This post is long even by my standards, but please bear with me as it&#8217-s significant news on several levels. It is an extension of the Microgaming poker scandal article I wrote for my own site, with some additional material but with graphics removed.

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Let me kick off by commenting generally on the relationship between a provider of online gambling software and the players who ultimately end up using it:

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Techinically speaking, there is none. The provider licenses the software to a client- the client then offers the software to players, and the provider is not a part of this latter relationship. This is a contractual fact, and it makes sense as well – if you sell fresh fish to an outlet, and the outlet leaves the fish on the shelves too long, resulting in poisoned customers, it is not your fault. It&#8217-s logical.

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And yet, software providers DO take responsibility, at various levels of involvement, for their players, notwithstanding their lack of legal or contractual requirement to so do. Why do they do this?

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Without preempting any of my more detailed comments further down the page, the simple reason is that it makes business sense- it imbues the provider&#8217-s indirect player customers with fundemental confidence in the product, and this has great reciprocal value.

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Provider says: &#8220-you&#8217-ll be safe here&#8221-.

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Player says: &#8220-thanks- I&#8217-ll play&#8221-.

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Players are safe, provider makes money. That is the basic premise at work here.

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So: onwards.

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Microgaming Poker was launched in 2003, an offshoot of online gambling software provider Microgaming. Originally called &#8220-Prima Poker&#8221-, it was rebranded to reflect the provider&#8217-s name in 2006.

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Microgaming is one of the oldest software providers in the business, having opened its doors way back in 1994. It has, to a date, a one hundred percent record of bailing out players from failed licensees – I will go into in more detail about this further on.

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The Wikipedia Mirogaming entry makes interesting reading:

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In late February 2008, twenty-seven Microgaming-powered poker rooms closed when their licensee Tusk Investment Corporation Limited went into insolvent liquidation, leaving all players who had funds in those rooms to claim as unsecured creditors in the liquidation.

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It is not yet known whether players will recover any of their money.

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Sounds intruiging.

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The first sign of trouble was an apparently innocuous report issued on 15th February 2008 by eCOGRA, an ostensible online gambling inspectorate, initiated and part-funded by Microgaming, and which endorses most of the the Microgaming operations:

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An onsite review was recently conducted by eCOGRA`s Compliance and Advisory Services staff at the operations for the following casinos as part of a normal seal renewal process:

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Challenge – www.challengecasino.com
Golden Reef – www.goldenreefcasino.com
I Big Casino – www.ibigcasino.com
Music Hall – www.musichallcasino.com
Nostalgia – www.nostalgiacasino.com
UK Casino Club – www.ukcasinoclub.com

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The audit revealed failures in compliance with eCOGRA`s Generally Accepted Practices. It has therefore been decided to suspend these seals pending further investigation.

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During the discussions about the above eCOGRA statement on the Casinomeister player forums, a representative for the casino group in question popped in for this update:

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We have been in discussions with eCogra and these purely administrative issues will be resolved shortly.

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In no way has our honesty, integrity or customer service been questioned and our reputation speaks for itself!

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We are expecting our eCogra seals will be reinstated very soon, but in the meantime it is business as usual.

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Since eCOGRA&#8217-s announcement had been so innocuous, this didn&#8217-t seem at all unreasonable.

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Unfortunately, the whole operation was gone seven days later.

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The following Tusk licence termination statement was reported by a prominent online gambling commentator:

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Company Statement:

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Microgaming announces that it has terminated its software licence with Tusk Investment Corporation – with immediate effect, after having received Tusk&#8217-s notification of its plans to put the Company into liquidation.

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Microgaming is presently gathering all facts related to this matter and will provide further announcements as and when information becomes available.&#8217-

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About Tusk

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Tusk Investment Corporation Limited operates a number of casino sites and poker rooms:

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Casinos:

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Challenge Casino
Golden Reef Casino
Music Hall Casino
Nostalgia Casino
UK Casino Club
Big Casino

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Poker rooms:
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Battlefield Poker
Royal Card Club
Red Nines
Arctic Poker
Raw Poker
Poker.ie
Daily Poker
Flush Draw Poker
Will Bet Poker
Bet Road Poker
Grand Central Poker
Off The Rail Poker
Privy Poker
Berserk Poker
Atomik Poker
Dave&#8217-s Poker Room
Hetman Poker
Hot Pepper Poker
Poker Seas
TilttAA Poker
Loose Games Poker
CPT Gaming Poker
Ice Bear Poker
GoHard Poker
Caya Poker
Mr Urban Poker
Poker Sweden
Euro Poker Dream

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Blimey.

