PokerFraudAlert Report: Pokerstars scammed its US players out of tens of millions of dollars with their Black Friday FPP cashout policy

[Dan Druff]

The Greatest Thief Steals and You Don't Know You've Been Stolen From

Cashing out FPPs was a complicated matter.

Player balances are easy and straightforward. If you have $1000 in your Pokerstars account, you expect them to send you $1000. If you receive anything less, you feel cheated.

Tournament tickets are similar. If you have a tournament ticket worth $215, you expect $215 in cash for it if you are no longer allowed to play Pokerstars tournaments. If they give you anything less than $215, you feel cheated.

But what about FPPs. If you have 100,000 FPPs, what is their cash equivalent?

Is it obvious? Not at all.

Is it simple to figure out? Unfortunately, no.

Did this confuse the hell out of the DOJ, to where they ended up just nodding their heads "yes" to Pokerstars' proposed plan? Unfortunately, yes.

This mass confusion, coupled with the general public's existing elation with Pokerstars regarding their deal quickly allowing players to cash out (as opposed to Full Tilt and UB), formed the perfect storm for Pokerstars to steal a little bit from each player, and come out smelling like roses while doing it.

However, this conclusion requires a bit of mathematics and careful analysis to figure out.

Before we begin, let's review Pokerstars' FPP policies BEFORE Black Friday:

- FPPs accumulated in your account for every raked hand you played. They never expired. You could hoard them forever, and in fact Pokerstars encouraged you to do so. They encouraged this hoarding by promoting exciting prizes like sports cars, which could be obtained in exchange for something like 3 million FPPs.

- FPPs could be "spent" in a variety of ways. You did this through the FPP store, and depending upon your purchases, the FPP value ranged from 1 cent to 1.6 cents each. That is, if you spent them wisely, you could easily get 1.6 cents value for every FPP earned.

- In order to get the 1.6 cent value, you needed to be at "Supernova" or "Supernova Elite" VIP level -- the two highest levels on Pokerstars. Both of these levels required a lot of active play on Pokerstars within the calendar year. It was easy to lose VIP levels. For example, any player who didn't play between January 1st and February 28th in any calendar year would fall to the lowest VIP level (BronzeStar), regardless of their past activity on Pokerstars. However, it was also relatively easy to rise back up. A player could achieve the third-highest level (PlatinumStar) by playing fewer than 5000 raked hands.

- Players at BronzeStar could only redeem prizes or bonuses worth 1.0 cents per FPP. This slowly rose up the levels to the 1.6 cent per FPP value for Supernovas.

- You usually could NOT exchange FPPs directly for cash, but could buy "bonuses" that you would clear by playing raked hands on Pokerstars. The "bonuses" available could only be purchased in blocks. The highest value bonus was $4000 for 250,000 FPPs, which was only available to Supernovas, and was worth 1.6 cents per FPP. The lowest bonus was $25 for 2500 FPPs, which works out to 1.0 cents per FPP, and was available to anyone.

When Black Friday hit, and Pokerstars had to come up with their FPP redemption plan, they simplified everything.

The entire FPP Store was closed to US players, aside from the bonuses. But since players couldn't be asked to "clear" bonuses with additional play while being banned from the site, the play requirement was scrapped, and players could simply exchange their FPPs in directly for cash at the same rate.

Again, on the surface, this seems both fair and generous.

However, it's the opposite. This seemingly fair plan actually cheats players in three ways.

Read on...

[Dan Druff]

The Ghost of Richard Pryor Returns to Haunt Pokerstars Players

Richard Pryor's character in Superman III made his fortune by stealing just a few cents from each of his massive company's employees. Over time, Pryor's character accumulated millions of dollars this way, and yet no individual "felt" the money that they lost, or even realized it was happening. This plot device was comically repeated years later in the Mike Judge farce "Office Space".

Mr. Pryor unfortunately passed away in 2005. However, apparently a part of him lives on.

Someone at Pokerstars must have been a fan of these movies, because they did pretty much exactly the same thing to steal as much as $20 million from their own players. To this day, this theft has been mostly undetected and unreported, and in fact most former Pokerstars players will argue with you if you attempt to bring it up.

Pokerstars' plan to cash out FPPs stole from players in three ways.

1) Any FPPs below 2500 get wasted. Since there is no way to "buy a bonus" for less than 2500 FPPs, if you have anything less than that, they simply go to waste. Does this only apply to players with FPP balances less than 2500? No! It applies to almost everyone, because you are forced to buy your bonuses in "blocks", and will almost always be stuck with a remainder of between 1 and 2499 FPPs. This means that each active or semi-active Pokerstars player lost somewhere between 1 cent and $24.99 through this terrible policy, and that's if you only count FPPs as worth 1 cent each. If you count them being worth 1.6 cents each (their true value), almost all players lost between 1.6 cents and $39.98 -- or an average of about $20 each! Multiply that by the millions of players on Pokerstars, and that by itself is a staggering case of theft.


