Ray Bitar, the disgraced former CEO of failed online poker outfit Full Tilt Poker (FTP), has reportedly turned himself into the US Department of Justice in New York. News of Bitar’s surrender to US authorities was broken by ‘PSpotential deal by which PokerStars would acquire FTPas part of a settlement of Stars’ own legal issues with the DoJ. On Monday, PS
To all Dublin Staff,
By now you probably have heard that I have returned to the US to deal with civil and criminal case that are pending against me in New York. We have all worked hard over the last 15 months to preserve Full Tilt’s assets and potential in order to provide for the repayment of all players, and that continues to be our top priority. It is as important as ever that we all do everything possible to make that happen and, hopefully our deal with Poker Stars will very soon make our goal a reality. My return to the US is part of this process.
I am particularly grateful to all of you here in Dublin for your hard work, patience and understanding during this difficult time. I believe that your hard work and dedication should not go unrecognized, and we have made arrangements for Poker Stars to guarantee all July salaries. You should therefore have no concern about coming to work during this period. After that, we expect that your employment contracts will be assumed by the buyer of the company’s assets.
For those that need to reach me, I expect to continue to be available by email and phone starting late Monday, New York time.
Raymond J Bitar
Multiple sources are now reporting the DoJ has confirmed that Bitar is currently in custody. On June 29, US Attorney for the Southern District of New York Preet Bharara requested a week-long extension to its July 2 court-imposed deadline in the prosecutions of multiple Black Friday indictees “to facilitate, and hopefully, to successfully conclude, certain ongoing settlement communications.” The court docket involving the Black Friday case was updated on Monday with a “SEALED DOCUMENT placed in vault” notice.
SUPERSEDING INDICTMENT DOUBLES DOWN ON ‘PONZI SCHEME’ ALLEGATIONS
Forbes’ Nathan Vardi reported that prosecutors have filed a superseding indictment (viewable here) against Bitar and FTP’s head of payment processing Nelson Burtnick containing fresh allegations regarding their efforts to conceal FTP’s insolvency. Among other things, the DoJ alleges that Bitar told FTP players that their deposits were kept separate from FTP’s operating capital, which the indictment calls “simply lies designed to fraudulently induce” players to entrust their money with FTP. A 2008 email Bitar sent a company attorney noted the need for a “canned response” to player inquiries regarding segregation of player funds, even though Bitar stated in the email that “we are not a bank” even though “we might act like one” and therefore customer funds “will always be at risk.” As such, the indictment includes a new “wire fraud against players” charge.
The indictment claims FTP misled its regulators at the Alderney Gambling Control Commission (AGCC) as to the separation of player funds when Bitar “directed FTP’s director of finance to inflate the amount of the company’s ‘cash’ on hand.” An August 31, 2010 report to the AGCC claimed the company had more than $370m “cash on hand,” despite the actual total being almost $200m less than the sum FTP owed its players.
US authorities launched a major crackdown on online poker payment processors throughout 2010, but FTP continued to credit its player accounts despite being unable to ‘pull’ the money from their accounts. On Feburary 1, 2011, Bitar received a projection from his bean counters that the company would completely run out of cash within a few months. Despite this warning, Bitar and his fellow FTP owners continued paying themselves approximately $10m per month, further accelerating the pace of FTP’s financial decline and causing the DoJ to double down on its Ponzi scheme allegations. The indictment claims Bitar and FTP’s other owners received a total of $430m in payouts between 2007 and the 2011 indictments, with Bitar personally reaping $41m of this total.
On June 12, 2011, Bitar sent an email to FTP’s other owners, advising that the company should not issue a press release revealing bad news because it would trigger “a possible new run on the bank” at a time when the company “can’t even take a 5 million run.”
BITAR APPEARS IN COURT
According to a DoJ press release, Bitar was arrested upon his arrival at JFK International Airport on Monday morning. While Bitar had notified authorities as to his flight plans, it was only after he was taken into custody that the DoJ unsealed the superseding indictment, the existence of which Bitar apparently had no prior knowledge. Bitar chose to return to the US despite the fact that he had yet to work out a deal on the charges he faces.
Poker blogger Diamond Flush reported that Bitar appeared in a New York City court around 5pm to plead ‘not guilty’ to all charges. Assistant US Attorney Arlo Devlin-Brown asked Magistrate Judge Debra Freeman to deny bail, in part because Bitar came to the US under the impression he was looking at a maximum of a year or two in jail, but the charges in the superseding indictment open the possibility that Bitar could face decades behind bars. As such, Devlin-Brown argued that while Bitar may have come back to the States of his own accord, he may rethink that decision if let back out onto the street.
Judge Freeman ultimately ruled that Bitar be granted bail, but raised the amount from $250k (as recommended by pre-trial services) to $2.4m – $1m of which must be paid in cash. The Judge rejected defense requests for Bitar to be released from custody for one week in order to raise the necessary sum. Bitar issued the following statement via his attorneys:
Today, I returned voluntarily to the U.S. from Full Tilt’s headquarters in Ireland to face the charges against me. I know that a lot of people are very angry at me. I understand why. Full Tilt should never have gotten into a position where it could not repay player funds. For the last 15 months, I have worked hard on possible solutions to get the players repaid. Returning today is part of that process. I believe we are near the end of a very long road, and I will continue to do whatever is required to get the players repaid. I hope that will happen soon.
Bitar was represented in court by Jack Baughman of Paul, Weiss, Rifkind, Wharton & Garrison LLP. The choice of attorneys may force the judge who has handled the Black Friday indictments, Judge Lewis Kaplan, to recuse himself from Bitar’s case. Kaplan was formerly employed as an attorney at the firm.