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Legislation for Poker & Income Taxes for Poker Players Discussions of various poker-related laws and steps players can take to push for better laws.

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Old 04-26-2011, 06:12 PM   #1
DrewOnTilt
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Senator's aide: DOJ source said sites created "massive financial black hole"

Hey all,

I know that nerves are a little raw around here right now, and we have been arguing amongst ourselves about skill vs. luck, "fraud" where no one actually lost anything, etc. I posted in another thread that I thought that maybe the term "war on poker" is a little off, and some people responded that there is no way there isn't a "war on poker." Obviously, our opponents are many: Kyl would like to put us six feet under and throw away the shovel, Bachus believes that everyone has the right to their own beliefs so long as they equal those of Spencer Bachus, FoF leaders continue to act as out-of-touch prohibitionists, certain B&M casino companies will use any legal means possible to defend their ever-eroding turf, and so on. It is a battle, but I think that it is important that we understand the motives of the various actors.

I had a good conversation yesterday with a Senator's aide about the poker crackdown. This aide is charged with work on Internet-related legislation, and last week I left him a voice mail with details on the situation and a request for help in retrieving my funds. He called me back yesterday and we had a lengthy conversation; it was obvious that the aide had done his homework and researched the issue before returning my call.

The aide told me that he has a contact at the DOJ, and that he reached out to him (her?) for information on what was going on. The aide shared some good info with me regarding the DOJ's motivations.

Keep in mind that this is feedback that I got second-hand, as in "I talked to a guy who knows a guy." I have no idea who the aide's contact at the DOJ is (for all I know the contact could be a pissed-off janitor or Preet Bahrara himself), so I can't personally vouch for the source's reliability.

According to the aide, his source offered this, verbatim:

- Part of the DOJ's mandate is to enforce federal financial laws
- Part of that mandate necessitates some level of monitoring of banking transactions
- The three targeted sites, in their attempts to get around audits and other rules, were engaging in activities aimed at masking the source of various transactions, or at the minimum making it appear that they did not come from poker or gaming related companies (he did not specifically mention UIGEA but I am assuming that it encompasses this)
- When the above is true, it is difficult for banks to know their customers, and it is difficult for the DOJ to ensure that the funds are not coming from or intended for some criminal purpose such as terrorism (the aide specifically cited terrorism funding as a type of money-laundering issue that the DOJ fears in this case)
- That, combined with the sheer volume of transactions that the sites were initiating, created a massive financial black hole that couldn't be monitored. "Massive financial black hole" were the aide's words, and he said that his DOJ source used that exact phrase.

The aide then went on to say that his source specifically told him that the "black hole" was the main motivating factor behind the crackdown.

Again, that is all second-hand info from a source that I don't know, so take it for what it is worth.

There is *some* good news here, though. I turned that point around and asked the aide, would it not make sense to set up some rules for operators to follow, rather than allow such problems to arise? He responded that it absolutely makes sense, and that he thinks that if someone crafts some reasonable regulatory legislation, that his boss would support it.
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Old 04-26-2011, 06:18 PM   #2
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

i still hate the DOJ, but not as much after reading this
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Old 04-26-2011, 06:22 PM   #3
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Quote:
Originally Posted by DrewOnTilt View Post
- That, combined with the sheer volume of transactions that the sites were initiating, created a massive financial black hole that couldn't be monitored. "Massive financial black hole" were the aide's words, and he said that his DOJ source used that exact phrase.

The aide then went on to say that his source specifically told him that the "black hole" was the main motivating factor behind the crackdown.
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Originally Posted by LeapFrog View Post
I kind of see Obama as Baron Harkonnen and Eric Holder as Beast Rabban and Obama told him to squeeze and squeeze.

However you slice it, we are entering an era where the government wants to be able to track every dollar going in and out of the country.
.
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Old 04-26-2011, 06:41 PM   #4
The Warlord25
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Sorry if I'm maybe sullying your post with my harsh opinion, but,

They are paranoid. The problem with that kind of thinking, not that the DOJ cares what I think, is that first if your a paranoid DOJ agent or FBI agent you tend to think like a criminal and assume everyone is a criminal, because hey you feed your family finding crooks.

Second of all, they have no proof of any wrong doing...there likely isn't any terrorist chatter that said, hey, let's funnel money though pokerstars. They just assume the worst; paranoid thinking. It's basicly a pre-emptive strike, like the Iraq War. "We have no proof, or even any hints, but let's take it down anyway."

