Interview with Dan Fleyshman- Part I

May 22, 2011 - 9:36 PM EDT
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Dan Fleyshman is CEO of Victory Poker, originally a skin on the Everleaf Network but now on the Cake Network. Before the indictments on April 15th, VP had planned to move to the Cereus network. Three days after Black Friday, Victory Poker pulled out of the US market, and as Fleyshman explains in the interview, his plans to move to Cereus were canceled. In this first half of the interview, Fleyshman discusses his background and the formation of Victory Poker, the financial relationship between skins and networks, his planned move to Cereus and the controversy surrounding that, and his views on the DOJ indictments.

 

Background

Noah Stephens-Davidowitz: First of all, just tell us a little bit about yourself.

Dan Fleyshman: My name is Dan Fleyshman. I’m the CEO of Victory Poker. I started my first company when I was seventeen.1 We ended up doing a $9.5 million deal with the Starter Apparel Group for my clothing line when we were eighteen.

And then we went through the roller coasters of life: losing millions, making millions, losing it, just being young entrepreneurs getting screwed over and starting back up again. When we were twenty-three, we took it public on the stock market and launched an energy drink. Over the course of three years, [we] got in to 55,000 stores. Then we went through some of the rollercoasters again, not getting paid by chain stores and going through the rollercoasters of being a young business man. The company’s still public six years later.

Then about a year-and-a-half ago I met with Antonio Esfandiari and some other pros to launch an online poker site.

NSD: How long had you had that idea before you launched the site?

DF: We had talked about it for a year prior, but I was still doing a lot of–You know, I had a lot of other businesses going, and I was consulting for other people’s companies. And then, I made the move to Las Vegas–I was living in San Diego for twenty years. I made the move to Las Vegas, and that’s when it all made sense because I was here, I was living in the same building as a lot of the pros, and it just made it–It made it more realistic. And, a lot of the guys that I saw were young internet pros or some big name guys like Antonio that I could put together. That’s when it made sense to go for it.

So that’s what we did. It was around the holiday season 2009, and then within a few months, we went live–February 1st, 2010.

The Network-Skin Model

NSD: What does it mean to be a skin on a network?

DF: So a skin on a network is–It’s kinda like being an affiliate. So, basically what you’re doing is really–You’re a marketing arm. You don’t deal with any of the back-end. The network does anything with the back-end for you. So what you really are is kinda like a nightclub promoter standing outside of a nightclub. You’re trying to invite people inside, get as many people inside as you can, but really the nightclub itself is the one handling the business, the sales, the music that’s played, the drinks, the credit-card processing, the receipts given out; everything’s really handled by the nightclub itself; you’re really just the guy outside, waving your arms, inviting everybody to come inside.

NSD: Could you discuss the specific terms of the deal? How do you get paid, etc?

DF: Sure. So, the deals are very different. I’d say 99% of skins have the same deal. Unless you’re a brand like a Doyle’s Room or Victory or some of the bigger names–That’s the only time your deal will change. So most of the time your deals range anywhere from fifteen to twenty-five percent of the gross rake goes to the network provider, usually more closer to the 25%, sometimes as high as thirty, but usually more like 25%. That’s pretty much across the board for networks, so let’s just use 25% as the number.

So now the network gets 25% of your gross rake. So let’s say–We’ll make an easy example: You’re doing $10,000 in rake in a month. Or, I’m sorry, let’s do $100,000. So you’re paying $25,000 to the network as your provider. Now you also pay the credit-card processing fees, the merchant processing fees. Even though you can’t access it and can’t handle it, you still pay those fees and just have to kinda hope and trust that it’s proper. In most cases it’s going to be. I mean, most of the networks are big enough, and they’ve been around for years that you should be fine.

But the fees are pretty high. Because the networks, they do most of their merchant processing overseas, if not all of it.

NSD: So the skin pays those fees. And how high are those fees roughly?

DF: Like 7%.2

Like the reason that some of the big sites do it in America is because they’re only paying like 2.2%, 2.9%, 2.7%, which is a huge deal for them to save 4.5% on $100 million. Most of the networks are low eight-figure-a-year companies. They’re doing five to thirty million in rake, compared to stuff like Stars, Tilt–Those guys are doing hundreds and hundreds of millions of dollars. So, a lot of networks would rather pay 6, 7, 8 percent and make sure it all gets processed properly because they don’t have the resources do it in America.