2) The requirement to cash out FPPs in blocks prevents nearly all players, regardless of VIP level, from getting full value on their FPPs. This is because even a Supernova Elite would need an EXACT multiple of 250,000 FPPs in order to get full value for his points. Otherwise, he would be forced to cash some of his points at a lower rate, simply because of the arbitrary nature of the blocks. Consider the following example:

A Supernova with 499,999 FPP has to cash out in the following fashion:

250k FPP buys $4000 (1.6 cents per FPP)
100k FPP buys $1500 (1.5 cents per FPP)
100k FPP buys $1500 (1.5 cents per FPP)
25k FPP buys $300 (1.2 cents per FPP)
4500 FPP buys $50 (1.11 cents per FPP)
4500 FPP buys $50 (1.11 cents per FPP)
4500 FPP buys $50 (1.11 cents per FPP)
4500 FPP buys $50 (1.11 cents per FPP)
4500 FPP buys $50 (1.11 cents per FPP)
2499 FPP gets wasted ($0)
TOTAL = $7550

A Supernova with 500,000 FPP gets $8000, by simply buying two $4000 bonuses for 250k points each.

Look at that staggering difference -- $450 to be exact -- simply because one player has a SINGLE FPP more than the other!

This difference occurs because even Supernova Elites are forced to buy the lesser-valued smaller bonuses when they don't have an exact multiple of 250k FPPs.

What's the sickening thing about #1 and #2 above? This loss in value could have easily been avoided if Pokerstars simply allowed people to directly convert their FPPs at whatever rate they qualified for! There was no need to require people to purchase these silly "blocks", and Pokerstars defended this thievery by blaming the policy on the DOJ. More on that later.


3) The arbitrary manner in which they determined everyone's FPP exchange rate -- based upon VIP level on April 15, 2011, was unfair and contradicted everything they had always promoted about their VIP program.

First off, Pokerstars reps constantly bragged on the 2+2 forums that their FPPs were worth 1.6 cents each. This was done in order to compare their VIP program favorably versus Full Tilt's 27% rakeback program. Indeed, when Washington state players were kicked off of Pokerstars, well before Black Friday, those players were allowed to cash out their FPPs at 1.6 cents each, regardless of their VIP level.

Second, Pokerstars encouraged VIP hoarding. Their message to the public was that your FPPs would never degrade in value -- that you could always take a break, then come back later and play actively again, and your previously-earned FPPs could once again be cashed out for maximum value once you got back to the Supernova VIP level. Thus, there was no penalty for hoarding VIP points, as any active player could return to Supernova again and have them worth what they were before.

Their Black Friday FPP cashout policy contradicted that. They picked the arbitrary date of April 15th as the determining factor for how much your past FPPs were worth. It didn't matter if you earned almost all of your FPPs as a Supernova Elite in 2010. If you took a few months off in 2011, they were now worth just 1 cent each.

Still don't think it's arbitrary and unfair? Consider these two examples:

EXAMPLE #1: Joe just started playing on Pokerstars in July, 2010. He was a pretty active player, and barely made Supernova by the end of the year. He also barely kept up enough play to maintain it in January and February, but didn't play in March or April of 2011. However, when Black Friday hit, Joe was still a Supernova, and was eligible to cash out his 150,000 points at 1.6 cents per FPP.

EXAMPLE #2: Mark has been a super-dedicated grinder on Stars for 5 years. He was Supernova every year it existed, and was Supernova Elite every year since that was introduced. However, in 2011, Mark felt burned out, and decided to take 3 months off from poker as a New Year's resolution. Mark was trying to get the Porsche, and had about 2.2 million FPPs in his account. When Black Friday hit, Mark was a BronzeStar because of his lapse of activity. He will only be able to cash out his 2.2 million points at 1 cent per FPP!

Are these extreme examples? Obviously, but it illustrates the HUGE FLAW in this FPP cashout strategy.

It gives a big slap in the face to great Pokerstars customers who were just taking a temporary break from the site, while rewarding the people who happened to have been most active between January and April, 2011.

Whether this is intentional or unintentional on Stars' part, the longtime loyal customers who happened to have a lower VIP level at the moment got royally screwed.

It is possible that, after reading my reasoning on the arbitrary VIP level cashouts, you're still not convinced on that point. Perhaps you agree with Pokerstars' way of doing things as described in point #3 above.

