The following article was penned by guest author, Scott Bell, aka “ElevenGrover”, an expert on the UltimateBet scandal. Below, Scott explains the meaning of information made public in secret recordings released this past weekend.
The poker world received a jolt when recordings of former UltimateBet founders discussing internal cheating were made public. In the ensuing media maelstrom, the tapes confirm all kinds of things originally suspected, followed by calls for lawsuits and other appropriate punishments. Lost in the moment, is the meaning of the tapes and their reason for release. Before getting to that, we need to go back a few weeks/months/years.
The latest round begins with the formal start of online legal poker in Nevada at Ultimate Poker, a site begun by Station Casino owners. UP has no relation to UB, instead taking the name from the long-standing Ultimate Fighting brand. On the first day of live play, a poster on the 2+2 poker forum reported he could not create an account due to an error that read simply “iovation error”. Subsequent research determined one of UP’s licensed software providers uses Iovation technology. Iovation is a follow-up company created by UltimateBet founders when they spun off the poker site to a Canada corporation in order to take it public. Iovation is predicated on anti-fraud technology developed for UltimateBet but the company continued to provide normal development and maintenance for the poker site through 2006. Iovation technology resulted in a patent application/grant by CEO Greg Pierson and CTO Jason Dehaan.
Scandal sleuths have long suggested Iovation technology should have been an important roadblock to the kind of endemic cheating occurring at UltimateBet from 2003-2007. Pierson must have tacitly approved and perhaps even assisted in the cheating. The recordings back the argument though Pierson does not admit to using the tool and acknowledges fellow founding investor, Russ Hamilton’s use sparingly. Much about the recordings is not as it seems. To understand why, it is necessary to consider the source (s).
Travis Makar began working with Hamilton in the early years of UltimateBet, later becoming Hamilton’s personal assistant and computer guru. For these services, Makar appears to have been paid handsomely with expensive living arrangements and significant financial participation not congruent with his education and skillset. Makar fell on difficult financial times after the scandal and began shopping a set of internal administrative documents in 2010 on Facebook under an anonymous handle called Ub Scandalstuff. He then went on an online radio program in 2011 and leaked additional information without providing satisfactory answers as to why. More importantly, he created strange excuses why he couldn’t give the full information to players so they could pursue legal action against the site. One rationale suggested he was enmeshed in some kind of federal case though there is no evidence of it.
In a second appearance, he brought out-of-context audio snippets from the above recordings, leading the hosts to draw inaccurate conclusions. Some of the documents mirrored data releases in 2008 by user brainwashdodo on 2+2 and by a blogger in 2010. Makar denied any relationship, though he did introduce Zoltan Rozsa as a Costa Rican UB customer service employee as the one attempting blackmail against the site. Rozsa is at best a local conduit for the real perpetrators. Over the last year, Makar has again dripped new information though few paid much attention.
Only after the Iovation story is picked up by 2+2 user PokerXanadu on May 10th and after we provided background research on Ultimate Poker’s software provider CAMS, LLC did an old story find new life. Seizing the opportunity, Makar created a new account on 2+2 and posted a large file dump containing the full audio recordings and all of the previously released materials from the past year. The documents have significance beyond the scope of this article, but Makar frequently characterizes the information as inculpatory in regards to Mr. Pierson’s involvement in UltimateBet cheating.
The first recording is made early in 2008 when high stakes players are gaining traction in an investigation of cheating at UltimateBet. Mike Fosco and David Paredes are the two individuals pushing hardest and they gain evidential hand history data showing statistically abnormal activity. The recording occurs once the founders realize the magnitude of the problem and appears to be a typical corporate damage control session. A significant and interesting fact is that none of the four individuals, Pierson, Daniel Friedberg, Sanford Millar or Russ Hamilton have any role or responsibility with the operating poker site. The tapes paint a picture of executives discussing risks and downside, counting assets and developing strategies to spin the story even though they have no official ability to carry any of it off. An example is the four discussing how to bound player refunds to under five million dollars, yet the site ended up refunding over $23M against a much larger number of cheating accounts and screennames.
The recordings are filled with dis-information. They discuss referring questioning players to Russ if he thinks he can dissuade them from pursuing refunds, yet most of Hamilton’s co-conspirators are investigated heavily and many are subsequently excluded from the refund list including Freddy Deeb. They discuss a list of players and amounts stolen with Prahlad Friedman mentioned having lost $360,000, yet his refund is well over a million dollars by the end of 2008. Hamilton says at several points that people like Freddy Deeb and Mansour Matloubi had no knowledge of cheating but available evidence suggests the opposite. As the one taping the conversation, Hamilton’s portion must bear heavy scrutiny.
