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Indicted poker websites bound for bankruptcy

One of three online poker companies named last month in a federal indictment will be forced to enter bankruptcy, leaving American card players with money on deposit with the Absolute  and UB poker sites at least temporarily empty handed.

One of three online poker companies named last month in a federal indictment will be forced to enter bankruptcy, leaving American card players with money on deposit with the Absolute and UB poker sites at least temporarily empty handed.

Madeira Fjord of Norway, which represents shareholders in the poker websites’ parent company, Blanca Gaming of Antigua, said in an email to shareholders this week  that it planned to file for bankruptcy protection in Norway after being informed that the latter company had “no cash on hand and no prospects for any cash flow for the foreseeable future.”

“Most importantly, Blanca Gaming has provided notice … that it is currently unable to make any payments toward its debt obligations,” it said. “Additionally, Blanca has further advised that there will be no future payments.”

Meantime, a source in Costa Rica, where Absolute Poker and UB (formerly Ultimate Bet) have their operations center, told that more than 300 customer support and marketing employees – approximately 95 percent of the staff — had been laid off.

Blanca Gaming could not be reached for comment Wednesday.

Absolute Poker and two of its founders — Scott Tom and Brent Beckley — were named in an April 15 indictment by the U.S. Attorney’s Office for the Southern District of New York along with two other popular poker sites — Poker Stars and Full Tilt Poker. UB was not directly named in the indictment, but it has common ownership and shares operations with Absolute Poker through parent company, the Cereus Network, which is in turn owned by Blanca Gaming.

The indictment alleges that the sites committed bank fraud, money laundering and illegal gambling offenses by “tricking” U.S. banks into processing online gambling transactions, a violation of the Unlawful Internet Gambling Enforcement Act of 2006. The indictment seeks at least $3 billion in penalties and forfeiture.

The government also seized five Internet domain names used by the companies, but later relinquished control of those owned by Poker Stars and Full Tilt to facilitate repayment of U.S. players’ deposits.

The former has begun repaying money on deposit to U.S. poker players while the latter has said it is making arrangements to do so.

The U.S. Attorney’s Office said it was willing to make a similar deal with Absolute Poker and UB, but no agreement was forthcoming. Nor have the sites been honoring withdrawal requests from non-U.S. players, according to “Fonzi,” who runs the Holdem Poker Chat, an affiliate marketing website that first reported on the bankruptcy announcement.

“The problem is they haven’t paid anyone outside the U.S.,” he said. “You are allowed to request $250 a week — request — but that doesn’t mean you’re going to get it.”

Fonzi, who spoke to on condition that he not be identified by his real name, said he expects that the bankruptcy means that players will never receive the money they deposited with Absolute Poker and UB.

“I already consider my money gone,” he said, adding that he had a “few hundred dollars” on deposit with the sites.

Absolute Poker, which was founded in by four fraternity brothers at the University of Montana in 2002, grew to become one of the top poker sites for American card players when it refused to stop accepting bets from U.S. players following passage of the UIGEA. But a cheating scandal in 2007 that the company blamed on a rogue insider shook the faith of many players, leading to erosion of its market share.

Management of the company, which merged with UB sometime in the mid-2000s, also has been involved in a running battle with shareholders over what many considered runaway spending. In 2009, for example, the company reported a loss of $33.7 million despite income of $215.3 million, according to the St. Petersburg (Fla.) Times.

Shareholders were working on a plan to sell the company last month, but that was quashed when the federal indictment was handed down, the newspaper reported Sunday.