Oh dear, the balance/deposit debate is back, and so am I.
Cliffs first for those with short attention spans:
- The amount of money available for remission payments does not determine the basis for calculating remission. It is a possibility that the amount indicates the DoJ's intention to pay bassed on balances.
- Stars' payments to players and remission payments are two different things. Don't draw conclusions about remission from Stars' payments.
- Stars' payments to players do not set a precedent that will affect remissions.
- Remission is paid on the amount lost due to an offence.
- Balance owed is not necessarily the same as the amount lost due to an offence - it could be lower or higher.
- IMO, losing players should get remission based on net deposits.
- IMO, winning players should get remission based on balances, but might only get deposits.
Let's try to get three things things clear.
- The fact that the settlements between the DoJ and FTP and Stars provided more than enough money to pay US players' balances, but not enough to pay US players' deposits does not mean that remission must be based on balances. Remission could be paid on the basis of deposits, on a pro rata basis. However the amount paid in the settlement might be an indication that the DoJ intends to pay remission based on balances.
- Remission payments and the payments made by Stars to players are two different sorts of things. You cannot draw meaningful parallels between them. The payments made by Stars are repayments of debts owing to players, made by a party which committed no offences against those players. What the players were owed (and what FTP's US players are still owed) is their balances. Hence when Stars was paying players, they paid what was owed - the balances. The remission payments are payments of compensation by the government to victims of offences based on the amount lost due to the offences, not necessarily the outstanding balances.
- Payments to Stars' players and to FTP's ROW players are not precedents for how remisson will be handled, for two separate reasons. Firstly, the payments by Stars to players were voluntary acts of a private company, not a result of a court ruling on a point of law related to how much the players should rightfully receive, and only the latter would give rise to a precedent. Secondly, since the payments made by Stars are not remission payments, they have no precedential impact on remission payments.
What the DoJ will be paying is remission. The question before us is "How will those remission payments be calculated?". Remission is not a repayment of debt. It is compensation for losses due to a offence. If FTP had not committed any offences, there would be no possiblity of remission. Being unable to pay debts is not in itself a crime. If FTP's only misstep had been to pay an unexpectedly high lobster bill that left them bankrupt, there would be no remission paments. Players would still be owed money, but they woudn't be getting "paid back" by anybody.
The DoJ isn't in the business of settling third party debts. However they will sometimes compensate the victims of crime. So the question that determines how much remission will be paid is not "How much are players owed?", it is "How much did players lose
due to the offence?". The answer to the second question may or may not be the same as the answer to the first question. This second question is not the same thing as "After the crime and subsequent enforcement activities, how much of what they were owed did the players fail to recover?"
The offence in question is wire fraud. Generally wire fraud occurs when a perpetrator commits fraud by means of electronic cummunication. Fraud generally consists of obtaining something of value by means of false inducement. So the question of how much to pay in remission would seem to be "How much money were players falsely induced to give FTP?". On the face of it, that would seem to be the amount players deposited while relying on FTP's false statements about the safety, availability, and segregation of funds. (The charges relate to false statements made as early as 2008.) It would also include amounts that players already had in their balances when the false statements were originally made and amounts which players kept on the site as a result of those false statements.
Consider the hypothetical case of Fred. Two days before BF, he makes his first and only deposit, in the amount of $1000. He never actually gets around to playing. How much was he fraudulently induced to give to FTP? Of how much did FTP defraud him? The answer to both questions is "$1000". When did the fraud against Fred take place? It occurred when he deposited the $1000. We can probably all agree that Fred's remission payment should be $1000.
Now consider the case of Joe, who makes the same deposit at the same time. If we ask the same questions - the amount of fraud and when it took place - with respect to Joe's status as of noon on the day before BF, the answers are the same as for Fred: "$1000", and "two days before BF". Now imagine that a few minutes before the site is shut down on BF, Joe plays NLH and loses $600. If one calculates Joe's remission payment based on BF balance, then his payment is only $400. Yet on the previous day FTP had defrauded Joe of $1000. How does Joe playing poker the next day change the nature and value of the crime committed against him the previous day? Sure it changes the balance owing, but how does it change the amount he lost
due to fraud? How and why is his poker loss allowed to reduce the crime committed against him? Remission is payment of compensation for the amount lost
due to an offence, not for the net amount lost due to an offence and other factors.
Now consider the case of Bloggs, who makes his one and only deposit of $1000 at the same time as Fred and Joe. He plays heads up against Joe and wins $500 ($100 was paid in rake). When FTP is shut down, Bloggs is owed $1500, but he doesn't get it. Bloggs loses $1500. But in what sense does Bloggs lose the $500 part of it
due to the offence? There was no practical way for Bloggs to have withdrawn it, so he cannot be said to have been falsely induced to keep the $500 on the site. He lost the $500 in winnings as well as the $1000 deposit, but he only lost $1000
due to the offence. (This is not to argue that winnings in general should not be part of the compensation calculation. Any winnings that were won early enough that there was a real chance to withdraw them, but which were not withdrawn, - that is to say, virtually all winnings - could be said to have been kept on the site due to false inducements, and were therefore losses due to the fraud.)
I have yet to see a convincing argument as to why losing players should not be compensated based on deposits. The argument that what they lost due to the fraud is the amount they were owed but did not collect does not wash. The amount lost to fraud could be more or less than the amount owed. What they lost
due to the fraud, is the amount they were falsely induced to give to FTP. They were defrauded when they made their deposits. FTP's susbsequent role in hosting poker games does not reduce their crime, not does it reduce the loss suffered by the depositor. The fact that what the losing players were owed by FTP is less than the amount of which they were defrauded does not, or should not, change the operation of remission.
As for winners, I think there are two ways the DoJ could go. If they are prepared to recognize the results of the poker games operated by FTP, then winners were defrauded of both their deposits and their winnings, so remission of winners should be based on balances. OTOH the DoJ might conclude that even though the games themselves were not rigged, their being a part of a fraudulent schemes invalidates the results, so the unrealized winnings were not real, and therefore not lost. In this case, winning players would be compensated based on net deposits.