Makar claims Hamilton made the tapes out of instinctual self-preservation suggesting he felt threatened by his former co-founders. It is a good read as the primary goal of the Portland duo of Pierson and Friedberg is to feel out Hamilton’s willingness to repay and to get his commitment some of the repayment will come through stock forfeitures. Friedberg is a lawyer who represented the pre-iovation UB development firm, ieLogic. He became the Chief Legal Counsel at Excapsa when the poker site went public and he held a significant ownership position.
Behind the scenes, Friedberg and Pierson are in the process of securing a much larger amount against a cash pool created when Excapsa sold the poker site to the private Malta company, Blast Off Ltd. after the UIGEA passed in the U.S. Though both UB and AP are still separate software platforms, the cheating scandal at Absolute Poker has changed the internal operating environment. The recordings suggest the operating manager Paul Leggett is in their pocket though hindsight says this must have been incorrect as Leggett’s blogs paint an adversarial relationship. In seeking a loan to repay cheating from UB shareholder assets, Pierson acknowledges everything he does not on the recordings. That the numbers are higher, they are going to have to be repaid and the Portland founders do not want to go into pocket to find the money.
A secondary goal for Pierson and Friedberg is affixing formal blame for the benefit of the regulator. Hamilton says Makar is “willing” to be named as an internal consultant who found a backdoor and committed the fraud. This is important because Makar has repeatedly stated they planned to throw him under the bus, as if without his assent. Remuneration for Makar’s sacrifice is not present on the recordings suggesting Portland is not really on board with the idea. In the second recording, Friedberg agrees they need to make Makar appear more guilty, but by then Hamilton had already been named and it was a fool’s errand.
Makar is one of a few individuals that could plausibly be offered up as sacrificial lambs for the regulator and subsequently, the poker media. Makar received copies of the cheating tool directly from Pierson and Pierson employees. Another Hamilton assistant made a pronounced show in 2008 of possessing damaging administrative materials as a threat against recrimination. This individual told a site manager that she had a “trove” of documents and would bring everything down if named. This individual is discussed at length in UltimateBeat, a documentary about the cheating scandal.
Neither end up taking the fall as Russ Hamilton is the scapegoat publicly named for the crimes just a few months after the first recording. Getting a financial commitment from Hamilton paves the way for an anonymous insider to feed 2+2 AP sleuth Nat Arem with information about Hamilton’s 1725 Glenview property address in connection with one of the cheating accounts. The account is registered to Makar’s wife, but investigators correctly rush past the Makars and dig into Hamilton as a founding owner at the site with a checkered history on the pro gambling scene.
The second recording is less consequential because it occurs after Hamilton’s information is leaked and is mainly a session where Hamilton seeks assurances from his partners. A large part of this recording was released by Makar earlier this year on the Donkdown website. In the meeting, Pierson does not attend and Friedberg attempts to assuage Hamilton’s concerns. Hamilton business partner, Sanford Millar is also present. That the parties are conversing privately is interesting because they note Hamilton has lawyered up with nationally known David Chesnoff.
A primary mission for Hamilton is describing the public blackmail attempt by the aforementioned user brainwashdodo. Hamilton is supposedly paying this individual to remain silent and requires financial assistance to continue to do so. There is little evidence whether the Oregon founders assisted in paying for silence though brainwashdodo disappeared after 2008 and the document trove remained buried until 2010. This recording, made in June of 2008 signifies the beginning of the brainwashdodo story, of which Makar’s final scorched earth release is perhaps the last chapter.
Hamilton was exposed legally and financially but must have realized that surrendering his stock warrants in both companies was a financial mistake. If Friedberg’s description of Hamilton’s 250,000 iovation shares to his own 12k ownership is an indicator, it could be a mistake worth tens of millions of dollars when Pierson follows through on his original plan to sell the company to a larger firm.
Makar has a swiss cheese resume and a weak technology skillset. Though he filed a Chapter 7 in 2010, he has few prospects for the kind of income working for Hamilton brought in. And then there is the mysterious third entity that made out with all of the internal administrative materials as a personal Damoclean sword. This individual met Pierson in 1993, was one of the first ten UB employees, set up the customer service operation, managed the fraud prevention unit, worked directly for Pierson, Excapsa’s Jim Ryan and Russ Hamilton at various times and ultimately holds a current job purportedly administering an Iovation contract for an unrelated 3rd party. We are now seeing the results of her work product.
Editor’s Note: Scott Bell is the director, writer and producer of the film : “UltimateBeat; too much to Lose” which is scheduled for Summer 2013 release and highlights the sordid tale of poker hustlers and technologists run amok during the poker boom of the last decade. More information on Scott and the film can be seen here. Follow Scott and film updates on twitter: @elevengrover.