Where Were You When Black Friday Crashed the Poker World?

I still remember April 15, 2011.

I had already been a freelance writer in the poker industry for a half-dozen years. I did some work each year at the WSOP in Las Vegas, covered certain other tournaments here and there, but I mostly worked from my Los Angeles apartment. I wrote about a range of poker news topics and interviewed poker pros. I also blogged for PokerStars, covering online tournaments like the Sunday Million and series like SCOOP and WCOOP.

That Friday morning of April 15 should’ve been like any other day of the week. I needed to get out of bed and get to work. But something was different. I woke up to texts and Twitter messages that were confusing…something about the US Department of Justice, PokerStars, Full Tilt, seizures…wait, what?

I headed directly into my home office and turned on my computer. When I pulled up PokerStars.com, I saw the notice. I couldn’t seem to wrap my head around the first dozen or so words: “This domain name has been seized by the F.B.I. pursuant to an Arrest Warrant…”

A few other words hurt my eyes. Illegal gambling business? Federal crime? For persons engaged in the business of betting or wagering… Was that me?

Black Friday

Everyone from members of the poker media to poker pros exchanged messages and social media posts in the hopes of discovering the scope and seriousness of what was happening.

Poker pros couldn’t access their online accounts. Those with whom I was friends messaged me that their entire bankrolls were tied up in those online poker accounts. The government had control of their money.

I remember a few other things from that day, things that happened after I figured out exactly what had happened to PokerStars, Full Tilt Poker, Absolute Poker, and UltimateBet.

I remember seeing it all over the mainstream media, from CNBC to the New York Times. It all began to sink in. Our poker world – our livelihoods, our beloved game and industry, our poker boom – was in dire jeopardy.

I remember receiving a message from PokerStars that day. While colleagues waited for word from sites like Full Tilt, those of us who worked for PokerStars received some reassurances. We would be paid. PokerStars was fine, and its money was secure. They would handle everything. Be patient but trust that they would take care of it.

It was difficult to do, but we knew that many colleagues received no such messages from UB, AP, or FTP.

Everything else was a blur of frantic phone calls and texts, scrolling through social media to see just how many people were affected and how quickly the news spread around the world, pacing and smoking too many cigarettes, pouring an occasional drink to try to calm my nerves.

WTF.

What Did Actually Happen?

Most people in poker know the full story. For those who don’t…

US Attorney Preet Bharara of the Southern District of New York worked with Janice Fedarcyk, Assistant Director-in-Charge of the FBI’s New York field office. On April 15, 2011, they revealed an indictment charging 11 defendants with a variety of illegal gambling, fraud, and money laundering offenses. Among them were the founders of PokerStars, Full Tilt Poker, and Absolute Poker/UltimateBet.

–Isai Scheinberg of PokerStars (founder) arrested in Switzerland, extradited to US in January 2020

–Paul Tate of PokerStars (director of payments) willingly traveled to US for October 2016 arrest

–Ray Bitar of Full Tilt (founder) willingly traveled to US for July 2012 arrest

–Nelson Burtnick of Full Tilt (director of payments) willingly traveled to US for August 2012 arrest

–Scott Tom of AP/UB (founder) willingly traveled to US for February 2017 arrest

–Brent Beckley of AP/UB (director of payments) willingly traveled to US for December 2011 arrest

–John Campos of SunFirst Bank arrested in Utah, April 15, 2011

–Chad Elie, payment processor arrested in Nevada, April 15, 2011

–Ira Rubin, payment processor arrested in Guatemala trying to flee to Thailand, extradited in April 2011

–Ryan Lang, payment processor willingly traveled to US for February 2012 arrest

Essentially, the DOJ and FBI accused the poker sites of disguising payments to and from players as non-gambling-related items. They accused the payment processors of facilitating money transfers to and from poker operators, disguising the money as non-gambling related transactions. And they accused Campos of accepting a bribe to process gambling transactions.

The charges, however, sounded far more sinister:

-Count 1: Conspiracy to violate UIGEA (Unlawful Internet Gambling Enforcement Act of 2006)

-Count 2: Violation of UIGEA by PokerStars

-Count 3: Violation of UIGEA by Full Tilt Poker

-Count 4: Violation of UIGEA by Absolute Poker

-Count 5: Operation of illegal gambling business by PokerStars

-Count 6: Operation of illegal gambling business by Full Tilt Poker

-Count 7: Operation of illegal gambling business by Absolute Poker

-Count 8: Conspiracy to commit bank fraud and wire fraud

-Count 9: Money laundering conspiracy

Each defendant worked out plea agreements with the US government, pleading to lesser charges, most often for fines and hand slaps. PokerStars founder Scheinberg was the last to face the US court system and did so just last year.

Highlights and Lowlights of Timelines

Several poker media outlets have provided very detailed timelines (via PokerNews) and more detailed explanations of aspects of the ordeal (via Professional Rakeback).

The days that followed Black Friday were a whirlwind. Every television network cancelled television programming and removed online poker-related advertising. Rumors flew and players with large balances out of reach online panicked.

