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Fighting for its Life: Absolute Poker Makes a Deal with Feds

In 2002, four fraternity brothers from the University of Montana founded an online gambling platform that became one of the most popular online casinos for Americans. However, after years of scandal, the Black Friday DOJ shutdown, and a PR nightmare lasting for nearly four years, it appears as though the company is officially down for the count, taking millions of dollars in player money and hundreds of jobs with it. The one glimmer of hope for spectators was that, unlike the other poker companies facing pressure from U.S. authorities, Ultimate Bet/Absolute Poker was fighting back against the DOJ.

Absolute Poker, which merged with Ultimate Bet (UB), was still in the process of rebuilding its reputation after 2007 when the company was involved in what has been described as the largest cheating scandal in online poker history. One of the original investors for the company that developed the sites software, Russ Hamilton who had the developers create a “super user” account that could see the cards of all players. Ostensibly, Hamilton told the developers the account would be used to catch cheaters. Ultimately, it was used to cheat players out of more than $22 million.

Then came Black Friday. As I and many others, including my colleague Brian McGraw, have written about, on April 15, 2011, the DOJ and the District Attorney’s office in NY unsealed an indictment against the major online poker companies serving U.S.-based customers. Two founders of Absolute Poker were among those cited in the indictment which alleges:

[T]he sites committed bank fraud, money laundering and illegal gambling offenses by “tricking” U.S. banks into processing online gambling transactions, a violation of the Unlawful Internet Gambling Enforcement Act of 2006. The indictment seeks at least $3 billion in penalties and forfeiture.

Prior to the indictment, shareholders were reportedly planning on selling the company -- now that seems all but impossible.

While Absolute/UB is officially out of the U.S. market for good, some held out hope that they could continue to operate overseas and make a profit. However, as reported by MSNBC, UB’s parent company, the Norway-based Blanca, filed for bankruptcy in the wake of the indictment and reportedly the company fired most of its staff in Costa Rica, that is “300 customer support and marketing employees -- approximately 95 percent of the staff,” stiffing its employees out of their wages along the way. Along with the 300 Costa Ricans who were laid off, UB terminated its contracts with the 10 professional players it sponsored.

After the rocky half-decade Absolute has endured, perhaps it is understandable that the company struck a deal with U.S. authorities, agreeing to ban American residents from real money in exchange for authorities un-freezing their .com site to allow customers to withdrawal their funds.

After the indictment, Antigua decried U.S. actions as illegal and stated its plan to file a World Trade Organization (WTO) lawsuit against the U.S. for violation of international trade agreements. Like the other two poker sites that had their .com domains frozen and funds seizes, Absolute Poker was given the opportunity to “make a deal” with the DOJ to return funds to players so long as it agreed to ban U.S. players from real-money play. Up until recently it seemed that Absolute Poker was standing its ground against U.S. authorities.

If Absolute does begin to issue refunds to players in the coming weeks, this could perhaps mean that there is hope yet that the company will not completely fold and that they plan to continue operations overseas (otherwise they would have kept players’ funds for a shareholder payout).

And for those observers hoping to see a WTO fight in the hope that the U.S. government would receive some punishment (even if it’s just a spanking) for its bullying behavior, the language of the agreement with the DOJ does not close the door to a lawsuit as it states:

The Agreement does not constitute an admission of liability as to any matter nor a consent to jurisdiction

While things may look bad for Absolute Poker/UB as a company, there's still hope for observers who, though perhaps skeptical of the company, have been quietly cheering it on as it stands up to the might of the U.S. government in the fight for its survival.