Court documents recently obtained by pokerfuse show that the string of events leading to the “Black Friday” crackdown against US-facing sites Full Tilt Poker and PokerStars began with a December 2010 regulatory order issued not by the Department of Justice, but by the Federal Deposit Insurance Commission (FDIC).
“The collected documents indicate that the Black Friday indictments were a multi-agency effort … including the DOJ, FTC and FDIC.” The FDIC, which maintains regulatory oversight of United States banks, ordered the SunFirst Bank of St. George, Utah, to stop processing deposits and withdrawals for several corporate entities connected to Elite Debit. Elite was the umbrella entity co-founded by Black Friday defendant Chad Elie and Jeremy Johnson, the Utah telemarketer targeted by the Federal Trade Commission in a $275m action.
The FDIC court order was drafted in November of 2010 and agreed to by SunFirst officers the following month, signed off on the same day the FTC filed its action against Johnson, much of the finances being funneled through other SunFirst accounts.
However, it was the agreement between the FDIC and SunFirst that turned off the spigot on the processing for Full Tilt and PokerStars, leading directly to the $134m backlog of uncleared deposits which subsequently accrued to Full Tilt’s American players, and helped cause the company’s downfall.
The collected documents indicate that the Black Friday indictments were the Department of Justice’s portion of a multi-agency effort that began with Johnson’s fraudulent IWorks telemarketing empire but soon ensnared US-facing online poker firms as well, including the DOJ, FTC and FDIC.
Of special note is that major corporate entities controlled by Johnson and used in the poker processing were specifically excluded from the FTC complaint, with the exception of Elite Debit itself, which had long since had its assets commingled with Johnson’s IWorks empire.
These entities included Triple Seven and Powder Monkeys, the primary entities used for Stars and Tilt processing, respectively.
The FDIC’s agreement with SunFirst generated a few business headlines at the the time, and was generally regarded as a crackdown against TPPPs (Third Party Payment Processors) contracting with banks in ways that could lead to money laundering.
However, all known reports tied the agreement between the FDIC and SunFirst to the new FTC case against Johnson’s IWorks empire. As Reuters reported in December of 2010:
The FDIC consent order against SunFirst, a small bank with a handful of branches, obliged it to ensure that all personnel whose work involves TPPP activities had sufficient training 'on the risks of such activities and BSA/AML (Bank Security Act/Anti Money Laundering) training on the specialized risks of TPPP activity, fraud red flags, and appropriate customer due diligence maintenance and documentation.’ It added that the bank had to develop a 'formalized process’ for reviewing TPPPs’ transactions to ensure that no related suspicious activity went unreported.
The bank shall immediately cease providing third-party payment processing for Triple Seven LLC, Mastery Merchant LLC, Powder Monkeys LLC, Elite Debit and its associated accountholders, customers, and clients … or any other third-party payment processor, or their client entities unless the FDIC has provided written notice approving the activity,’ the FDIC order mandated.
“If Elie and Lederer ever had a meeting on New Year’s Eve, it could only have taken place in 2010 … only 10 days after the actions against Johnson and SunFirst were taken by the FTC and FDIC.” What these reports missed is that the companies named, with the exception of Elite Debit itself, were specifically excluded from the FTC complaint against Johnson and IWorks, while nearly 60 other businesses and shell companies were expressely named as corporate defendants.
Elie and Full Tilt React
In hindsight, the firms’ omission from the FTC complaint while specifically being included in the FDIC agreement was a clear indicator that multiple agencies were involved, and that an investigation into the online poker processing was ongoing.
Whether or not Full Tilt processing had been slowed prior to the December 21, 2010 agreement is unclear, but Chad Elie, with financial backing from Stars and Full Tilt, filed his own action against Johnson, SunFirst and several other defendants just seven days later.
Elie has alleged that Johnson stole the last two weeks of player funds, some $30 million, being processed through SunFirst. Elie made these Tweets on November 4th:
Chad Elie @BlackFridayChad
Did you know , Jeremy Johnson /Jason Vowell / Todd Vowell stole over 30m+ from poker stars and FT players and got away with it? #Fact
@Haley_Hintze Johnson was the owner of Elite. PS&FT came to me when they discovered he stole the last 2 weeks of player funds+reserves.
That Elie had an extensive connection to Full Tilt cannot be disputed. Elie also developed a legal relationship with prominent gaming lawyer A. Jeff Ifrah, which likely grew out of these SunFirst-related troubles.
Ifrah known for his legal consulting and representation of Full Tilt’s interests in other matters, also represented Elie in separate court matters in 2011 and 2012.
Lederer’s Payment-Processing Knowledge?
The timing of the events indicates that former Full Tilt board president Howard Lederer was intimately aware of the problems swirling around SunFirst, and Full Tilt’s own loss of US-facing processing services.
Elie’s very first Tweet upon the opening of that social-network account disagreed with Lederer’s general denial of knowledge of processing specifics. Elie Tweeted this on Nov. 2nd:
Chad Elie @BlackFridayChad
“I never met with a payment processor”-Howard Lederer. Interesting Howard,do you not remember the MEETINGS we had?What about NYE?5hr meeting
A five-hour meeting with Lederer on New Year’s Eve? Such an event fits exactly with the timeline the actions against SunFirst and Johnson and the loss of FTP’s processing channel would produce.
If Elie and Lederer ever had a meeting on New Year’s Eve, it could only have taken place in 2010. Full Tilt did not join the Elie/Johnson/SunFirst processing operation until April of 2010; prior to that, it was only PokerStars. Likewise, by New Year’s Eve of 2011, Black Friday had already occurred, Elie was indicted, and FTP itself had been shuttered.
New Year’s Eve of 2010 also came only three days after Elie had filed his action against Johnson (assisted by Full Tilt and PokerStars), and only 10 days after the simultaneous actions against Johnson and SunFirst were taken by the FTC and FDIC.
A New Year’s Eve meeting lasting five hours could only have involved a general update on the situation and a detailed examination of the case against Johnson. There is no other rational explanation, and it explicitly defines Howard Lederer as having knowledge of Full Tilt’s loss of its processing capabilities for US players. Whether or not Ifrah also participated in the New Year’s Eve meet is unknown.
While it is possible that Lederer entrusted the search for replacement processors to FTP execs Ray Bitar and Nelson Burtnick, his assertions that he did not know about the looming processing hole are simply unsupportable by the known sequence of events.
Following the FDIC’s crackdown against SunFirst Bank, Full Tilt Poker was sent careening on a course toward financial armageddon, augmented by tens of millions in suspect distributions to its own player/owners that continued recklessly and can no longer be solely blamed upon Bitar.
If Elie’s Tweet is true, then Lederer accepted those distributions with what appears to have been full knowledge of Full Tilt’s processing difficulties, a suspect circumstance for an executive who claims to have been “retired” from Full Tilt operations during this period.
While PokerStars was able to secure alternate US-facing processing between late 2010 and Black Friday, Full Tilt was not, and its executives, including Lederer, had to be fully aware of the situation.
