Mod note: This thread is mostly a sort of Frankenstein built from posts moved from a tangent in this thread. I wrote up this OP to give it some context.

For posterity: This thread was actually created on 12/22/2011 at around 2:00 AM EST and not the date listed.

This story's a bit weird, so if it's not making sense to you, you're probably understanding it correctly. Sometimes reality is stranger than fiction.

As banks started to put the regulations of the UIGEA into effect, it became progressively harder for poker sites to collect deposits from the US.[1] It was particularly difficult for the sites to find payment processors who were willing and able to collect e-check deposits from players in certain states. E-checks were really popular, so that sucked for poker sites.

Around August 2010, in a strange and stupid effort to gain market share, FTP made the deliberate decision to credit player accounts without any payment processor in place. They allowed players in states without a payment processor in place to deposit by e-check as normal and they simply did not debit those depositors' bank accounts. To the players, these transaction appeared to be completely normal except that no money actually left their bank account.[2] FTP presumably planned to collect these deposits at a later date once a payment processor was found, and they hoped that by doing this they would attract players who were unable to play on Stars. FTP was effectively loaning players money without telling them that it was a loan.

These uncollected deposits have been called "the shortfall" (a poorly chosen term that I made popular after borrowing it from the DOJ), "the backlog," and "phantom deposits."

They quickly got out of control. Between roughly August 2010 and Black Friday, FTP credited hundreds of millions of dollars in this way. They only began attempting to collect this money already February. The efforts to collect were not very successful; they started by collecting the most recent debt, and even with that they found that many players had closed their bank accounts or disputed and reversed the transactions. The collection was also expensive; they paid high fees to get payment processors to agree to go after this old debt in unsafe states, and they paid high penalties for the many reversed and failed transactions. It was also very taxing on employees; unrelated departments were called in to help deal with the flood of confused e-mails.

Some players had deliberately defrauded FTP by depositing tens of thousands of dollars from fake bank accounts or from bank accounts that they planned to close. Others deposited with the intent to pay but chose to close their accounts when FTP tried to collect the debt months later. Others had simply changed bank accounts or did not have enough money in their old account and did not see the e-mails from FTP. Many thought that they were being scammed and disputed and reversed the transaction because it seemed suspicious. Most were simply never contacted.

Indeed, FTP's attempts to collect the debt were necessarily put to a hault by Black Friday (and FTP's subsequent agreement with the DOJ to stop taking money from US customers).

In total, FTP says that $128 million remains uncollected. Of that, only $9 million remains in the account of players who have outstanding phantom deposits. It is unknown how much total money FTP loaned to players in this way, how much was collected successfully, and how much they tried to collect but failed.

Recently, FTP has agreed to forfeit assets to the DOJ. In exchange, the DOJ has agreed to take responsibility for FTP's debt to US players (estimated to be about $150M) and to sell assets to Groupe Bernard Tapie, who has agreed to make non-US players whole. This process hasn't taken place yet and it may not happen, but all three parties have signed agreements stating that these are their intentions.

So people have begun to discuss whether the DOJ or GBT will go after these phantom deposits when and if one of them acquires them as an asset of FTP and whether they should go after them. Some have argued that the DOJ will be unable to pay US players back without collecting this debt. Others argue that it's not legal for the DOJ to collect this debt. Some think that people who made phantom deposits are obligated to repay, and others don't.

This is the thread to discuss things like that in PH.

[1] Banks were originally required to have these regs in place by December 1, 2009, but that was put off until June 1, 2010.

[2] It's worth noting that there is always a delay in e-check processing. Typically, a poker site will credit an e-check instantly (because people don't like waiting to gamble), but it usually takes a couple business days to collect it. This delay led to a lot of fraud and was a major cost for US-facing poker sites.

And there's the matter of the phantom deposits. The DOJ certainly has the power and wherewithal to pursue the US individuals that owe that money. That could be a first step by the DOJ before repayments are initiated.

Money owed to US players minus phantom deposits = <$80M. Seems like the DOJ won't have to find additional funds anywhere else.

you're incorrectly leaping to make the HUGE assumption that all the players who made these phantom deposits just deposited the money and left it there in their accounts. they neither played with any of the money, nor lost any of it.

do you see how assuming that can be a problem?