Sort of like going around town punching people in the face, and you tell the judge, well I thought he might hit me, so I hit him first.

So you throw the baby out with the bath water. What if 100% are innocent poker players?...then it's a really big ---- up.

If the DOJ acts on pure paranoia then they are incompetent.

And all the people's livelyhoods that where taken away and freedoms! That is terrible. Sort of like taking away people's rights with that other bill Bush passed so they can tap your phones.

The "War on Terror" (and the "War on Drugs" too) are just excuses for paranoid people to do all sorts of bull---t and take people's freedoms away, because of perceived threats and not real threats.

Some people thrive on anxiety. And some even feed their families with it.

I think maybe they have some sub-conscious guilt for not going after the bankers who created the finanical mess, and it expresses itself by going after innocent people.

I totally understand and appreciate your post.

Last edited by The Warlord25; 04-26-2011 at 06:47 PM.
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Old 04-26-2011, 06:45 PM   #5
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

I am glad you posted this, because it is important to know why the Department of Justice has taken an interest in online poker. We can debate the merits of their reasoning all we want, but the fact remains that online poker sites are (1) a potential hotbed for terrorist money laundering; and (2) a mecca for "professionals" who fudge their taxes.

Contrary to popular belief, this is not about "Big Brother" trying to take away our Twenty-Eighth Amendment right to play online poker. It is first and foremost about several massive foreign corporations that have reached their tentacles into the U.S. market while (allegedly) thumbing their noses at U.S. laws.
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Old 04-26-2011, 06:49 PM   #6
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

I've tried to tell people this in my posts ever since April 15 and even before. It's perfectly clear that the DOJ is extremely concerned about any unregulated offshore financial institutions and is especially concerned if they are covering their tracks.

Unfortunately a lot of people here would rather tell themselves that the New York US Attorney's Office is full of religious conservatives or that people have a fundamental right to move their money around offshore.
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Old 04-26-2011, 06:49 PM   #7
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Poker sites didn't create massive black holes. Kyl and company did. Seems pretty simple. Don't create stupid laws and you don't cause legitimate businesses to go under-ground with financial transactions. It's not like the sites wanted these circumstances.
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Old 04-26-2011, 06:50 PM   #8
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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Originally Posted by lawdude View Post

Unfortunately a lot of people here would rather tell themselves that the New York US Attorney's Office is full of religious conservatives or that people have a fundamental right to move their money around offshore.
No, the DOJ isn't, but the people who created these circumstances are as I just said above.
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Old 04-26-2011, 06:55 PM   #9
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

The "massive financial black hole" is entirely of their own creation, via UIGEA.
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Old 04-26-2011, 06:56 PM   #10
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Quote:
Originally Posted by Lucky Clubs View Post
Contrary to popular belief, this is not about "Big Brother" trying to take away our Twenty-Eighth Amendment right to play online poker. It is first and foremost about several massive foreign corporations that have reached their tentacles into the U.S. market while (allegedly) thumbing their noses at U.S. laws.
But isn't it perfectly legal for foreign corporations to operate in the US market. And only after the religious zealots passed UIGEA and created a new(highly dubious and illegal) law was it even available for the DOJ to enforce the new law.
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Old 04-26-2011, 06:58 PM   #11
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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Originally Posted by OneOut View Post
Poker sites didn't create massive black holes. Kyl and company did. Seems pretty simple. Don't create stupid laws and you don't cause legitimate businesses to go under-ground with financial transactions. It's not like the sites wanted these circumstances.
+1
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Old 04-26-2011, 07:04 PM   #12
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

This fits in with something I heard, I think maybe on pokerati or last weeks 2+2 pokercast from the pokerati guy about Obama/Holder issuing their internet security initiative (something like this, don't remember the exact phrase he spoke about). But if there's a massive financial black hole, and they're talking about securing our country from terrorism and other dangers through an internet security initiative, they have to crack down on this stuff because it is a loophole that can be used to wreak all kinds of havoc, even if that's not what the sites were doing which we all assume/hope is the case.

It makes a lot more sense they had to do this, of course, the sites would have never coded their transactions in that way if the UIGEA hadn't f'ed everything up for them in the first place, ironic since the UIGEA, attached to the port security act no less, kinda lead directly to the government not being able to track what these sites where doing.

