Thursday, November 06, 2008

Compensation For Victims of UltimateBet Online Cheat Scandal


Compensation Resumes in UltimateBet Scandal as Legal Agreement Reached

The Kahnawake Gaming Commission released a summary statement on Wednesday confirming a legal settlement reached earlier this week between Excapsa, the group holding original ownership of the UltimateBet online poker site, and Blast Off Limited, owned by Joe Tokwiro Norton, which took over as proprietor in late 2006. Among the latest revelations is that the total due to be refunded to affected players, including that already paid, will be in vicinity of $21 million.

Approximately $6.1 million had been refunded to UltimateBet players in an original wave of payments earlier this year, though subsequent investigations confirmed that the cheating had gone on longer and had been of a greater scope than originally realized. This subsequently resulted in a legal action between Blast Off and Excapsa which is believed to have been resolved after court negotiations on Monday, in which Excapsa made additional payments to Blast Off to cover the cost of reimbursing players still awaiting refunds due to more cheating accounts being uncovered.

According to PokerNews, KGC representative has confirmed that details of the Excapsa liquidation proceedings as published in a story in Montreal's National Post were "pretty accurate." That story stated that $15 million will be paid by Excapsa shareholders to "Blast Off Ltd., the company owned by Mr. Norton that runs Ultimate Bet." Monday was scheduled as a deadline under which the site's certification by the KGC would be imperiled if the situation had not been resolved and refunds to players resumed. The cheating, which involved the surreptitious use of a software tool to view the hole cards of the cheaters' opponents at any given table (and thereby allowing the cheaters to play accordingly), had been in place from 2004 until its discovery earlier this year through mathematical examination by players of suspect accounts' unsupportable win rates.

Documents released by the Canadian liquidation court as reported in the National Post also showed that Norton (Blast Off) sought $81.4 million in damages for being sold "corrupted" software, including $5 million in damages to Norton's reputation and $49 million in damage done to the "UltimateBet" brand name. Blast Off stopped making payments toward its overall $130 million purchase price last December. However, exact details of the settlement beyond the latest $15 million for player compensation and a $1.5 million fine payable to the Kahnawake Gaming Commission – in addition to the initial $6.1 in player refunds, which also came from Excapsa – have not been released. The $15 million may include a reserve for interest, meaning that the total of approximately $21.1 million may exceed by a million or two the actual amount traced through the years of illegitimate play.

The settlement, furthermore, is likely to have trimmed significant equity from the original Excapsa sellers, who according to documents denied knowledge of the cheating tool embedded in the software. However, Sheldon Krakower, the court-appointed liquidator, was cited in the National Post piece as having "advised shareholders that fighting Blast Off in court would likely mean an end to payments of the US $109 million still owed from the original sale and could wipe out Excapsa's cash funds of US $36 million." Previously, the KGC publicly named Russ Hamilton as being involved in the cheating; Hamilton had reportedly been associated with the site since its creation.

Refunds of defrauded funds to affected players are expected to resume within the next few days, according to the KGC, with Blast Off also having to provide proof to KGC officials that payments have been properly issued.

The body of the KGC statement:

Kahnawake Gaming Commission Confirms UB Compliance with Interim Decision

The Kahnawke Gaming Commission ("KGC") announced today that it has received information from its agents, Ultimate Bet and other related parties indicating that Ultimate Bet has addressed, or is addressing, the matters set out in the KGC interim decision of September 29, 2008.

In particular, the KGC has confirmed that Ultimate Bet has commenced reimbursing approximately US$15M to players who were adversely affected by the cheating incidents. This is in addition to the US$6.1M that Ultimate Bet has already reimbursed to players. The KGC will defer its final decision in this matter for a short period of time for the purpose of ensuring that all required reimbursements have been made.

In addition to reimbursements to players, the KGC is considering the available evidence and will decide whether Ultimate Bet has satisfied all of the other terms of the KGC interim decision.

The KGC's final decision in this matter is expected to be issued once all player refunds have been confirmed.

Murray Marshall
Senior Advisor
Kahnawake Gaming Commission