So you pay those fees. Then you also pay tournament shortfalls. So let’s say there’s a guaranteed tournament, like a $50k guaranteed tournament that misses it by $9,000. That $9,000 is split up amongst all of the skins on the network.

NSD: How is that split?

DF: It’s split amongst those skins based on how many players you had in the tournament. So let’s say out of the $9,000 missing there was 30 Victory players and there was 60 other players from all the other little skins. Victory would pay the thirty out of that ninety.

The Planned Move to Cereus

NSD: What’s your current relationship with Cake Poker? You were planning to leave them for Cereus, and that was announced publicly. But you’re still with them now, so what’s your relationship like since then?

DF: I mean, nothing changed. They understood my decision; it was a big deal to go with the third biggest and to have that huge platform and to be focused on, compared to being on Cake where there’s 50 or 60 skins, and there’s always lots of headaches and situations going on with the other skins that sometimes affect us. So, for me–They understood completely why I wanted to go because it was such a big deal.

I’m still friends with all the owners and the attorneys and the staff and the executives. I go to Vancouver–I’m one of the only skins that actually travels there, and you know, spends time with them. I brought them other deals. Like, we have a good relationship. But, the online poker market is a whole new world now. The future is completely different, and we’re making a lot of decisions because the US is such a focal point, and you know, it’s almost half of our business, and it’s just frustrating–It’s more like emotionally frustrating.

So we’re just thinking about a lot of things with Cake. There’s a lot of new stuff coming from Victory. As far as for America, we’re still not taking US players, but we’re gonna have strategy videos and more things that are–

NSD: Well, we’ll get into that, but I want to stick with this for a second. I was curious how close you actually were to moving to Cereus before Black Friday happens?

DF: Four days.

NSD: You were four days away?

DF: Well, not four days from moving, but we were four days from 42 of the staff going out there to get all set up. We weren’t moving for a while.

NSD: Ok, but the deal was basically set? Had Black Friday not happened, you were pretty much guaranteed to go?

DF: Yeah, but the contract was not signed yet.

NSD: How did you choose Cereus instead of Merge or Cake or the other US-facing networks?

DF: Merge and Cake are similar as far as having fifty or sixty skins. The reason that I originally went to Everleaf was because we would be the focal point. You know, I could have gone to Cake from day one, but there was always Doyle’s Room–There was Doyle’s Room, there was Sportsbook.com, Player’s Only; there were so many other major players; there would be no focus on us. And, with us having such a big team, I wanted focus for our brand. I wouldn’t have left Everleaf if it wasn’t for all their financial situation when it happened with the law suit. But that all finally got cleared, so–I just couldn’t afford to stay there when I had those head aches.

So, why’d I choose Cereus? Well, the other networks are international networks, and I wanted to be able to accept US players because I don’t see anything wrong with it.

NSD: Merge accepts US players.

DF: Correct, but like I said Merge is in a similar situation to Cake. I wouldn’t be the focal point. They have so many things going on. Their staff can’t handle fifty or sixty skins and then have one major player come. It just wasn’t for me. I like the guys at Merge; I talk to the CEO all the time. They’re a great option, and obviously their business has grown tremendously since this whole situation. But, I don’t feel like I would’ve been the focus because of their relationship with Sportsbook.com and some of the other sites that were on there, we just wouldn’t have been the major player.

NSD: But on Cereus, I assume that Victory would be much smaller than Absolute and Ultimate Bet, and before your mention of going there, I don’t think many people thought of Cereus as a network because the two skins are owned by the same company and are basically identical. So, whose idea was it?

DF: It’s been their idea for a while to create a network, and they had brought it up at a couple of the conventions that there’s very few brands that they’d be interested in. Really, it was just us because of our marketing.

It was obviously their idea. I wouldn’t have approached them because I didn’t think of them as a network, and I wasn’t comfortable. Once I went there three times and heard the speeches and saw the things that–Like, it just felt completely right after the second trip, and the way the whole deal was working out, we were gonna have so much control and so much behind the scenes and so many things that I wanted and needed, which I guess at this point could’ve been, you know, complete lies or could’ve been true. I don’t know.