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What was that eCOGRA told us?

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The audit revealed failures in compliance with eCOGRA`s Generally Accepted Practices.

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Well, I can only say that this was one hell of a &#8220-compliance failure&#8221- which led to the collapse of fully 34 casinos and poker rooms. Way to go, eCOGRA. Any chance of a slightly more accurate statement next time? &#8220-Licensee dead in the water&#8221- would have been a tad more accurate than &#8220-compliance issues&#8221-.

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Anyway, to cut to the chase: liquidators were appointed for the Tusk group, as reported by Microgaming in their 20th March company statement, and those six casinos in the previous Microgaming statement, which had player liabilities of $194,000 in total, were taken over by another group.

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That another group took over the defunct casinos was good.

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Unfortunately, the good news stopped there.

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The liabilities to the poker players was a bit more. A little over $5,000,000 more, to be precise.

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To be even more precise, the total poker player liability was $5,312,923. Five million, three hundred and twelve thousand, nine hundred and twenty three dollars.

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It is therefore maybe not so surprising that a buyer did not come forward for the poker rooms in the way that the casino buyer did.

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But what about the customers of the twenty eight poker rooms? Who is responsible for paying these players their balances?

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These poker rooms were all &#8220-skins&#8221-, or &#8220-white labels&#8221-, of Tusk Investment Corportation, operating their poker branch under the name &#8220-My Poker Profit&#8221-. Skins are glorified affiliate sites which send players to the parent company (in this case, Tusk) but with no access to player funds, the financial side being handled exclusively by the parent company. The &#8220-skin&#8221- has information on player numbers and maybe other relatively trivial matters, but they have no control over the finances.

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For an excellent Tusk operator&#8217-s description of the skin concept, and other relevant matters, see the open letter to Microgaming at the 2+2 forum written by one of the skin owners, Red Nines Poker:

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At the end of 2005, Rednines contacted Microgaming (then named Prima Poker) to explore the possibilities of becoming a skin into the Microgaming network.

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We were advised by Microgaming to contact Tusk to get a deal through them instead, since they had a deal in place with Microgaming which made it possible for new partners to get a skin up and running within days.

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This process is known as a white label solution, which means that our work on Rednines.com would basically be to get players, and get a revenue share of these players. In other words, Tusk / MyPokerProfit.com would take care of everything from Payment Gateways, holding on to player funds, dealing with Microgaming and handling customer support.

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The only information we had access to was the players signed up through Rednines.com, we could see their names, emails and their current rake. We had no way of even making a deposit to a players account without going through Tusk / MyPokerProfit first. In fact any poker room related issue had to go through TUSK.

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Let me interrupt the narrative here to add a personal comment on &#8220-skins&#8221-:

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Skins are nothing but bad news for the player. They create endless confusion through lack of any real clarity about the parent company, the result of which is that the players end up being completely misled with regard to who is responsible for their money. In this case, clients of &#8220-Battlefield Poker&#8221- thought that &#8220-Battlefield Poker&#8221- held their money and paid them- some, in fact, thought Microgaming held their money- NOBODY knew the truth, that Tusk Investment Corporation held their money, because noone told them, and the Tusk involvement would have been buried deep in the terms and conditions at best, if it was mentioned at all. Here are a couple of representative comments made by players in the lengthy discussion at the 2+2 poker forums:

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where are the player&#8217-s bankrolls held?

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are cashouts/deposits done through microgaming as a whole or is each skin seperate in that regard?

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Sorry fella, wrong on both counts.

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So is Tusk or Microgaming holding the players&#8217- money currently?

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Getting closer, but they still don&#8217-t know.

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So, total player confusion.

