In fact, even after the indictments against Full Tilt Poker were unsealed, the AGCC was confident that no major violations had occurred and that, at least on the AGCC regulatory side of things, there were no major concerns.
Unfortunately there was a problem, however, and an enormous one at that. Full Tilt was $300,000,000 of player funds short.
“It was only after when we started investigating that we realized […] they had wrongly reported to us and misled us as in terms of their financial position,” said Andre Wilsenach, the AGCC’s Executive Director in an interview during the Global Gaming Expo.
Millions of dollars that were reported to the AGCC as cash-on-hand were actually frozen by the Department of Justice. Wisenach defended his “regulate by report” method however, saying that a level of “trust was in place” with Full Tilt. Wilsenach also said that he and the AGCC were aware all along that player funds had been “commingled with [Full Tilt’s] own funds” despite reporting to the DOJ that “those funds had been held in segregated accounts.” The AGCC didn’t fret, however, because their reports led them to believe that Full Tilt had “sufficient cash to cover player liabilities.”
Unlike most poker players, industry observers, and outside viewers the AGCC doesn’t consider the segregation of player funds to be the Golden Standard, or “Silver Bullet” of protecting players. “Even if they had these players’ monies held in a separate, segregated account I’m not convinced in my own mind that it would have solved the problem…In the case of an insolvency you just don’t know whether the insolvency legislation (in regards to bank’s not recognizing player interests and having the first option on those funds) and the that applies in that particular country is going to recognize the [players’] interest,” Wilsenach stated. As for the best solution for protecting player funds, Wilsenach said “I don’t think anyone has the answer.”
The commission did hope for the sale of Full Tilt poker, and that accounted for what some might characterize as passivity by the AGCC. “From the bottom of my heart I hope that there is such a possibility,” Wilsenach said of a potential sale, “We’ve said all along that if…it materialized and they came to us under new management and ownership, we would work with that entity to get it licensed and get it back on the road as quickly as possible. That must be in the interest of the players.”This seemed to be one factor in the AGCC’s decision to hold the London meetings with Full Tilt in private. Wilsenach also indicated that the privacy was also chosen in order to prevent incriminating information being released about Full Tilt that could be used in the US, saying that “As a regulator we have a responsibility to keep crime out of the industry.”
At the end of the day, however, the AGCC’s hands were tied and they were left with no choice but to suspend and ultimately revoke the license of Full Tilt. “Although there is a huge player interest, we cannot allow an operator to continue doing business, whereby [players] would just deposit more money and ultimately lose more money.”
Ultimately, it’s unclear how much, if any, blame should be assigned to the AGCC and if their self-reporting based model deviates from other industry standard regulatory practices. It’s worth noting that many large regulatory bodies in other aspects of society use self-reporting practices. In the United States, self-reporting is a significant part of the Federal tax system with the Internal Revenue Service (IRS), as well as the often newsworthy National Collegiate Athletic Association (NCAA) which regulates its member institutions primarily through self-reporting. Going forward, it will be telling to observe if the AGCC, and other gaming commissions, change their practices to be more pro-active in investigating potential violations, and whether the few countries with gaming legislation that recognize these off-shore gaming commissions as viable regulators of the e-gaming industry will continue to do so in the future.
