said no. "The repayment of Full Tilt players is being conducted by the Federal DoJ. They have authority in this matter and state laws won't make a difference."

The wording of the repayment plan also indicates that any American employees and professionals won't be compensated meaning that Phil Ivey's tirade against the company was for nothing and the likes of Alan Cunningham and Chris Ferguson will not get a red cent of what is owed to them but few FTP customers seem to be upset about that.  I spoke to numerous former FTP customers located in the U.S., Canada and England and it seems that most consider the FTP professionals the main reason for the Ponzi scheme, the lack of funds in FTP and most importantly the reason they were unable to get paid back immediately as PokerStars players were. As far as these former players are concerned they have no sympathy for the professionals and would actually like to see some of them in jail.

The one variable that has to still be answered is whether any players have to fear repercussions for submitting a request for compensation. When Navigant coordinated repayment of NETeller clients in 2007 they made it clear that no names or information would be sent to the government so those owed money by NETeller had nothing to fear. The same announcement was not made here and in fact the wording under point 1 that "the loss is supported by documentary evidence including invoices and receipts" is making some very uneasy. One player from St. Louis who I keep in regular contact with is wondering whether to apply for the $500 he is owed.

"It's not a lot of money," he told me, "but how the heck can I verify how much I sent over the years. I may actually be up money but I never declared it as income because I'm not a professional. If I submit for repayment will I get a call from the IRS? What's the point?" After a brief pause he said, "screw it I lost more money than that at the track on some days, it's just not worth it, they can keep my 500 bucks."

Of course that is almost certainly what the DoJ is hoping. If only 50% or so actually submit claims for repayment by November then the DoJ gets to keep about $70 million and I guarantee you they aren't going to go out of their way to find the customers that are still owed money.

What should have been a simple procedure where everyone who is owed money were simply compensated by PokerStars after they paid the extortion to the DoJ (err . . . purchased the assets of Full Tilt from the DoJ) has been turned into a big ordeal and as a result a lot of people who should be getting money back are now either out of luck as they are deemed unqualified to receive compensation or simply have been made too scared to request compensation back. It's really unfortunate but it is consistent with the tactics of the DoJ all along.

Contact Hartley via email at hartley[at]osga[dot]com.

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