It all comes down to our legislative body not being able to adapt quickly enough to a new industry that sprang up on the internet, so they tried to put a band-aid on it until congress could come to an effective resolution. Of course, congress has been to slow to act, for many reasons too numerous to even attempt to discuss here, and the band-aid caused a festering sore and we have Black Friday for the poker world

DrewonTilt, I have read multiple places where you have talked to people that work for congress and have all kinds of good information that you specifically have posted on these boards that I hear nowhere else. It's impressive, I'd like to thank you for all of the work you have done on this front, I just wish more of us would step up to the plate, especially those who are essentially unemployed right now because of this.

I have tried to email people, get popvox going, emailed friends, ppa action thing everyday, facebook townhall etc., but I haven't called anyone yet and I need to, despite the fact that I work a full time job, I need to get off my ass and light up a few phones one day at lunch. Hopefully other people can follow the example you've been setting, I know some people are, but we need a lot more people to be this active if we're gonna make a big difference in a time frame that is remotely acceptable.

Thanks for your efforts!!!
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Old 04-26-2011, 07:13 PM   #13
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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Originally Posted by OneOut View Post
It's not like the sites wanted these circumstances.
I wouldn't go so far as to say they wanted those circumstances, but at the same time, the passing of the UIGEA (and thus PartyPoker exiting the US market) did allow Stars and FTP to take over the top 2 spots in world market share. That's not something I would sneeze at.
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Old 04-26-2011, 07:13 PM   #14
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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Originally Posted by bias1 View Post
i still hate the DOJ, but not as much after reading this
I hate the DoJ even more after reading this. If the DoJ didn't attempt to enforce a non-existent law, the poker sites would have happily transferred all money in plain sight, and remitted the appropriate withholding to the IRS if they wanted.
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Old 04-26-2011, 07:14 PM   #15
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

I think American citizens should be more concerned with the "funny business" our government participates in. Am I the only one old enough to remember Iran-Contra? Or Donald Rumsfeld shaking hands with Saddam Hussein?

Bottom line is I trust the "unregulated" European sites far more than the Congressmen who want to have their hands in every pie any day of the week.
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Old 04-26-2011, 07:15 PM   #16
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

And in order to avoid such a "financial blackhole" the DOJ went to congress telling them why regulation would be beneficial to the country.

Oh, no it didn't.

Last edited by Akileos; 04-26-2011 at 07:20 PM.
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Old 04-26-2011, 07:16 PM   #17
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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Originally Posted by OneOut View Post
Poker sites didn't create massive black holes. Kyl and company did. Seems pretty simple. Don't create stupid laws and you don't cause legitimate businesses to go under-ground with financial transactions. It's not like the sites wanted these circumstances.
This really isn't right.

There have always been offshore banks, but for most of our history only very rich people could use them. It's pretty clear that a mechanism that made offshore banking available for millions of Americans for the first time was going to draw the ire of banking regulators. So yeah, poker sites created the black holes.

And you should realize that although the catalyst for Stars and Tilt concealing their transactions was surely UIGEA, miscoding transactions (which, by the way, went on before UIGEA for different reasons) isn't the only reason why online poker sites are a concern for prosecutors charged with protecting the financial system.
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Old 04-26-2011, 07:20 PM   #18
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Drew's message makes a lot of sense. Hearing things like this give me some degree of optimism that regulation may be coming soon. (of course, I'm desperately searching for anything to give me optimism about this). But, in order to avoid another black hole via whatever poker sites rise to meet the demand that clearly exists in the US, the Feds' best option is to create a common sense regulatory scheme. Clearly, the status quo is not going to work. And, with the playing field clear, Harrah's Interactive, Party, etc. have even more incentive to push to get a regulatory scheme in place that will allow them to operate in this market. At least that's what I hoping . . .
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Old 04-26-2011, 07:24 PM   #19
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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This really isn't right.

There have always been offshore banks, but for most of our history only very rich people could use them. It's pretty clear that a mechanism that made offshore banking available for millions of Americans for the first time was going to draw the ire of banking regulators. So yeah, poker sites created the black holes.

And you should realize that although the catalyst for Stars and Tilt concealing their transactions was surely UIGEA, miscoding transactions (which, by the way, went on before UIGEA for different reasons) isn't the only reason why online poker sites are a concern for prosecutors charged with protecting the financial system.
But if there wasn't such staunch opposition to legalizing and regulating the industry, there would be no reason to miscode transactions.

As for offshore bank accounts, you can't really blame the poker sites for that. I'm not even sure that's something that deserves any blame at all. It's not illegal in and of itself. You can't tell the DOJ to crack down on something that's expressly legal just because it's a bit of a pain the ass for banking regulators.
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Old 04-26-2011, 07:35 PM   #20
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

It isn't so much about "blame".

