It’s been more than a decade since the Ultimate Bet and Absolute Poker scandals, but they continue to be discussed in the poker world. Given that the US Department of Justice (DOJ) has recently authorized payments to players who were affected by the scandals, a refresher is in order.
Ultimate Bet Poker: The Beginning
Once upon a time, in the late 1990s, Greg Pierson and Jon Karl started a software company called ieLogic. Their goal was to create gaming software for massive multi-player online role-playing games (think World of Warcraft). Pierson was a poker player, and, during one trip to Las Vegas, he became acquainted with WSOP pro Russ Hamilton who convinced Pierson to use his software for online poker. The rest is history.
Pierson and Karl tweaked their platform while Hamilton spread word among other poker professionals about the forthcoming website. (Phil Hellmuth and Annie Duke would come aboard as the site’s spokespeople.) In 2001, Ultimate Bet was born and licensed by the Kahnawake Gaming Commission (KGC), which is an arm of the Mohawk Tribe near Montreal, Canada. The site offered numerous games, such as Texas Hold’Em, Omaha High/High-Low, Seven Card Stud High/High-Low, various mixed games, and a play-money card room.
In addition to online play, Ultimate Bet hosted the World Poker Tour’s Aruba Poker Classic for four years. Winners of this tournament include Juha Helppi (2002), Erick Lindgren (2003), Eric Brenes (2004), and Freddy Deeb (2005). Ultimate Bet also sponsored the popular poker television series Poker2Nite.
In 2006, at the height of Ultimate Bet’s success, the United States enacted the Unlawful Internet Gambling Enforcement Act (UIGEA), which criminalized financial transactions occurring on online gaming sites.
At this time, Excapsa Software—the parent company of the Ultimate Bet card room—was a publicly traded entity on the London Stock Exchange. This meant Ultimate Bet was exposed to legal risk, and that risk would force a shutdown. By contrast, private sites like Full Tilt Poker and PokerStars remained in business, not thinking they were breaking any laws.
After the UIGEA’s passage, Excapsa announced that it was selling its assets to private company Tokwiro Enterprises ENRG and delisting itself from the stock exchange. Most notably, Tokwiro Enterprises ENRG was owned by Kahnawake Grand Chief Joe Norton, who also purchased Absolute Poker just a few months earlier. In July 2008, Ultimate Bet merged with Absolute Poker to become the Cereus Network.
The Absolute Poker Scandal
Absolute Poker was created in 2003 by a group of University of Montana fraternity brothers who had no gaming experience. They moved the company to Costa Rica where the site could operate without a gaming license. KGC, in exchange for providing Internet service to Costa Rican companies, furnished gambling sites with their gaming “licenses.”
While other competitors left the US market after UIGEA, Absolute Poker remained and became a legitimate contender in the market despite its rudimentary software. When Absolute Poker merged with Ultimate Bet, the software received a much-needed overhaul.
In September 2007, members of Absolute Poker levied accusations of cheating in numerous Internet forums. Specifically, they cited suspicious results of a particular account during a tournament, claiming that this account was able to see other players’ hole cards during play. By October, news of the alleged “superuser” account spurred an investigation by KGC.
After reviewing the complete history of the tournament in question, it was clear that a user named Potripper had access to every other player’s hole cards in the tournament through the use of a master account known as “User 363.”
One player, “CrazyMarco,” contacted Absolute Poker to request his hand histories in a tournament that he thought had questionable play. Instead, CrazyMarco received a master hand history that contained every player’s hole cards, as well as the IP addresses of all players and observers. Of particular interest was a player named “Potripper” who was located in Costa Rica. Further, an observer at each of Potripper’s tables was also located in Costa Rica. This observer moved tables with Potripper during the tournament. The hand histories also illustrated Potripper’s perfect success rate in folding to players with winning hands and successfully bluffing players with weak hands–decisions that simply would not be possible to make without insider information.
Despite initially denying the existence of any master account, Absolute Poker eventually conceded that a master account was, in fact, used to cheat. However, importantly, the company never admitted that it was an inside job.
