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.
Last edited by NoahSD; 12-22-2011 at 03:38 AM.