Random Thoughts About Absolute Poker Bankruptcy

Before I start I wanted to point out some Cereus news.  Haley’s Poker Blog outlines an email exchange between the customer service center and upper management of Cereus.  It is an interesting exchange that appears to show that Cereus failed to keep $2,750,000 in a reserve as required by Costa Rica law to cover severance packages.  As you see there are some interesting threats.  Now onto my random thoughts about the Cereus bankruptcy.

When I used to play home poker games as a teenager in Atlanta there was a friend that would lose substantial amounts of money into our games.  He would always owe some of the money at the end of the game when we went to cash out.  The biggest winner would end up with this debt.  We would call this debt “Bucky Debt” because it was only worth a fraction of its face value.  Maybe you will get paid but you probably will not, at least not at face value or anytime soon.  At this point it is quite safe to assume that the Cereus Poker Network, Absolute Poker, UB, Blanca Games or whatever you want to call them, is now bankrupt.  Players that are owed money are now owed “Bucky Debt” which is only worth a fraction of its face value.  Maybe they will get paid but they probably will not.  There seems to be quite a few people in denial about this.

Blanca Games has told Madeira Fjord, a shell company consisting of Cereus bond holders, that they will not be getting paid on their $250,000,000 worth of bonds.  In the letter bondholders were told that there was no cash on hand and it was unlikely that there would be any future cash flow.  Bankruptcy was going to be the next step.  Cereus also laid off what appears to be their entire workforce.  How did it get to this point?

Some want to blame the Department of Justice.  Of course their seizure of Cereus bank accounts was the final nail in the coffin but there have been problems leading up to this point.  There have been a few major processor seizures in the last six months.

Daniel Tzvetkoff was arrested by U.S. authorities for his role in the banking fraud.  It was alleged he had not only been skimming accounts that may have been related to Cereus but he eventually squealed on all involved and got the ball rolling in charges against PokerStars, Full Tilt Poker and Absolute Poker.

In November 2010 EwalletXpress, a major U.S. facing processor was seized by U.S. authorities.  Typically processors require poker rooms to keep 3-6 months reserves in their merchant accounts to cover potential chargebacks.  There is no telling how much Cereus lost in those reserves but I think it is safe to say it was well into six figures.

In March 2011 Houston, Texas payment processor EcheckUS was busted by federal agents for processing online gambling payments.  Again there is a good chance Cereus had a high reserve sitting in their merchant account there as well.  The online poker funds in any merchant account seized by the U.S. government is lost forever when it is seized.

After losing what is almost certainly hundreds of thousands of dollars when processors were seized and losing what could have amounted to millions in fraud and maybe even bribes to other processors things were running tight as Cereus to begin with.  Affiliates were not getting paid and there were some other issues behind the scenes.

Then on April 15th they lost access to what appears to be a crippling amount of money to the federal government.  It obviously took Cereus by surprise and they were not ready for it.  They probably already had problems with covering player balances and now they lost access to what little cash they had.  On top of that a run on the bank was coming.

What I do not get is their next step.  They blocked all banking transactions to U.S. players.  Since obviously Cereus has let U.S. players play why did they not just continue to let them bank?  I cannot imagine they lost their UseMyWallet merchant account because if they had I would think UseMyWallet would be shutdown for all online poker rooms.  They also had some creative looking phone card type deposit deals.  It is probably safe to say those are still somewhat intact unless maybe they were their own processor there.

It also would seem that Western Union and Moneygram would be options available to them.  Sportsbooks have created their own Western Union offices all over the world to handle transactions.  They have done this for decades and seem to always get away with it as they change their office and agents regularly.  This must be something Cereus had been doing as well.

Since they already had their finger in the air to the federal government, which to be quite honest I respect, why not go all out and really tell them to go do something to themselves?  I think the answer to this one is that this seemed like a great time to make an exit from the online poker world in typical Absolute Poker fashion.  It was their chance to run off with the money they had buried and blame it all on the U.S. government.  This way at least they can try to lay the blame on the bad guys, the misguided people at the federal level that have stolen a hobby away from what seems to be millions and affected online poker players around the world.  Why not take this opportunity to kick the feds when they were already down while running for the hills?

At some point the reserves in places like UseMyWallet and credit card processors will become liquid.  Maybe there will be something for players then.  That is if Cereus is even still around which is becoming a bigger if every day.

I am not dancing on anyone’s grave here.  I am trying to tell it like it is.  I wish nobody had played on Cereus because of their thieving past.  They stole a lot of money from me I never got back but I do not want them to take more from players here nor do I want the feds to take it either.  I want players to get their money.  At this point I think it would actually be best if the Department of Justice actually held the funds and had their own liquidation.  The trouble with that though is that players outside the U.S. would likely not receive anything.

This whole thing is a mess and I am following it closely.  Hopefully I am wrong about there being no cash but there is little evidence that they have the ability to pay anyone right now, not even their employees.

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