FTP’s “$60M Shortfall” Actually Much Larger

August 26, 2011 - 4:25 PM EDT
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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.

Edited on 9/1/2011 9:07 AM EDT: Fixed a typo in footnote two.

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 been 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.

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22 Responses to FTP’s “$60M Shortfall” Actually Much Larger

  1. Buzz
    August 27, 2011 at 12:22 AM EDT

    OK so 9M/128M is 7 cents on the dollar. Maybe I should have taken the 10 cents offered way back (never mind player transfers were not allowed).

    • jively
      August 31, 2011 at 9:32 PM EDT

      They are not saying they have $9 million in cash. They are saying that they can reduce the $128 million owed to players to $119 million by subtracting the $9 million that still sits in players accounts that deposited and never had their banks debited. The rest of the money went to other players or lost to rake.

  2. ttwoplustwo
    August 27, 2011 at 4:12 AM EDT

    Aha. So that’s pretty much the entire US player liability. I wonder how healthy the non-US balance is?

    • Ryan
      August 27, 2011 at 6:15 PM EDT

      Given that FTP was having issues processing before they shut down (ala moneybookers story posted here on SP), I would say not very healthy at all.

  3. d1PLOd0cus
    August 27, 2011 at 5:38 AM EDT

    Unbelievably stupid malpractice. It’s been very quiet lately on the pending buy out front, so is it a case of no news is good news, or is FTP just quietly fading away?

  4. William Sumner
    August 27, 2011 at 11:16 AM EDT

    So, if the players that owe money to Fulltilt were able and willing to pay what they owe, then Fulltilt might be able to pay the players it owes. Is that correct?

    • Ryan
      August 27, 2011 at 6:16 PM EDT

      Probably along the same lines as “if the US politicians that made horrible decisions in the last decades were forced to pay up for those decisions, we would be in a good place economically!”

      IE maybe true, but unrealistic/impossible.

    • William
      August 28, 2011 at 3:41 AM EDT

      Thats correct.

      They might also be able to pay if they got bailed out by the US Government, if the queen of England agreed to pay $500 Million to have sex with Phil Ivey or if Gaddafi agrees to buy Full Tilt so he can hide in one of Ray Bitars chins.

      In other words, keep dreaming.

  5. Alex
    August 28, 2011 at 5:03 PM EDT

    Leadership at Full Tilt needs to go to jail!

    • wims
      August 30, 2011 at 9:39 AM EDT

      Actually, they need to go to prison, not jail

  6. LimoGuy
    August 28, 2011 at 5:40 PM EDT

    I think all FTP team has to go to jail. They have done nothing at all to help players get their money back.

  7. Bill
    August 28, 2011 at 6:28 PM EDT

    In the 2+2 Forums I read about Chino Rheems and other deadbeats that don’t pay their debts as being the exception rather than the rule in poker. Here where we have $128,000,000 in deadbeats most seem to think that not paying their poker debts is the not the exception but to be expected.

    • jordan
      September 6, 2011 at 2:43 PM EDT

      you are an idiot. the 128 million was not paid because it was never charged to our bank accounts. when they did get a processor to take the payments they got shut down and legally they cannot take the money. deadbeats, i mean come on are you serious. i have a lot of money that never got credited to my bank account and i actually emailed full tilt and told them to take my money because i dont like owing money. they responded saying they are working on a solution. i can see being upset at full tilt but to call people deadbeats for doing nothing except not having funds withdrawn is pretty ignorant

  8. Furious Aggy
    August 29, 2011 at 11:50 AM EDT

    In the midst of all the rumours nobody seems to care about 600 employees at FTP Ireland that will most likely lose their jobs in the coming weeks due to frauds committed by a few owners and executives. Absolutely disgraceful!

  9. Gaza
    August 29, 2011 at 12:40 PM EDT

    Stupidity of the highest order. FT deserves to go down the pan.

  10. Hey
    August 29, 2011 at 6:36 PM EDT

    I must b high – story is hard 2 follow . I read elsewhere the Ceo Bitair had a big head so he & Howard drove the car into a ditch.

  11. mike matisow
    August 30, 2011 at 1:50 AM EDT

    I been saying FTP sux all awhile it seems UB/AP will survive and eventually pay back there players this is really good news for UB/AP i new FTP was worse i should of never advertised them lol!!!

  12. Greg
    August 30, 2011 at 4:52 AM EDT

    This whole thing is very sketchy… only time will tell how this whole thing will unravel. I say stick with the rakefree rooms and you’ll be safe.

  13. Mike
    August 30, 2011 at 1:25 PM EDT

    This mess is just getting deeper, lol.

  14. mynutsrfull
    August 30, 2011 at 11:51 PM EDT

    turn ftp back on .i will play there best site ever

  15. jack
    September 3, 2011 at 10:05 PM EDT

    Phil Ivey should be arrested also!!! He knew the money he was stealing was players money. In between flying around on private jets with players money he forgot to pay taxes on most of his Full Tilt money! It’s called tax evasion people. David Grey who has 30 million of players money. Notice how the full tilt OWNERS oh (share holders) now are in hiding!!! HMMMMMM You will see very soon the unfolding of the full tilt thieves. Most of them are hiding out of the country.

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