For those who don't know, Purple Lounge was a division of Media Corporation, a publicly traded company. Both the Purple Lounge division and Media Corporation have been suffering large losses recently. A little over a month ago Purple Poker just suddenly shut down, with no communication with the players beyond 'updates about your account balances will be forthcoming in x days'. A number of these deadlines were missed. It should be noted that cashouts were basically stopped ('delayed') in the weeks leading up to this.

Just this morning, Media Corporation finally made a public announcement concerning Purple Lounge. It can be found here http://www.4-traders.com/MEDIA-CORPO...date-14350881/. Basically, they cite large losses and claim that the Purple Poker division lost them a lot of money, despite a 1 million euro loan they made to the division. They now claim that they are liquidating the division, and that they do not expect to be responsible for player balances:

"The Board regrets any corporate failings in the past and seeks to assure shareholders that it is exploring routes to try, in some way, to mitigate the expected player losses, though this is against a background where the Group has loaned well over £1m to the division since its acquisition in October 2009. The Board does not believe that the Group will incur any further liabilities in respect of Purple Lounge over and above the realisation of the above loan."

I don't understand how a company which has owned Purple Lounge for years can just say 'their debt isn't our debt' and not pay the players what they're owned. This is a publicly traded company, yet I haven't heard of any stock exchange regulators stepping in. The only regulator that's said anything is Malta’s Lotteries and Gaming Authority, which announced weeks AFTER the site shut down that the day before the site was closed, Purple Lounge had cancelled their license and the Gaming Authority was therefore no longer responsible for anything. This is unbelievable. If a publicly traded company's site isn't safe, I don't know what is.

Scandalous. Particularly tilting is this line:

"Notwithstanding the difficult decision it has made, the Board believes that it can put the poor trading of Purple Lounge behind it and will be working to bring the Group back to profitability, as quickly as possible."

Will you give us our money back then?

Pokerfuse also have an article.

http://pokerfuse.com/news/law-and-re...ted-liquidate/

I've done the research on this one and it looks bad:

1. It's not fraud to use player funds for operational expenses such as paying salaries; the segregation requirement is a regulatory issue, not a legal accounting rule in the UK.

2. The parent MediaCorp is not liable for the debts of its subsidiary Purple Lounge. The concept in law is called "piercing the veil" and it can only happen in some very rare circumstances. The fact that PL had its own employees and received money from MDC are big legal evidence against making MDC liable for the debts.

I'm doing more on this and will get out an article soon.

Legal arguments are summarised here

The most salient point in this fiasco is that the regulatory authority, the Lotteries & Gaming Authority of Malta, provides no protection for players despite their regulations and claims otherwise. The LGA is also the regulator for the Merge Gaming Network. Anyone who says without proof that player funds are safely segregated on Merge (and no one, including Merge Gaming and any of the network site official reps or owners, has provided any proof despite the many requests to do so) is not to be believed.

I, for one, look forward to the day that online poker is available under the strict and lawful regulation of the Nevada Gaming Commission. It is great to see the NGC taking the time necessary to get all the details of regulation and licensing correct. I hope the other potential US regulatory authorities (NJ, IL, CA, etc.) do the same. Somehow I think NV will do a much better job of it than anyone else.

It also appears that they license Betfair, Everest, Unibet, a bunch of Microgaming, Boss and Entraction sites.

I don't understand all the license classes, but if I am reading correctly, these are some pretty decent sized poker rooms and it is looking more and more like the LGA license means nothing for players or player fund security.

PX, Nick, someone, any regulatory body that has a stellar track record? IoM? Anyone else?

Nevada Gaming Control Board.

I think this could still be fraud - they have intentionally deceived players by stating they were segregating funds (via stating they were regulated by the LGA) despite knowing this was not they case and they were breaking LGA regulations.

Sure, the LGA messed up by not auditing Purple Lounge regularly to ensure segration of funds.

