New RICO Complaint Filed Against UltimateBet.com

Source: courthousenews.com

High-stakes poker players claim that UltimateBet stole $20 million from "crooked" online poker games by exploiting security flaws that allowed others - or the website and its operators themselves - to see players' hole cards.
In the federal RICO complaint, eight named plaintiffs claim they lost $2 million in the rigged games. Lead plaintiff Daniel Ashman says the cheating scandal has "been the subject of intense public interest and scrutiny."
Named as defendants are the online poker and gambling website operator, 6356095 Canada Inc. aka Excapsa Software, and 10 John Does.
The complaint states: "UltimateBet (aka Ultimatebet.com) is an online poker and gambling website that has and continues to serve players in the United States. 6356095 Canada, Inc. (formerly Excapsa Software, Inc. or 'Excapsa') and Does 1-10 are holding companies, licensing entities, marketing companies, software firms, and individuals organized in or residing in jurisdictions throughout the world that developed software for and/or operated UltimateBet by and through which owners of Excapsa sought to direct and shield its illegal and fraudulent activities from courts, police, and tax authorities. Individual Doe defendants are owners, operators, officers, employees, and/or agents of Excapsa. While UltimateBet is not itself a legal entity, it is the vehicle through which defendants operated various conspiracies to defraud plaintiffs and the broader public.
"Since at least June 2003 and until at least January 2008 Excapsa/UltimateBet did conspire to and did direct, effect, and permit the theft of over $2 million held in plaintiffs' online poker accounts at UltimateBet.com. Specifically, by creating and making use of an intentional a security flaw in the UltimateBet.com software, and with the assistance of owners, agents, and employees of Excapsa and its various subsidiaries that operated UltimateBet, defendants either allowed others to or did directly view plaintiffs 'hole cards' during high-stakes poker matches run at UltimateBet.com.
"With the assistance of owners, operators, officers, employees, and/or agents of Excapsa and its subsidiaries, the cheaters were further able to change their online identities to avoid detection and to improperly funnel their illicit proceeds through various UltimateBet accounts in a manner that would have been impossible without insider assistance. Through these activities, defendants stole or caused to be stolen at least 20 million dollars from plaintiffs and other high-stakes poker players at games run by UltimateBet."
The named plaintiffs come from five U.S. states, one Canadian province, and Peru. "At this time, plaintiffs suspect but do not know the identities of Does 1-10," the complaint states. "Evidence, some of which is discussed below, has arisen that some of the founders and management of UltimateBet and Excapsa, including Greg Pierson, Jon Karl, Jack Bates, Russ Hamilton, and others who formerly operated (and may continue to be involved in the operation of) UltimateBet were likely aware of or involved the conspiracy to cheat players. However, because the identities and activities of UltimateBet and those who have profited from its operations has been intentionally shielded though numerous agents, subsidiaries, and foreign corporations, it will be necessary to conduct significant discovery before a complete list of defendants can be identified. After such discovery, plaintiffs will seek to amend the complaint to add additional defendants."
In "the UltimateBet.com online poker cheating scandal," the complaint continues, "plaintiffs and other high-stakes online poker players were cheated out of millions of dollars in crooked online poker games where their opponents (employees, agents, owners, and/or officers of Excapsa/UltimateBet) had illicit access to players 'hole' cards. Plaintiffs unknowingly played games of high-stakes poker with their cards essentially face-up. The facts underlying the case have already been the subject of intense public interest and media scrutiny, including a feature story on 60 Minutes, an investigative series by the Washington Post, a feature article by MSNBC, and hundreds of articles and news reports across the Internet."
The plaintiffs say that UltimateBet has a "history, ownership, and business structure" that is "cloaked in layers of obscurity as a result of intentional efforts by the individuals profiting from the enterprise to avoid scrutiny. This is hardly surprising as the prospect of criminal prosecution under the Wire Act, 18 U.S.C. § 1084, the Illegal Gambling Business Act, 18 USC 1955, RICO, 18 U.S.C. § 1961, et seq., and similar statutes has haunted operators of Internet gambling sites from their inception. In 2011, a Grand Jury in the Southern District of New York returned an indictment against the current owners of UltimateBet (Scott Tom and Brent Backley) and owners of other online poker rooms for violation of these and other federal statutes.
"At the same time, Excapsa Services Inc. has suffered no harm, either due to the nature of its operations (often conducted through various and sundry foreign subsidiaries) or the cheating that took place while it owned and operated UltimateBet. Instead, since 2006, when it 'sold' UltimateBet (via the sale of various operating subsidiaries) to Tokwiro Enterprises in what appears to be a related-party transaction, Excapsa has been involved in liquidation proceedings in Toronto, Canada. As part of these proceedings, the assets (mainly cash from operations and from the sale) are being disbursed in an orderly manner to Excapsa's shareholders, which include individuals who knew of and participated in the high stakes poker cheating."
The complaint claims that "a related cheating scandal that took place at UltimateBet's sister site Absolute Poker. UltimateBet and Absolute Poker are now operated by the same holding company, Tokwiro Enterprises, allegedly a Mohawk sole proprietorship owned by the Joseph Norton, the former Grand Chief of the Kahnawake Tribe, which operates the KGC [Kahnawake Gaming Commission]."