I just felt really comfortable, and they offered a great deal, and we were going to get a lot of focus and a lot of future marketing, and I had just finished a deal with a major tour. There were a lot of things going on that they were gonna support us with that other networks wouldn’t. So, it was an obvious choice for me.

NSD: So, you were obviously criticized a lot. I criticized you a lot, in fact, for your choice to move to Cereus.3

DF: And rightfully so.

NSD: Did you anticipate that?

DF: Oh, yeah, absolutely. I mean, we had thought about that. That was the biggest and only real concern was–Is it gonna be safe for us and the players? You know, we’re gonna have to fight, you know, a big media backlash. Are we willing to, and do we agree with it? Because I was very passionate about it–against them–and so were some of the other pros, and a lot of our friends were affected by it.4

So, there were a lot of decisions about it, and if we didn’t feel comfortable, if we didn’t, like–How do I say it? If we didn’t hear all the things that we heard, and if didn’t see all the paperwork that we saw, if we didn’t, like, walk all their offices and see their staff and spend a lot of time there, I never would’ve done it, and it really took a lot of, you know–Not soul searching because we became so comfortable with everything that we heard and saw that it was the right decision for us.

Looking back, I wouldn’t change my decision. You know, the things that [Fleyshman pauses and sighs.]–The things that are coming out now is what really scares me–you know, a lot of the financial situations. But the way it was described there, it was like, you know, they were doing so well; they were willing to put so much effort into us and blah blah blah. It felt right.

NSD: It sounds like you’re saying you feel lied to. Is that fair?

DF: In some senses, yes. But, I dunno. When we were there, it comes off so sincere and like, when you’re at dinner and like, the guys are like drinking and getting comfortable and they start telling you all the stories and about how much they hate the past, and how much they hate the old shareholders and how much they hate the people that cheated, like, and you see the sincerity of it, it’s hard to like look back and think that they were lying because they were so passionate about moving forward and the good light and like doing things right, so that eventually, ten years down the road, twenty years down the road, people would forgive and forget because it’s not them. We just started to feel like, wow, maybe, you know, it’s true.

NSD: Does any of the news that has come out since Black Friday directly contradict anything that they told you?

DF: I guess the money situation, really, but I guess not really as much because if they got their money seized or 83% or whatever it is was US or some crazy number, then that doesn’t really shock me because they just got their money frozen, and they lost all their players, so that’s why there’s a huge money problem. But, while you’re there and there’s hundreds of employees–It’s not like, they’re not hurting.5 Just that one office has hundreds of employees.

NSD: You’re talking about the customer service office, IDS?6

DF: Yeah. It’s not just customer service there. They have marketing staff and executives there too.

The Indictments and Payment Processing

NSD: So what do you think about the indictment? Do you think that the people who were indicted are guilty?

DF: Of money laundering and bank fraud? Absolutely. Of course.

Money laundering and bank fraud. Online poker, obviously that’s not the focal point. Those charges are for ten or fifteen grand and two-and-a-half years. It’s all lunch money stuff, and they don’t care. They know that they have ‘em without a shadow of a doubt. I mean, they waited freakin’ three or four years to take them out. This New York Department of Justice is not messing around; they’re not gonna lose this case.

NSD: Were other sites doing the same thing?

DF: I don’t know. The advantage of being a skin is that all your focus is really on the marketing. You never have to bring in merchant processors. I mean, like, so many times you would hear stories like “Oh we gotta find a new this” or “We gotta find a new that,” but you would never know the details or hear about it because it didn’t matter. For me, as long as people could deposit and all those things were working, it didn’t really matter.

And we would see thousands and thousands of dollars a day in declineds and always wonder, like, “Why is this?” or “Why is that?”, and you would see a lot of our players are international, and it was coming from those and not as much from the US.

NSD: So you’re talking about declined deposits and withdrawals?

DF: Mostly deposits. Withdrawals don’t get declined.

NSD: So, did you suspect that this might’ve been going on? You must have thought about it.

DF: That what was going on?