You should understand that a federal crackdown on online poker was inevitable-- and that the reason it was inevitable was NOT because of moral opposition to gaming.

Rather, the federal government was not going to stand idly by while multi-billion dollar offshore banks were created where money laundering, tax evasion, underage gaming, and cheating were all live possibilities.

And the reason why it is comforting to many poker players to tell themselves that what is really going on is just moral opposition is because the actual reasons for the DOJ action suggest that online poker cannot really be an unregulated, untaxed international nirvana that many players would prefer.
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Old 04-26-2011, 07:41 PM   #21
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

So you imagine PartyPoker and Neteller, publicly listed companies on the LSE - simply refuse to cooperate if any intelligence services have good reason to suspect terrorists are moving large quantities of money through them? how about paypal, ebay?

No, these are not massive financial black holes. I'm sure if bin laden was dumping piles of cash at the Party nl5k tables to a cell of extremists in Britain so they could fund their attack, our government would find out and deal with it. or if in the worst case not - the money could be traced after the fact.
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Old 04-26-2011, 07:45 PM   #22
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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So you imagine PartyPoker and Neteller, publicly listed companies on the LSE - simply refuse to cooperate if any intelligence services have good reason to suspect terrorists are moving large quantities of money through them? how about paypal, ebay?

No, these are not massive financial black holes. I'm sure if bin laden was dumping piles of cash at the Party nl5k tables to a cell of extremists in Britain so they could fund their attack, our government would find out and deal with it. or if in the worst case not - the money could be traced after the fact.
You should draw a distinction between voluntary cooperation and being subject to US regulation.

The DOJ wants all financial institutions that handle significant sums of deposits from Americans to be subject to US regulation. The fact that sites had voluntary rules against laundering is pretty much irrelevant to the DOJ. (And bear in mind, it isn't as though all the sites were trustworthy. UB/AP was VERY shady in multiple ways, and all the sites allowed way too much underage play.)
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Old 04-26-2011, 07:47 PM   #23
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

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It isn't so much about "blame".

You should understand that a federal crackdown on online poker was inevitable-- and that the reason it was inevitable was NOT because of moral opposition to gaming.

Rather, the federal government was not going to stand idly by while multi-billion dollar offshore banks were created where money laundering, tax evasion, underage gaming, and cheating were all live possibilities.

And the reason why it is comforting to many poker players to tell themselves that what is really going on is just moral opposition is because the actual reasons for the DOJ action suggest that online poker cannot really be an unregulated, untaxed international nirvana that many players would prefer.
Now I'm not so sure that we have opposing views on this anymore. I'm not saying that enforcement was elective, but that it hasn't been regulated due to moral opposition. And that moral opposition of regulation has caused the circumstances you allude to in your last paragraph.

I absolutely agree that a crackdown was inevitable and knew the status quo couldn't last much longer, many of my posts towards the end of last year even reflect this. I pulled all my money off Full Tilt in February and refused to move up in stakes for a while because I was uncomfortable keeping enough of a bankroll online to do so due to conditions and "the writing on the wall".

I'm just saying that the sites didn't want it this way. Going under-ground caused as many problems for them as it did for the DOJ. Everyone would have been much happier to have been able to do things on the up and up.
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Old 04-26-2011, 07:50 PM   #24
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

Quote:
Originally Posted by lawdude View Post
It isn't so much about "blame".

You should understand that a federal crackdown on online poker was inevitable-- and that the reason it was inevitable was NOT because of moral opposition to gaming.

Rather, the federal government was not going to stand idly by while multi-billion dollar offshore banks were created where money laundering, tax evasion, underage gaming, and cheating were all live possibilities.

And the reason why it is comforting to many poker players to tell themselves that what is really going on is just moral opposition is because the actual reasons for the DOJ action suggest that online poker cannot really be an unregulated, untaxed international nirvana that many players would prefer.
While I agree with some of the reasons you have listed, I don't think you should totally discount the moral objection aspect. Also, it is just plain silly to list the possibility of cheating as a problem, since cheating occurs in the casinos as it is, and will certainly exist in any US regulated online site.

But the rationale for this prosecution is far more about getting rid of all the competition before allowing US companies in. Big business is driving both the legislation and the prosecution.
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Old 04-26-2011, 07:57 PM   #25
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Re: Senator's aide: DOJ source said sites created "massive financial black hole"

why is it the governments job to track the flow of all $ again?
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