The complaint cites a transcript from the "60 Minutes" report, broadcast in November 2008, which states: "The virtual poker games are actually run on computers servers from a Canadian Indian reservation outside of Montreal. It's all licensed by the sovereign tribe of the Mohawk nation, which has no experience in casino gambling and doesn't have to answer to Canadian authorities.
"The [current] grand chief is Mike Delisle.
"Chief Delisle says Internet gambling is illegal in Canada, but tells ['60 Minutes' reporter Steve] Kroft, 'We're not Canadians. We're a member of the Haudenosaunee Five Nation Confederacy. And we're Mohawk Kahnawake people. We're not
Canadian.'
"And that legal distinction has allowed the Kahnawakes to rake in millions of dollars a year by licensing Internet gaming sites and housing their computer servers on the reservation. They now register and service more than 60 percent of the world's Internet gaming activity from a highly protected and nondescript building that used to be a mattress factory."
The plaintiffs continues, in their 42-page complaint: "KGC, the regulatory body to which UltimateBet claims to answer, is part of a self-proclaimed sovereign entity located on a few square miles just across the St. Lawrence River from metropolitan Montreal. The Canadian government has had a history of tense, even violent, relations with the Kahnawake Tribe, who are notorious for cigarette and gun smuggling. The Canadian Government considers the licensing and regulatory activities of the KGC to be illegal." (Footnotes omitted.)
The plaintiffs say that they uncovered the cheating by sharing information at the online poker forum, twoplustwo.com.
In the complaint, they claim they identified a player who they suspected was a "superuser" who could see their cards, and other unknown players they suspected of cheating.
"Members of the twoplustwo.com forums discovered, among other things, that certain accounts with highly improbable win rates often logged on to UltimateBet right after a similarly suspicious account had logged off. Also, many of the suspicious players simply disappeared, never to return, after booking huge wins at high-stakes games, an extremely unusual pattern of activity. Finally, the high-stakes online poker community is relatively small and many high-stakes players know one another from their hundreds of hours of play together, from discussing poker strategy online, and from meeting at live events, such as the annual World Series of Poker in Las Vegas. However, no one had an information about the real world players behind the suspect UltimateBet accounts," the complaint states.
The players say that Tokwiro admitted, in a May 29, 2009 press release, that six player accounts had been cheating, listed 18 account names that "participated in this scheme," and offered refunds.
The complaint states: "UltimateBet has admitted that at least six accounts (presumably six separate individuals), some or all of which belonged to employees and/or owners of Excapsa Software, Inc., used a software vulnerability to steal millions of dollars from players on its site. However, UltimateBet did not then and to this day has not released the names of any individual other than Russ Hamilton, a former World Series of Poker Winner, early manager/employee of UltimateBet, and shareholder of Excapsa, on who UltimateBet has sought to pin the exclusive blame.
"However, given the nature of the security breach (which is essentially built in to the underlying software) and UltimateBet's willingness to protect the identities of the cheaters, it is likely that the cheaters were high-level members of UltimateBet's management and/or software engineering team, and/or its founders and original programmers, as only such individuals could create and exploit the software loophole, frequently change the names of cheating accounts to avoid suspicion, and bypass security measures designed to prevent the cash out of illegitimate winnings. Statements from insiders at UltimateBet have corroborated these suspicions."
The plaintiffs add that the refunds UltimateBet offered also have been shrouded in secrecy: "While UltimateBet has provided 'refunds' to certain players, it has largely kept its methodology for doing so secret. Moreover, it has refused to publicly release or even send affected players hand histories from the compromised games, so that they might determine the accuracy of the refunds; it has refused to provide a full account of its investigation, so that players can examine whether the list of fraudulent accounts is complete; it has not addressed the role of cheating accounts in other poker games, such as high-stakes tournaments or high-stakes limit (as opposed to no-limit) games; and it has refused to compensate players for lost interest, lost profits, emotional distress, or any other form of damages. In short, UltimateBet has acted as its own investigator, judge, and jury in this matter and has stifled any public scrutiny of its 'investigation.' ... Cheated players are bringing this action because they believe that only a public and impartial tribunal can accurately determine the full scope of the cheating and the identities of the individuals behind it."
Finally, the plaintiffs say: "Under federal and state law, the affected players have a right to learn the truth of who cheated them, how they were cheated, and to receive appropriate redress for their injuries. UltimateBet should not be allowed to control the investigation into its fraudulent activities and to set the terms of any penalty unilaterally."
The players seek an injunction and damages for RICO conspiracy, conversion, interference with prospective economic advantage, intentional infliction of emotional distress, unfair business practices, fraud and negligence.
They are represented by Alan Engle with Meador & Engle, of Anaheim Hills.

My Take: I don't think this huge online poker cheating cheat scam will ever go away...and it shouldn't, just to serve as a reminder of what can happen in the nefarious world of online poker and online gambling in general.