The Ultimate Bet Poker Scandal
In January 2008, Ultimate Bet players reported cheating that was similar to what occurred on Absolute Poker. What are the chances that two online poker sites, owned by the same person, licensed by the same commission, and using the same software become embroiled in a similar cheating scandal?
Ultimate Bet also eventually confirmed the existence of “suspect” accounts with “abnormally high winning statistics” after being alerted to suspicious results for an account under the name “NioNio.” Subsequently, six other suspicious player accounts were identified—with 18 different screen names between them—and found to have used a single fraudulent account to target the site’s highest-limit games.
The cheaters relied on a superuser account named “Auditmonster2,” that would observe tables and was able to see everyone player’s hole cards. This account would inform the cheating players, who would then play accordingly—bluff, call bluffs, fold, etc. In some cases, the cheaters would lose on purpose in order to deflect attention. (For a more detailed description of the actual cheating methods, check out this piece.)
In May 2008, Ultimate Bet issued a statement that confirmed cheating had, in fact, occurred between March 2006 and December 2007. A subsequent KGC investigation found that the cheating had been going on since 2004, and had cost players millions of dollars. The Commission fined the company $1.5 million and let them continue to operate, thus triggering a mass exodus of players from the site.
Then, on 15 April 2011, the DOJ shutdown and seized the domains of PokerStars, Full Tilt Poker, and Absolute Poker.
Cereus Poker Network remained open until 12 May, 2012, and was, for that time, one of the world’s ten largest online poker card rooms before losing the majority of its base. When it did finally close, Cereus was an estimated $50 million in debt, most of which was owed to US players. Whereas PokerStars was able to repay all of its US players in full, the combined debt of Full Tilt Poker, Ultimate Bet, and Absolute Poker reached the hundreds of millions.
At this point you’re probably wondering who was held accountable at Cereus, and to what extent. The answer is perhaps underwhelming. In 2012, Absolute Poker’s head of payment processing, Brent Beckley, pleaded guilty to two charges: conspiracy to violate the UIGEA and conspiracy to commit bank and wire fraud. He was sentenced to fourteen months in prison and fined $300,000. Beckley’s brother-in-law Scott Tom, who was one of Absolute Poker’s founders, dodged accountability for almost six years before showing up in a New York courtroom to accept a plea deal. In exchange for pleading guilty to a misdemeanor and paying a $300,000 fine Tom avoided jail time. Beckley was released after serving nine months.
But Wait, There’s More
A three-hour audiotape containing a conversation between Hamilton, Pierson, and two company attorneys emerged in 2013. On the tape were discussions about the specifics of the cheating and the various ways it could be covered up. Hamilton in particular could be heard admitting responsibility for stealing between $16 and $18 million. He also made it clear that he had no interest in making things right.
Travis Makar, Hamilton’s long-time personal computer expert and right-hand man secretly recorded the conversation in an attempt to protect his own reputation. He released the tape as part of a large data dump that included screen grabs, photos of the cheating accounts, and details as to how Hamilton was able to bypass the site’s fraud-prevention software. The tape proved that the extent of the scandal was much larger than originally thought.
Interestingly, Ultimate Poker subsequently used Pierson’s Iovation software to verify players’ identities. Makar cited Iovation’s reemergence with Ultimate Poker as a motivation for releasing the tape, and since it implicated Pierson in the scandal, Ultimate Poker dropped Iovation’s services.
The End Result
In 2017, the Money Laundering and Asset Recovery Section of the DOJ approved the first round of payments to Absolute Poker and Ultimate Bet’s affected customers. A third-party facilitator of these payments, Garden City Group, reported that nearly 7,400 petitioners will receive almost $33.5 million from funds seized on Black Friday. While these payments will not cover all of the affected players’ losses, it’s something.
The Ultimate Bet and Absolute Poker scandals underscore the potential danger of using online gaming sites, especially following the 2011 Black Friday scandal. Even today, players are warned to avoid KGC-licensed sites and those that use Iovation software (such as Club WPT). And many players have altogether given up playing poker online. Clearly, the acrid taste of online poker scandals is lingering.
What are your thoughts on these scandals? Please comment below.
Until next time.
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