NSD: That Stars and Full Tilt were doing what they were doing and that possibly Cake and Everleaf were doing it as well?

DF: Buying banks?

NSD: Well, not specifically buying banks, but committing bank fraud. For example, miscoding transactions.

DF: No, I actually didn’t know about that part because I didn’t see it myself. I never deposited onto my own site, and I never got to look at what showed up on people’s cards. I still don’t know what happens if you deposit, what it shows up as. And there’s 18 different ways to deposit, so people do NETELLER or Western Union or all those different other options–Moneybookers and all that. I don’t know how that is affected. So, I still don’t know exactly if you charge it on like a Visa what would happen or what it would say.

Cake has described to me three or four times this last month, ever since Black Friday, that they’re moving forward. I’ve heard from Cake, Merge, Everleaf, and Yahatay; they’re all moving forward; none of them did that; “blah blah blah.” Like everybody’s comfortable moving forward. So, I wasn’t comfortable moving forward. Even though I don’t deal with the processing and I don’t think we’d get in trouble even 1% of the time, but there’s just too much focus on Victory, and we were on TV all the time. With how irrational the government actions were in diving into all these countries and arresting people globally and seizing bank accounts in countries that you can’t seize bank accounts, I just didn’t want them, even if it’s just for throwing spaghetti against the wall, to grab me or to try to say that I did something wrong. Even though I know I didn’t, it’s just that that’s a battle that you can’t win.

NSD: You said the government’s actions were irrational. Could you elaborate?

DF: Well, they didn’t think about the fact that they were gonna affect eight million people, eight million player accounts. Right? That’s irresponsible. You know, you can go after these businesses; you can say whatever you want; you can go try to arrest people. You knew that out of your indictments, you’re not gonna be able to get these billionaires in other countries.

Let me be clear, though: They did an amazing job with their take down because they shattered the online poker industry. So, what they wanted to happen, they did. And the impact is gonna be forever. But, they didn’t–It’s irresponsible to have eight million people’s player accounts seized or stopped or blocked and not really have an answer ahead of time of “Hey, this is how they’re gonna go to it. Send their money back to people.” ‘Cause it’s not PokerStars and Full Tilt’s poker money’s to keep; It’s not the government’s money to keep; these are people; it’s their credit cards; it’s their $100 in Nebraska; it’s their money.

NSD: To be clear, Stars was able to pay back players.

DF: Right, but there was no clear answer of how they’re gonna do it at first. That’s why I said irrational and irresponsible.

NSD: You touched on this a little bit, but I want you to be clear. Why exactly did Victory pull out of the US market? I believe you pulled out three days after Black Friday. Right?

DF: . . .

In part II of this interview, Fleyshman discusses his decision to leave the US market, the feud between Doyle’s Room and the Cake Network, Victory Poker’s debts to Two Plus Two Publishing and David “The Maven” Chicotsky, and unfair treatment by the media.

Edited on 5/22/2011 11:57 PM EST: Changed “i” to “I”.
Edited on 5/23/2011 8:51 PM EST: Added link to part II.
Edited on 5/26/2011 9:17 PM EST: Small fix.

Footnotes

  1. Fleyshman is referring to the licensing and branding company Who’s Your Daddy, Inc.
  2. All the processing fees Dan quotes are much lower lower than Subject: Poker has heard from other sources. I asked Fleyshman for clarification after the interview. He said that this is an average from many different processors and players based in many different countries.
  3. I was primarily referring to a thread on the Two Plus Two Forums in which Fleyshman was criticized by me and others both for his choice to move to Cereus, as well as his past business deals and his debt to 2+2.
  4. Fleyshman is referring to the superuser scandals on Absolute Poker and Ultimate Bet here, in which both companies cheated their players out of millions of dollars.
  5. The day after the interview, I showed Fleyshman the St. Petersburg Times article about Cereus’s relationship with former shareholders (discussed in depth in Scott Bell’s article on Cereus since Black Friday). He was shocked to learn about the losses and high fees referenced in the article and the 29% processing fees in particular.
  6. This is the office that was recently laid off and is featured heavily in Scott Bell’s article about Absolute Poker and Ultimate Bet.

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