The Feds Attack Online Poker

On Black Friday, The Justice Department killed a $2.5 billion industry.

Says Mogelefsky: "It's month-to-month, but the game plan is, hopefully, I can make enough playing live to survive until that day comes whenever it may be — Five years from now? Two years from now? Ten years from now? — when I can go back to playing online."


Vanessa Peng is a vivacious, engaging young woman from Singapore. She came to the United States with her newly remarried mother when she was 8, settling in Rock Hill, South Carolina.

It was a culture shock to say the least. She and her brother found comfort playing video games as they slowly assimilated, and the seed of competition was sown. She would eventually study law in little Lexington, Virginia. Her eureka moment came when she watched a friend play poker online. "I was completely fascinated."

It wasn't until her third year of law school that she found the time to dive in. She started with $25 in her account and played the penny tables, slowly learning the game. She was thrilled by the competition and the mental challenge.

"The thing about living in a very, very small town is you get bored pretty quickly," Peng says. "Since I didn't have much of a social life in that little town, I was able to play a lot of poker in that six months. By the time graduation came I was supposed to be studying for the bar and that good stuff, but I was so wrapped up in poker, that was kind of what took over my life. On top of everything else, the legal market had sort of crashed at this point."

She found a job working with a divorce attorney in Chicago, but discovered she didn't have much stomach for it. Then she failed the bar. It was something of an omen.

"I was able to take a step back and really re-examine my life. Around that time poker was going really well for me. I had my first five-figure month and I just really started re-evaluating, thinking maybe this is what I was meant to do."

She made $40,000 that first year. By 2010, she was pulling in six figures annually.

When Black Friday hit, Peng was one of the top money-makers on Ultimate Bet, with $30,000 in her account. She'd also just won $12,000 in a Full Tilt tournament. All told, she saw $80,000 frozen in the crackdown.

Peng was better situated than most to weather the storm. She and her boyfriend — who also plays — moved to Windsor, Ontario. The Canadian town sits just across the river from Detroit, allowing her to play online while still traveling to live tournaments here and abroad.

Nearly a year after the feds froze her money, Peng, who planned to use it to start a used jewelry business on eBay, still hasn't seen a penny of it.


Within a month of the federal crackdown, PokerStars returned $100 million to U.S. players, and continued to operate abroad.

Full Tilt was cleared to offer returns but never did, since it doesn't have the money. It owes $150 million to American players alone. In September, the feds accused owners Howard Lederer and Chris "Jesus" Ferguson of running a "global Ponzi scheme."

"Banks fail for not having sufficient revenue to cover customer deposits all the time," the company's lawyer, Jeff Ifrah, said at the time. "No one refers to such failures as Ponzi schemes. And there was no Ponzi scheme here." The court battle rages on.

This fall the French company Group Bernard Tapie stepped in to buy Full Tilt for $80 million, promising to pay off the debts to international players. The feds have assumed responsibility for paying American players. They've announced no timetable for repayment.

Absolute Poker — originally formed by four frat brothers at the University of Montana — wasn't liquid enough to continue either. None of its players have been reimbursed.

In December, Absolute Poker co-owner Brent Beckley pleaded guilty to lying to banks about the nature of his transactions. He's expected to receive 12 to 18 months in jail.

His accomplice, Ira Rubin, ran a payment processing company in Costa Rica that disguised gambling proceeds through fake merchants and suppliers. He pleaded guilty in January and is expected to receive up to two years.

Rumors have been circulating that Absolute Poker will repay players soon, though payoffs may be as little as 25 cents on the dollar.

"If you had a federally state-regulated system, that wouldn't happen," says Texas Republican Congressman Joe Barton. He's also pushing a law to legalize online poker. "This is one of those rare congressional bills that's not a Republican-Democrat issue. There are people for it and against it on both sides, but there are much more people for it. If it came up on the floor of the Senate on a majority vote wins, it would pass. Whether it has 60 votes, I just can't tell you."

The general sentiment, from players to politicians, is that something will get done ... eventually.

In the meantime, poker has gathered some powerful advocates. Casinos that once guarded their turf are hoping to get in on the online action. They're pushing Nevada Democrat Senate Majority Leader Harry Reid to get something done, but the prospect of new revenue sources is anathema to many Republicans. They squashed Reid's attempt to pass online poker regulation in 2010.

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