What happened afterward to the phantom deposits is not at all germane. The figures simply are how much is owed to US players from account balances, and how much is owed to FTP in phantom deposits and can be collected from US players by the DOJ. Every dollar that can be collected can go towards balance repayments.

And I think that money is largely collectible. What would you do if you got a letter from the DOJ saying that you had to pay them the $500 deposit that was never collected from your bank account, an asset now owned by the DOJ under forfeiture law, for example?

The only questionable amount might be how much of the phantom deposits did actually get collected from players bank accounts but disappeared on the way to FTP, either due to DOJ seizure or payment processor theft. This, of course, should be noncollectable from the players.

I disagree. Those deposits attempts are how many months old now?

I guess we'll see, but I personally think that the floated funds will never be recovered, and that FTP is solely responsible for swallowing that loss. It was, after all, their decision to continue to float loans for weeks (then months) after they realized they were having issues collecting, rather than doing what PS did (shutting down e-deposits to certain players).

It obviously sucks that some players knowingly took advantage of this, but I tend to think this was the minority (mostly because I tend to be optimistic, not because I have any actual evidence that this is so).

I think it would be interesting to see some numbers on the floated funds (# of people involved, how many deposits and for how much people made), but I doubt that will happen.

The DOJ will have name, address, banking info and SSN (from the bank, if not already part of FTP records) of all these players. I'm pretty sure they'll be able to collect one way or another.

I, too, think only a minority of these players were trying to take advantage. I'm not implying that the DOJ will take punitive action on any players. I just think they will pursue collecting those funds which are owed by the players, as part of the assets acquired from the FTP forfeiture. I expect this to be done through some sort of debt collection process, not simply a reenactment of the previous payment processing, due to the age of the transactions.

Just my opinion - not based on any insider info.

How can the DOJ NOT go after the phantom deposits? It's owed money that can be used to pay legit claims. When players submit claims for their balances the DOJ will surely check to see if the request is legit and that should include checking to see if all deposits were collected esp since they know it's a very large number.

This is the DOJ we are talking about, folks, just about the biggest hammer the government has. Get a letter from them, you better pay up, imo.

I hear you and they should look at that when reconciling payouts. Someone with a negative balance due to the free-roll and losing, could make a strong case that the transactions were illegal and not subject to collection.

That's true and lost freerolls probably account for a good percentage of the shortfall, but the people who actually made withdrawals from uncleared deposits or from winnings beyond those deposits could be threatened and/or served with unjust enrichment lawsuits.

I also disagree with this statement, although I am open to suggestions on how it could be handled. Here is a very stylized hypothetical situation which hopefully illustrates a problem that I (and I'm sure others) foresee:

Suppose Person A was one of the Full Tilt users who got a phantom deposit. In fact, to simplify this further, suppose Mr. A had no money on the site before putting $1K on there. He used some payment processor and - voilá - his FTP account says he has $1,000. Yet no such funds have left his bank account, which he never notices -- it's too small an amount for him to pay any mind.

Later that day, Mr. A sits in a game and loses all $1,000 to Miss B.

So now Mr. A is busto. With no balance on the site, Mr. A decides to quit playing at FTP. Black Friday comes and goes. News of the Ponzi accusations and the GBT acquisition come and go. Mr. A cares about none of this because he no longer has any interest in the matters of Full Tilt Poker.

Then at some point, the DOJ begins facilitating the paybacks to the U.S. customers. Again, Mr. A has no interest here since he has no account to collect. But Miss B is among those who request their paybacks. What would that agency do about that $1K phantom payout? Deduct it from Miss B's balance? She did nothing wrong. From her point of view, she won it fair and square, so why penalize her? Does the DOJ locate Mr. A and attempt to collect it from him? He also did nothing wrong (other than exercise awful BR management in his game with Miss B), particularly if he didn't know the money never left his bank account.

So already, this oversimplified example poses a few tricky questions. Now expand the problem out to include however many people made phantom deposits. Consider also how many knowingly did it vs. how many had no idea it had happened*.

