Most people are aware of Black Friday. Full Tilt Poker fell apart and stranded all of its customers, as did UltimateBet and Absolute Poker. PokerStars, however, was the company that took care of everything and everyone.
When the US government seized those four major poker sites on April 15, 2011 – the day the poker world knows now as Black Friday – PokerStars was the only one of the poker operators with its books in order. PokerStars paid its players and employees, and ultimately paid most of the customers of Full Tilt, Absolute, and UB as well. The company settled with the US government, with those payments as a part of the deal, for hundreds of millions of dollars.
Meanwhile, PokerStars had also been dealing with a court case in Kentucky since 2008. The state’s governor then seized dozens of gambling domains and eventually sued PokerStars in 2011. Years of legal wranglings finally led to PokerStars’ parent company, Flutter Entertainment, agreeing to settle with Kentucky rather than appealing to case to the US Supreme Court. Instead of paying the nearly $1B sum that the state wanted, Flutter settled on $300M to end the rift with Kentucky.
PokerStars had just about enough of run-ins with US federal and state governments. At the same time, it was working its way into the new US online poker market, launching poker sites in New Jersey, Pennsylvania, and Michigan.
Enter the United States Securities and Exchange Commission.
SEC Filing
The Securities and Exchange Commission (SEC) is an agency – an independent one – of the US government. It formed after the stock market crash of 1929 and works to track the stock market, monitoring for crimes and market manipulation.
On March 6, 2023, the SEC revealed cease-and-desist proceedings against Flutter Entertainment, particularly its Stars Group. The violations facing Stars pertained to “violations of the books and records and internal accounting controls provisions of the Foreign Corrupt Practices Act of 1977.”
The SEC accused PokerStars of paying about $8.9M to consultants in Russia. This happened from May 2015 through May 2020, prior to PokerStars pulling out of Russia entirely due to that country’s invasion of Ukraine in 2022. During the time cited by the SEC, the Stars Group had been working with consultants to work toward finding a way to legalize poker in Russia. And they did not keep proper records of the transactions with said consultants and lawyers.
In summary, Flutter violated two particular sections of the Foreign Corrupt Practices Act.
Oops.
Money Makes It Better
The SEC filing noted that the cooperation of PokerStars, the Stars Group, and Flutter throughout the past decade to resolve issues revolving around Black Friday mattered. That didn’t mean the company was off the hook, though.
There were some sanctions:
-Flutter will cease and desist from committing or causing violations of the Exchange Act.-Flutter will pay $4M to the SEC (to be transferred to the United States Treasury) within 30 days.-The payment will be considered a civil money penalties payment.
While Flutter did not admit to any wrongdoing, it did agree to pay the $4M. The SEC also made mention of Flutter’s cooperation efforts and desire for a remedial conclusion to the incident.
All in all, PokerStars and its broader business family caught a break. While PokerStars may want to get back into the Russian online poker market someday, it will find a new way to do it. And for now, as long as Russia remains in Ukraine and threatening war, PokerStars will stay out of the mix for the time being.
https://twitter.com/complianceweek/status/1633513559157280768?s=20
