If Pokerstars and Full Tilt Poker (in particular) weren’t so focused on world domination, and trying to one-up each other in terms of player volumes, I think that the events of Friday the 15th of April may not have happened.
In the race to keep maintaining player deposits from US customers, and given that credit cards are not an option, (particuarly for new customers), ACH transactions became much more important. ACH transactions are bank transfers where the player gives their bank details to the gaming company, and a transfer is inititiated through a payment processor, from the bank, to the player’s gaming account.
Why was this important and how did it impact on Full Tilt, Pokerstars and Ultimate Bet?
It became important because it allowed these companies to bypass credit card blocks, as the system that’s set up to monitor bank transfer payment types (in the ACH system) isn’t as robust as what the credit card companies have available. It’s also a system that requires a lot more monitoring, but is much more fragmented as (in the US) it is populated by the diaspora of small, local US banks.
The banking system in itself in the US is a lot more fragmented than in other parts of the world. This means that you’d need to have checks & balances in place, at a local level at every single bank that has the ability to send or receive funds from/to any 3rd party. Currently, the US banking system (and individual banks) conduct due diligence into the business of any merchant when the account is opened, but if the nature of that business changes (ie: from buying & selling coffee and having 1000’s of individual transactions from individuals buying coffee > overnight 10,000+ transactions which may or may not be related to online gaming) , the bank don’t necessarily have the resources (or the interest) to look deeper into it. Also, let’s face it, fees are now being generated on the 10,000+ transactions. Money talks.
Now, if you are a big enough online gambling business, and have:
a) enough cash at your disposal to buy a bank
b) difficulty in getting payments from US players
…why not buy a bank, where you can set up as many merchant accounts as you like – to process as many transactions as possible? Or, at least buy the companies/people that can do that for you?
That’s what these guys did – and it came back to bite them on the ass. When one of their payment processors (a middle man) got caught, it looks like that in exchange for doing a deal with the DoJ in the New York – he reverse engineered a lot of the transactions and the money trail – thus allowing the DoJ to work out who was getting money from where, and where was it ending up.
How does it impact on the companies indicted?
If you combine that fact that it’s relatively easy to take a guess about the player volumes (and therefore revenues) that are being generated at these sites, because of poker aggregating sites like Poker Scout – and the feds could now reverse engineer the money trail due to Tzvetkoff. A perfect opportunity was presented to allow the DoJ to indict the owners of the largest online gambling companies out there. The Full Tilt owners (in particular) probably didn’t need to flaunt their market position so openly – three words. Red rag, bull.
Personally, I think that it’s a perfect storm for these companies only. They’ve backed themselves into a corner with payment processing, market share and profile.
US players that have money on PS / FTP / UB are probably trying to get their EU based buddies to log into their accounts and chip dump to other EU accounts so that they can get their money out. Alternatively, if they want to get their cash, they’ll ned to relocate outside of the US. Otherwise, they are in for a long wait for their cash.
Interesting times for the industry. I’d bet they’ll get more interesting.
NB: it might slow up (in some cases) some recruitment – as people wait to see if there’s fallout (ie: good people) from the biggest companies in the space. It may actually accelerate it in other companies – as those at certain companies jump ship (wrongly) as a knee jerk reaction to this. My take? Wait and see. The sky’s not falling in, and in a month’s time, it’ll be business as usual for most people.