I’m not going to pretend I saw Black Friday coming but PokerStars and FullTilt were on a path where I’m not entirely surprised at the outcome. Going back to the passage of the UIGEA I’ve been dismissive of their legal arguments about poker being a game of skill. I even predicted that their demise in the US would be the cash flow strangulation resulting from the DOJ’s chokehold on banks and payment processors.
And I wasn’t alone is predicting this. Many industry insiders privately agreed with me. Yet, I can’t find a single cautionary note in any of the mainstream poker media. Despite plenty of warning signals, including one poker media site reporting that an unnamed industry insider told them that several big poker sites would collapse if the Reid bill wasn’t passed because of . . . payment processing difficulties!
Of course, we all see what their lack of journalistic curiosity got us.
But this post isn’t about Black Friday. There’s another potential scandal brewing and nobody in the mainstream poker media is covering it. It won’t likely impact players in the way that Black Friday did but it is something players should be made aware of.
Mike ODonnell reporting for CalvinAyre.com recently wrote a piece titled, Playtech’s Trust Issue, in which he discusses the fact that Playtech has announced yet another acquisition of assets that just happen to be owned by Playtech’s founder and largest shareholder, Teddy Sagi.
According to reports, Playtech will pay approximately £80 million to acquire certain assets of a social gaming company which is owned by Sagi. Sagi will retain 80% of the company (i.e. the £80 million is for a 20% stake) plus the rights to use some of the assets that Playtech is buying. In other words, he’s selling them software that Sagi plans on keeping for his own use.
This is in addition to the fact that another Sagi affiliated company is selling Playtech their office space in London for £10.5 million.
And if you do some googling around you’ll find this isn’t the first or even the second time Sagi has sold assets he’s owned back to a company he effectively controls. This is at least the third time he’s dipped into Playtech’s coffers to cash himself out.
Playtech shares took a dip (at one point shaving nearly 10% of their value) on the news. The investor view of this constant dipping into the corporate well was summed up beautifully by Simon McGrotty, an analyst at Davy Research.
Where concerns will be raised is that once again Playtech is acquiring assets from its founder and largest shareholder.
Ninety five million euros is a significant investment, especially in an area that is relatively unproven – there is no mention of the current profitability of the assets being acquired in this morning’s announcement.
Oh and in case that wasn’t troubling enough, according to the Las Vegas Review Journal, William Hill’s Nevada gaming license is “possibly” being held up due to regulators wanting to take an extra close look at William Hill’s online business partner, Playtech. Why? Well, because the guy who is the majority shareholder, Sagi, was convicted in 1996 for fraud and bribery.
But you won’t read about these stories on any of the mainstream poker media’s sites. Once again, they’re either turning a blind eye or too inexperienced in the poker business to connect the dots.
Maybe Sagi’s deals are legit. I don’t know. The purpose of this post was not to make a case for or against Playtech or Sagi. My purpose was to point at the poker media and ask why they aren’t asking the same questions everyone else is.
If the worst were to happen and Playtech were to collapse, how many poker skins would they take down with them? How many of those skins are properly segregating their funds? How would another major implosion impact legalization of poker or the overall poker market?
The fallout has the potential to be staggering and widespread. Yet, the poker media is too consumed with posting trivial updates (or updates telling you that there are no updates) about the Full Tilt situation to pay Playtech much attention.
Maybe their investigation turns up nothing funny going on but shouldn’t they at least be asking the questions?
If Black Friday taught us anything it’s that as long as nobody is asking questions you can get away with virtually anything.