Amaya Gaming Hurts Online Poker Industry by Hiring Cereus COO

May 11, 2013
Amaya Gaming Hurts Online Poker Industry by Hiring Cereus COO

US players hoped the Nevada online poker industry would be safe and secure.  This included leaving the shady reputation many offshore sites had for a clean reputation in the newly regulated industry.  Unfortunately, two huge gaffes have already been uncovered by industry observers that could hurt the industry’s growth.

The first major issue involves former Ultimate Bet CEO Greg Pierson’s backdoor into the Nevada online poker market.  The other involves Paul Leggett, who has found his way into the management team of Amaya Gaming.

The Ongame Network was purchased by Amaya Gaming in 2012.  While the company is not licensed in Nevada, the group has signed partnerships with several companies that are already approved or have applied.

Paul Leggett was hired as Chief Operating Officer of Absolute Poker around December 2007.  Ultimate Bet later merged with Absolute Poker to become the Cereus Network.  Both companies had cheating scandals that stole anywhere between $25 million and $50 million from players.   Leggett announced to anyone that would listen that Scott Tom, the alleged mastermind of the Absolute Poker cheating scandal, was long removed from the company.  He also publicized that nobody that ever cheated at online poker was still involved in Absolute Poker.

In a blog post on the now defunct Cereus family of sites, Leggett proclaimed:

I wanted to start off by confirming that no individual who has been linked to any cheating works for Tokwiro or any of its subsidiaries

The US Department of Justice disputes this claim.  The Black Friday investigation worked well beyond Leggett’s first days with the company.  The indictment claims Scott Tom was involved with Cereus for years after Leggett started with the company.

Leggett went on to say:

When I took the COO position with Tokwiro, the AbsolutePoker investigation had recently finished and the UltimateBet one was just around the corner. Amongst other things, the result of the AbsolutePoker investigation required Tokwiro to demonstrate to the Gaming Commission, and their auditors, that a list of certain individuals were no longer working for the business and that they had no ownership of any kind. The list of individuals included all names that were associated with the cheating in any way or form and also anyone who was identified as hindering the investigation.

After hearing the Hamilton Tapes and talking at length to Travis Makar I would like to hear how Paul Leggett did not hinder the cheating investigations.  He was not at the taped meetings, but in my opinion everyone there assumed Leggett was fully versed in the cheating, though they did acknowledge Leggett’s desire to keep a safe distance from it.

Perhaps Leggett did not notice Tom’s involvement in the operations of the company where he was Chief Operating Officer or maybe the US Government’s allegations are false.  In my opinion, and a number of other industry observers, it is hard to believe that the evidence that points to Scott Tom’s involvement in Cereus through at least March 2011, according to the Department of Justice, could be missed by the Chief Operating Officer of the company.

Maybe the US Government got it all wrong.  I respect the fact that Scott Tom is innocent until proven guilty, even though he has refused to return to the US to fight his charges, he still deserves his day in court.

Leggett Mentioned in Hamilton Tapes

Paul Leggett was mentioned a number of times in the recently released Ultimate Bet cheating scandal tapes.  It was clear he was aware of the cheating after the fact.  Leggett and his company remained silent to both their regulators and the poker playing community as those involved in the scandal released statements that were later proven to be false.

Cereus Operated Short on Funds

It is no secret now that Cereus was well underfunded.  Player balances were clearly not held in a segregated account.  Player funds were squandered in some way in the years preceding the implosion of Cereus.

One theory is that player funds were used to repay the victims of the Absolute Poker and Ultimate Bet cheating scandals.  It is at least the most reputable option of all the choices that would have caused the Cereus bankruptcy.  The others involve operating a blatant fraud or insiders stealing.  Any are possible, none are acceptable.

While Leggett was apparently ignoring Scott Tom’s alleged involvement in Cereus in its final months of existence, he was also ignoring the company’s ailing balance sheet.

Cereus Defaults on Debt Obligations

The Tampa Bay Times reported that Cereus had not paid its debt holders since mid 2009 at the time of Black Friday.  That left nearly two years of nonpayment.  The cumulative value of the outstanding notes was $250 million and the missed interest payment was $30 million.  The company was at least $30 million behind on its debt payments at the time of Black Friday, but that amount could have been $60 million.  This places the outstanding debt in the $280-$310 million range, which was in default in the months before Black Friday.  That does not include player deposits either.  This amount only represents the amount owed to investors.

Sensing a revolt by bondholders and issues with former Ultimate Bet shareholders, Cereus ownership was transferred to Blanca Games, a shell company based in Antigua.  It would later become clear that this move was nothing more than an attempt to shield Cereus from potential legal claims.

Cereus Balances Not Honored

While Cereus was stiffing their bondholders, they were also slow paying affiliates and players.  The company was at least two months behind to several of their marketers.  This was further exposed when Cereus was indicted on April 15, 2011 and player withdrawal requests were reversed.  Cereus was short about $45 million when the Black Friday indictments were unsealed and virtually everyone with a balance saw their funds evaporate.  Cereus saw some bank balances seized by the US Government, but there was still a large hole in the balance sheet well into the tens of millions.

Payoff Demands by Former Cereus Employee

There is also evidence that Leggett was engaged in a payoff discussion with Zoltan Rozsa, known in the online poker community as Brainwashdodo.  It seems nothing ever came out of this discussion, but leaked emails seem to make it clear that Leggett was willing to entertain the idea.

Too Many Good People Out There to Employ Former Cereus Management

US online poker players have hoped that regulating the game in the States would put an end to people related to scams in the industry.  Instead, Amaya Gaming decided to hire someone that appears to have helped cover up one or two cheating scandals, a massive shortfall in cash, stiffed bondholder claims that dated back two years, and appears to have been caught in discussions to pay an extortion attempt.  All the while, his company was indicted for fraud and illegal gambling, while virtually all of their players were stiffed.

It does not seem clear when Leggett left Cereus, but it was no earlier than two weeks after Black Friday.  He was still COO of a company that was indicted by the Department of Justice, while at the same time still allowing US players to have access to real money tables.  Considering the company’s financial situation, it was trading while insolvent in the weeks after Black Friday, presumably under Leggett’s watch if he was still sending internal emails on April 29, 2011.  Trading while insolvent is a financial crime in virtually any first world country.  One could argue the company lacked proper liquidity for at least nine months before Black Friday considering its inability to meet its debt obligations.

Amaya Gaming ignored all of this when hiring Leggett.  They did not care that he helped to cover up cheating scandals, cash shortfalls or continued to operate a site accepting deposits that was clearly broke.

Amaya Gaming hurt their reputation in immeasurable ways when it hired someone associated with a loss of about $45 million in player funds and a number of cover-ups.  Several potential Nevada operators and licensees have entered agreements with Amaya Gaming and their Ongame Network.  Amaya Gaming does not yet hold a Nevada license and their choice to manage their online operations will not make that process any easier as thousands of US players were cheated by Cereus, Leggett’s former employer.  Iovation’s involvement in the Nevada online poker industry proves that players that fell victim to online poker fraud never forget.

After the disaster caused by Ultimate Poker’s inadvertent partnership with Iovation, one has to wonder if Amaya Gaming’s partners will tolerate someone else associated with the Ultimate Bet cheating scandal being a part of their future online gambling business.  It is frustrating to the entire online poker community that this is even an issue.

This opinion does not necessarily reflect that of

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