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I have heard the absurd justification that skins serve a &#8220-niche&#8221- market- for example, if I am a one-legged Mongolian crocodile trainer, I would like to play at a gambling operation called &#8220-One Legged Mongolian Crocodile Trainers&#8221- more than &#8220-Ladbrokes&#8221- or &#8220-William Hill&#8221-. What absolute nonsense. How do our professions or hobbies dictate our preference for the name of the gambling operations we patronise?

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Skins serve one thing alone: the gambling industry. They allow individual operations to effectively transform and mutate into any number of other operations, with apparently distinct identities and all the adherent marketing and profit potential for the original parent companies.

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For the player, they create nothing but confusion and trouble.

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Or, in this case, the loss of $5,300,000.

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Anyway, moving on:

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The poker side of the Tusk collapse has been discussed at huge length in the monumental 27 Microgaming skins to close discussion at the 2+2 forum. I have not read every one of the 3000+ posts, but what I have read represents little useful information- for the most part, players are expressing their general confusion and anger, and a hope that their balances will not be lost.

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One startling fact to emerge from the discussion is that the skin operators appear to have been treated with the same scant disregard by software provider Microgaming as the players. If you look again at the Red Nines open letter:

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Rednines.com is no longer running, along with BattlefieldPoker.com and several other white label solutions of Tusk / MyPokerProfit. Microgaming has not reached out to us, nor have we been able to get a hold of anyone with a say in Microgaming that could help us solve what happened. Even though it is several months since Tusk went bankrupt we have at several occasions tried to get a hold of someone that could take responsibility for what happened – unfortunately without success.

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I have been told by many that they feel Rednines.com should pay up for player balances and their losses, and I can understand their frustration. The problem is that we never saw any of these deposits, we simply got a revenue share for our players rake. This was around $25,000 gross profit every month for the months we were operative. Microgaming was actually making a bigger profit than us on our players.

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I would like to see Microgaming take a stand in this matter, and be the responsible party, which means they should pay for the player balances.

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This latter feeling is also expressed by the players, some of whom took it for granted that Microgaming would honour their balances – these comments are taken from the mighty 2+2 thread:

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I believe Microgaming has covered players&#8217- balances when things like this have happened with casinos running their software before.

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All the balances are covered by Micro Gaming.

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Microgaming has been around since before online poker, and I don&#8217-t think a player has ever lost money when one of their casinos or poker rooms shut down. I&#8217-m sure your money is safe.

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In this case I would think that Microgaming would step in to cover player balances, and as such your money should be safe.

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I really doubt that Microgaming will allow the money in accounts to be lost.

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Unfortunately, notwithstanding the opinions and hopes of both players and skin operators alike, Microgaming has failed to communicate.

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In mid-2008, six months after Tusk / My Poker Profit collapsed, Microgaming received a letter from a lawyer representing one of the players who had a large investment, notifying them of a proposed court action. The player in question reported the matter in this short 2+2 post:

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My dad sent microgaming a letter notifying them he was intending to take them to court. Within 4 days he got a response from a firm in Toronto (they have hired legal counsel already) saying they take no responsibility and that our accusations against them were erroneous.

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So: no comment from Microgaming, apart from one denial of responsibility when they were forced to respond.

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Earlier on I mentioned the provider / player relationship, and the responsibilities thereof. Now would be a good time to start to consider them in detail.

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Two questions to consider:

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Is Microgaming going to honour the balances of the players involved in the Tusk collapse?

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They may yet, but it doesn&#8217-t look good. They have been uncommunicative to all involved parties, and the one occasion that they chose to break silence was to deny any responsability. It may be the case that they are waiting for the liquidation to run its course, at which point they&#8217-ll survey the damage and take the necessary remedial action.

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However, since they know the numbers involved from the liquidation report (see below), they know exactly the extent of their potential liability and should therefore be able to give some sort of indication of their intentions. The fact that they have not done so suggests to me that they are not planning on making the players whole.

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So it&#8217-s not looking good.

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Should Microgaming honour these balances?

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This one&#8217-s easy: yes. Microgaming should compensate the poker customers of failed licensee Tusk Investment Corporation, notwithstanding the fact that, as the software provider, they have no legal liability. There are two reasons for this:

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In the first place, it&#8217-s the right thing to do and they&#8217-ve done it before.