Then figure how much of that phantom money is distributed among numerous accounts, including that of the original depositor. After all, unlike the above example, players tend not to lose it all to one player in one session.

Bear in mind further, some of those players who made phantom deposits ended up winning money. So does the DOJ deduct that amount from their cashouts? It seems unreasonable to do this only to the winning players. They're not any more culpable than losing players who did the same thing. They were just more successful and/or skilled at poker.

I'd like to think those phantom deposits can be resolved and squared away, but I just can't see any logistical way to do it that doesn't excessively punish some and unfairly absolve others. I think I side with RJ -- allowing these phantom deposits to happen was mostly the wrongdoing of Full Tilt, so they should bear the brunt of the cost.

* This is to say nothing of how many will claim they had no idea it had happened.

Saying that FTP has to bear the brunt of the phantom deposits is meaningless. FTP is a dead company who is forfeiting all their remaining assets over to the DOJ. One of those assets, which the DOJ will now own, is the amounts owed by players in those uncollected deposits.

The DOJ can simply follow this procedure:

1. Deduct all phantom deposits from the corresponding US player account balances.

2. Proceed to collect any negative balance accounts from the US players, through either direct contact (hey you, you owe us $1000 - please pay now), and/or through subcontracted debt collectors.

3. Accept applications from US players for account balance repayments.

4. Provide a process of review or appeal for any further detailed disputes. Players who had money disappear in transit will probably have to provide banking records as documentation to dispute any unwarranted phantom deposit deducted from their account balance. Likewise for players who had withdrawals disappear in transit before it hit their bank accounts.

I doubt very much the DOJ will concern themselves with details of who won money, who lost it and which money it was - deposits, phantom deposits, winnings or transfers, etc. It's just a simple matter of account reconciliation, collection of negative balances and disbursement of positive balances.

Yeah, I'm not sure how the DOJ ends up swallowing the loss if none of the floated funds are recovered. They are merely facilitating the transfer of FTP assets, and receiving enough (I guess) to settle with US players and satisfy the outstanding civil case.

But I guess we'll see, I never really rethought the situation once it became known that the DOJ was going to act as a go between for the FTP assets, I was just sure (reasonably) that if FTP repaid players they wouldn't be able to recover the floated funds themselves.

Overall, PX, I hope you're right. That four-step process would be the only way to reconcile everything. And, as you said, that is Full Tilt handing over an asset to the DOJ. (Until you said it, I never thought of it as an asset but you're absolutely correct. Shows you just how well I retained the 18 units of accounting I took way back when.)

Ultimately, the sticking point is Step 2:

This is the part where I hope someone can provide some legal expertise. If a player knew he benefited from a phantom deposit, did he legally commit some sort of fraud? If so, then it seems the DOJ could use that charge (or potential charge) as leverage in collecting these debts -- e.g. if a person does not pay back the owed amount in 90 days, he will be charged with X offense.

If not, then I wonder if the DOJ will need some sort of evidence to show that, indeed, a player owes for a phantom deposit. Sure, the easy, glib answer is "it's the government; they can do whatever they damn well please." But I'm curious to know if they would need more than that when push comes to shove.

There are players that made deposits in good faith expecting the funds to eventually be withdrawn from their accounts. The 'eventually' likely has just arrived. Then there are the players who gamed the system. I suppose that there is some charge lying around somewhere that they'd be liable for but as a practical matter I don't think the DOJ will bother w/ them if they pay up.

There are going to be players that can't pay. If I had to guess I'd say that the DOJ will handle them the 'IRS way': Hound you for life until they get the money.

It appears that most of the early responders to this thread were prepared to have the debits take effect on their bank accounts. In fact, the more forthright posters seemed to WANT them to. As someone who accidentally overdrew from his checking account last week (hard to explain), I can sympathize with the anxiety of not knowing when a payment will post to an account.

I only got a few pages in before the posts became more trollish in nature, so for all I know a large number of players who happily and willingly took advantage of the situation may have spoken up later on. But among the first few hundred posts, it looks like the majority of people wanted their phantom deposits rectified back then.

Of course, 2+2 contains more avid poker players... I have to think there are many casual players who deposited late last year who STILL don't realize that the money never came out of their bank accounts.