By April 20, PokerStars and Full Tilt had worked with the Bharara to make agreements that put the sites back into the hands of their rightful operators. They encouraged players based in the US to withdraw their funds immediately.

Meanwhile, AP and UB refused to enter the same agreement right away. Their parent company, Blanca Gaming, filed for bankruptcy the following month, and the sites did begin to work with the US government…but most players never received their money.

Full Tilt Poker had been assuring players that they would be able to withdraw their funds soon. That didn’t happen. Full Tilt disappeared in late June 2011, and chaos ensued. That situation only got worse when Bharara amended his original complaint to allege that Full Tilt Poker and its board of directors had operated as a Ponzi scheme against its own players. Names like Chris Ferguson, Howard Lederer, and Rafe Furst popped up in the new document, accused of defrauding players and paying board members with player funds.

Full Tilt was no longer a viable company and owed players around the world approximately $390M but only held $60M in its accounts.

Settling Up and Settling Down

It took more than a year for PokerStars to work out a settlement with the US government to make things right. PokerStars agreed to pay $547M in fines and $184M to repay all Full Tilt Poker victims. In return, PokerStars took control of Full Tilt’s assets from the US government.

Full Tilt apologized to all of its customers, though the words rang hollow to most.

The US Department of Justice established a repayment scheme with the Garden City Group, which took PokerStars’ payments and fines and transformed them into refunds for many former Full Tilt players. That process officially began in 2013 and lasted for several years. When completed, money remained, and PokerStars and the DOJ agreed to direct leftover funds to repay the victims of Absolute Poker and UltimateBet. Those payments began in 2017 and continue to this day. The process has remained in limbo through today.

PokerStars did revive Full Tilt Poker but put it on the Stars platform. It never seemed to do very well, leading to PokerStars’ decision just this year to retire the FTP brand entirely.

The New Normal

Black Friday changed everything for poker players around the world.

A huge part of the poker boom and the massive growth of the online poker market came from US-based players. The global market shrunk proportionately.

Worse, the moves by the US government spurred similar moves by other countries to reject dot-com poker for nationally-regulated and licensed online gaming. France, Spain, Italy, and Portugal were four of the European markets that ventured off into their own ring-fenced, regulated markets. Australia banned online poker. And countries like Germany and India continued to struggle through the years to figure out how to legalize and/or regulate online poker.

The poker sites had to adjust and refine their goals. They had to spend substantially more money to obtain individual country licenses. Unregulated poker sites flourished but had to operate carefully so as to offer online poker to players in countries like the US while avoiding detection by various governments.

Players in some countries had few options. US players had the most difficult time, as some of them changed their focus to live poker and others simply moved to countries like Mexico, Canada, Costa Rica, the UK, or Malta to continue playing online. Quite a few poker pros ventured off into new careers or went back to college.

Live poker scaled back productions without the influx of money from online poker sites, not to mention their players who satellited in to the live events. The World Series of Poker in Las Vegas scaled back significantly after Black Friday, focusing more on poker tournaments and less on the festival atmosphere that used to accompany the summer series.

Everything changed.

US Market Takes Baby Steps

When the shock of Black Friday wore off, a few states decided to push for online poker to be regulated within their borders. Nevada, New Jersey, and Delaware were the first to do so. And those three eventually signed a multi-state online poker liquidity agreement to be able to share player pools across state lines, though only the WSOP.com site has yet to do so.

Years later, Pennsylvania and Michigan joined the US market, and West Virginia legalized online poker but has yet to authorize a site launch.

Without even a suggestion of legalization on a national level, states have been slow to pass such legislation. The ones with online poker each had an advocate in their respective legislatures, at least one person who understood online poker, saw the potential, and educated fellow lawmakers. Most states do not have such advocates, and there is no lobbying organization to represent online poker.

PokerStars fought hard for the right to reenter the US market, doing so first in New Jersey, then becoming the first – and still only – site to launch in Pennsylvania and the first to launch in Michigan. It now works with FOX Bet, as the WSOP operates on the 888poker platform and BetMGM works with PartyPoker US.

It has been a slow process and continues to be.

Online poker may never return to the United States with the excitement, popularity, and potential of its boom years. Ten years after Black Friday, it seems more unlikely than ever.

Those of us who had the privilege of experiencing the poker boom in some capacities were lucky. We knew online poker in its prime, in the good ol’ days.

The poker boom changed poker forever, as did Black Friday and the decade since. No one knows exactly what the next decade will bring, but some of us will be here for it.

 

About Jennifer Newell

Jennifer began writing about poker while working at the World Poker Tour in the mid-2000s. Since then, her freelance writing career has taken her from Los Angeles to Las Vegas and back to her hometown of St. Louis, where she now lives with her two dogs. She continues to follow the poker world as she also launches a new subscription box company and finishes her first novel. Jennifer has written for numerous publications including PokerStars.com and has followed the US poker and gaming market closely for the last 15 years. Follow Jen on Twitter

Disclaimer: The information on this site is my interpretation of the laws as made available online. It is in no way meant to serve as legal advice or instruction. We recommend that you seek legal advice from a licensed attorney for further or official guidance.



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