Online poker operator PokerStars has reached a settlement with the U.S. Department of Justice to obtain control of former industry rival Full Tilt Poker for approximately $731 million, according to government documents.
According to the documentation, PokerStars will forfeit $547 million to the government, while Full Tilt Poker will forfeit virtually all of its assets to the goverment, which will in turn give those assets to PokerStars.
Under the terms of the PokerStars settlement agreement, PokerStars will return $184 million (the full amount owed) to foreign players by Full Tilt Poker. American players will be able to file claims with the Department of Justice to get reimbursed. The money that is used to reimburse victims in the United States will come from the forfeited $547 million.
Poker Stars and Full Tilt's were among the domains seized by the DOJ on April 15, 2011, which has come to be known in the poker industry as "Black Friday." On that date, indictments were unsealed against 11 individuals affiliated with major online poker platforms and their payment processors, with charges including bank fraud and money laundering. Poker Stars and Full Tilt Poker both immediately left the U.S. market, with Full Tilt ceasing operations in June 2011 as their license to operate was suspended. Full Tilt player funds have been frozen since that time.
Full Tilt Poker CEO Ray Bitar was arrested after voluntarily surrendering on July 2. Bitar was released on bail eight days later.
As part of the settlement, Bitar, Howard Lederer, Rafe Furst, Chris Ferguson and Nelson Burtnick are prohibited from being employed by PokerStars in the future. The settlement also prohibits former PokerStars CEO Isai Scheinberg from serving in a management or director role in any PokerStars company.
"PokerStars does not admit to any wrongdoing and is explicitly permitted to apply to relevant U.S. gaming authorities to offer real money online poker when state of federal governments introduce regulation," said PokerStars in a statement.
According to the settlement, charges against PokerStars will be dismissed upon the first of three payments from PokerStars to the Department of Justice.
"Upon the first payment [$225 million] and subject to the terms of Paragraph 7, the in rem forfeiture action against the PokerStars Defendant Property and the civil money-laundering claims against the PokerStars Companies shall be dismissed with prejudice. Accordingly, this Stipulation and Order of Settlement fully and finally resolves this action as to the PokerStars companies and the PokerStars Defendant Property."
The PokerStars press release goes on to state that "PokerStars plans to re-launch Full Tilt Poker in most markets as a separate brand, following the appointment of a new, independent management team."
"It's a tremendous, tremendous deal," said Jeff Ifrah, an outside counsel who represented Full Tilt Poker in negotiations with the DOJ. "This was a dream opportunity, given the hand we were dealt, that hand specifically being a company that had over $330 million of debt owed to poker players around the world.
"It was tremendously difficult as you could imagine to find the right buyer who would appreciate the industry and appreciate the value of the asset and on top of all of that, who would pay the poker players ." Ifrah said. "PokerStars was truly the only potential candidate to appreciate the value of the Full Tilt asset and the impact that the Full Tilt deal would have on the poker community. Because of those factors, Poker Stars was really the only candidate who could step up and do this thing. To actually attain their encouragement and get them involved and have the DOJ's help in putting together this deal it's really miraculous."
And added:
"The objective, and part of my marching orders, was to get all of the players paid back. Obviously, there was a big focus on U.S. players
This was a situation that hurt people in a lot of ways throughout the year. A lot of folks who had a lot of money tied up or some folks without as much tied up which would have meant a lot to them
I think the future is looking bright for their reimbursement now."