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It&#8217-s the right thing to do because the players are, at the end of the day, customers of Microgaming. As I said in my opening remarks, players, for their part, have the confidence of knowing that, whichever licensee or skin they&#8217-re patronising, they are safe because Microgaming is safe. Good for Microgaming, good for the players.

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And yes, it&#8217-s happened before:

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When the Tropika group failed in 2001, Microgaming paid – see the Microgaming to pay all Tropika players thread from Winneronline.

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When Goodfellas Casino failed, Microgaming paid – see the Goodfellas thread at Winneronline.

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On these occasions, Microgaming did the right thing and should receive all due credit.

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Why would they not now?

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Aside from the moral responsibility and the good business sense of helping – and the potentially disastrous business consequences of not – there is another slightly less altruistic reason for expecting a provider hand up on this one:

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Microgaming directed the skins to Tusk in the first place.

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Look again at the open letter at 2+2:

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We met Microgaming and their representatives at a hotel in London in early 2006 in connection with the ICE gaming show. During this meeting Microgaming stressed the fact that they were backlogged in the process of accepting and adding new skins to their network already.

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We were then advised by Microgaming to contact Tusk (also known as MyPokerProfit.com) to get a deal through them instead, since they had a deal in place with Microgaming which made it possible for new partners to get a skin up and running within days.

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This was far away from what we would prefer. Maybe we are guilty of being naive, but as Microgaming said it was an easy way to join the network, and Tusk/MyPokerProfits way of doing business was condoned by Microgaming themselves. This made the deal seem legit and secure for us.

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In addition to this, Microgaming said that once we were integrated in Tusk/MyPokerProfit’s system, it would be an easy process to re-convert us over to Microgaming as a regular partner once their queue was less backlogged.

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So, Microgaming specifically directed these potential skin customers to Tusk.

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And Tusk failed.

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If you look at the liquidator&#8217-s report to creditors, you can see that during the financial year in which Microgaming recommended Tusk to skins Battlefiend and Red Nines, they were hardly doing well, with a total profit of $282,000 for the year – you can see screenshots of the relevant pages in the liquidation report section of my other article.

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Maybe in late 2005, when Microgaming made the Tusk recommendation to these skins, they were doing less badly.

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Or maybe they only had the 2005 report to go by, which may have been better.

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Or maybe Microgaming knew that Tusk was struggling, and tried to help by sending them skin customers. Eeek, now there&#8217-s a thought.

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Or maybe they didn&#8217-t look at the figures at all?

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However, at the end of the day, Microgaming recommended Tusk, which was NOT the solution that at least two of the skins wanted, preferring a direct arrangement with Microgaming whereby THEY would take care of THEIR players in all matters, financial and otherwise. These potential licensees did not want to hand over these key aspects to an unknown third party, such as Tusk. They wanted a responsibiity that they were denied – look again at Red Nines&#8217-s comment:

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This was far away from what we would prefer. Maybe we are guilty of being naive, but as Microgaming said it was an easy way to join the network, and Tusk/MyPokerProfits way of doing business was condoned by Microgaming themselves. This made the deal seem legit and secure for us.

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And now, these skin partners themselves are owed money by Tusk – $1,522,649 to be precise.

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So quite the charming little disaster all round.

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Assuming Microgaming fails to honour the players, they can they expect to receive around fifteen percent of their balances from the liquidation – if you look again at the liquidation report, you&#8217-ll see that there is $1,400,000 cash in the bank against the $9,000,000 total creditor, or about 15%.

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Of that $9,000,000, the sum total of the poker player balances is a cool $5,312,923.

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Hopefully, Microgaming will break silence on this and offer to compensate the affected players. If they do not, it will be their first failure in these circumstances, and it will send a big, fat, red warning to players that their deposits at Microgaming operations are no longer as safe as they once were.

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It may be of interest to note the full list of Microgaming poker clients.

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The point of saying that is not to warn players against patronising the listed operations – some, like Ladbrokes, are big names and very solid.

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The point is to be aware that should any of them fail, it must not be automatically assumed that Microgaming will bail out the players, as once was the case- as such, players should not simply rely on the name of Microgaming when choosing to play there.

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I will be keeping on top of ths matter, and will report any developments.

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