But if the Directors intentionally deceived players into depositing by claiming funds were segregated and these funds in part would have been used to pay Director salaries, despite the company then heading into liquidation, then this could be classified as fraud (I am definitely no legal expert but it seems possible)

The LGA offers an out on the requirement to segregate funds. The regulations state that the LGA can grant any exception to this requirement at its discretion. Read more about this in this thread.

The only one that seems to have a stellar track record is IoM, as evidenced by the PokerStars payback of US players. However, it isn't apparent whether this was actually due at all to the authority of the IoM regulators or simply due to the integrity of the PokerStars owners. One need only read all the complaint threads in the Internet Poker forum to get a sense of how little any of the other existing foreign regulatory authorities do for players - essentially nothing at all.

As ProP indicates, the only gaming regulatory body in the world that I would personally trust to regulate Internet poker is the Nevada Gaming Control Board. Of course, that's this century's NGC, not the one from the mid-1900's.

From the 31/05/12 Media Corp trading update:

"The Board regrets any corporate failings in the past and seeks to assure shareholders that it is exploring routes to try, in some way, to mitigate the expected player losses, though this is against a background where the Group has loaned well over £1m to the division since its acquisition in October 2009."

How sincere.

Then:

"The Board does not believe that the Group will incur any further liabilities in respect of Purple Lounge over and above the realisation of the above loan. "

Does sound to me like they will be getting any cash left in the PL bank accounts before players.

If for example a player deposited £10K in April it will have gone directly to reduce the Media Corp loan. And how long were they taking deposits without paying players?

On the 2011 accounts you can see the liabilities of 2,527,000, most of which will be the player balances.

It's starting to look like PL have lost an enormous amount:

It's perhaps telling that so few online poker sites are registered in the Isle of Man. According to casinocity DB, there are 60-ish operators with IOM licenses, but the only other poker room is Microgaming skin 180poker. Compare that to the LGA, which have over 600 operators and dozens and dozens of poker rooms. It's surprising because the operating costs in IOM are pretty competitive in terms of low tax rates for operators (it's hard to compare cross jurisdiction, they are all tiered, IOM charges a VAT duty; Malta is 0.5% GGR up to 500k/pa, etc).

But i believe IOM stipulates that sites actually base their operations on the island, not just the servers and not just paying for some rubber stamp. If you check IOM licensed sites, they all print in their footer actual physical addresses and phone numbers based on the island. PokerStars head offices are actually there, real large physical presences with real registered companies.

I'm thinking it's stipulations like this go a long way to weed out the crap. So far IOM has a stellar track record, although honestly i can't remember when the regulator had to actually intervene in a customer dispute.

Edit:
Here's an interview with a guy from IOM, where he talks extensively about the importance of player protection and segregated accounts, in light of recent Full Tilt/AGCC fiasco.

http://calvinayre.com/2012/04/19/leg...view-ao-video/

Here's another one, where a rep from the IOM government talks about taxation, importance to maintain the reputation of the island, they do "good checks on businesses, make sure the businesses want to be part of of the island, understand what the IOM is all about. It's a two-way process". Discussion on Full Tilt/AGCC around 05:30 and the regulator's policy of compulsory fund segregation, and how they would deal with a operator going bad ("that's an easy answer, we have the ability to refund players and to shut them down")

http://calvinayre.com/2011/10/10/bus...terview-video/

Did Media Corp. count player deposits as revenue? That would be like a bank counting customer account deposits as revenue. A player deposit should only be counted as an asset (cash) with a corresponding liability (customer deposits). Anything else is faulty accounting. Only when a player paid rake or lost a house-banked wager would some of the cash then become revenue (and reduce corresponding customer deposits).

I believe that not paying the players is the the same as stealing and should be punished as such. The players are not investing in a site no matter how much a site thinks this. They do not share in any profits so they should not be invested in anyway. People should go to jail when players do not get repaid because it is stealing. Player deposits should never be an unsecured asset.

This.

How is it not the number one basica requirement for sites to segregate player funds?