However, there is absolutely NO POSSIBLE EXCUSE for their actions described in #1 and #2 (especially #1), which are nothing but outright theft. Can you think of a rational reason why Pokerstars should keep everyone's "excess" FPPs between 1 and 2499? I bet you can't, but if you're having trouble figuring out, the reason is simple:

Because they can get away with it.

[Dan Druff]

NOT ME

Perhaps the older people reading this report will remember the charming little "Family Circus" cartoons appearing in the Sunday paper. Often these comics would feature the rambunctious children damaging things all over the house, and always responding with their trademark "NOT ME!" when confronted by their parents. At the end of the strip, a ghost named "NOT ME!" sarcastically took the blame for the children's follies.



Pokerstars management appeared to have learned a lot from growing up with these comic strips, as they played the same "NOT ME!" game involving this dreadful and unscrupulous theft of FPPs.

While most people were gushing about Pokerstars' generosity and speedy payments, a few bright math-inclined people cried foul. They realized that Pokerstars was literally making off like a bandit.

Many wrote to Pokerstars, demanding an explanation.

The most common question was, "Why are you keeping our remaining FPPs below 2500? Isn't that pretty much equivalent to stealing?"

Pokerstars obviously anticipated these questions, and had their "NOT ME!" answer all prepared.

Instead of blaming the Family Circus ghost, they blamed the easy scapegoat of the day: The United States Department of Justice.

"We are sorry that you do not agree with our FPP redemption policy, but this was the plan approved by the United States Department of Justice," wrote Pokerstars to disgruntled former players. "Unfortunately, we are legally required to adhere to this policy."

If taken completely literally, Pokerstars was indeed telling the truth.

Yes, this was the plan approved by the DOJ.

Yes, Pokerstars would be violating their agreement with the DOJ if they deviated from it.

So doesn't that make this the DOJ's fault, rather than that of Pokerstars?

No.

This is because the plan was proposed by Pokerstars in the first place. Had a much more honest and fair plan been proposed, such as directly converting each FPP into 1.6 cents cash, the DOJ would have definitely approved that, as well.

It is highly likely that the DOJ approved Pokerstars' proposal because they did not fully understand the convoluted formulas and procedures for converting FPP values into real money.

Pokerstars proposed, "We will allow players to convert the FPPs exactly how they could have on April 15th, except we won't require any playthrough to cash them out", and to the DOJ, who didn't understand all of the problems with this, it seemed very reasonable and fair.

If the DOJ knew that this allowed Pokerstars to keep somewhere around $20 million in FPP value from US players, I doubt they would have approved it. Unfortunately, the DOJ did not have the time nor inclination to carefully study this matter, and simply approved a broad plan that sounded good on the surface.

Pokerstars knew this was likely, so they put out a proposal that maximized the money they would keep for themselves (at the expense of US players' FPP value), while appearing fair and honest to both the DOJ and the majority of their player base -- most of whom were thrilled to get ANY value from FPPs in addition to their regular balances.

But that brings me to my next point...

Did we really have a right to full value on our FPPs, since Pokerstars could no longer keep us as customers?

Weren't FPPs just a promotional gimmick, meant to reward loyal play, and had no actual cash value?

No. Read on for the conclusion...

[Dan Druff]

Cash Money is Cash Money

Some Pokerstars apologists were insisting that FPPs had no cash value. They claimed that players should be grateful to get ANY value for them, and that demanding full value is unrealistic and greedy.

That is a very flawed argument.

FPPs definitely had cash value.

This is because Pokerstars marketed them as an equivalent to rakeback. They very clearly assigned them a value of 1.6 cents each, and very clearly insisted that they were just as good as cash to the active player, as they could easily be used to purchase cash bonuses.

Never did Pokerstars concede, "Full Tilt has a better VIP program because you get real money as your rakeback, while we give you FPPs which can be confiscated or devalued at any time."

Instead, we were treated to endless mathematical analyses showing us that not only did FPPs have value, but their value was greater than Full Tilt's 27% rakeback to the active grinder.

Thus, FPPs were not a gift. They were not a promotional gimmick. They were points that were assigned a real value and provided as an equivalent (and in fact greater than equivalent) to their competitor's direct cash rakeback rewards system.

Pokerstars was happy to gain the action of their highest-raking players by promoting a VIP system that was supposedly of superior value to that of Full Tilt's.

It is unfair and unethical of them to backtrack on those claims of value, and instead hide behind little-known Terms of Service language that assigns no actual cash value to FPPs.

Pokerstars proudly trumpeted the true value (1.6 cents each) of FPPs when it benefited them to beat their competitors, and they have to live by those claims when it comes to cashing out the FPPs after Black Friday.

They failed to do this -- and it was intentional. As hard as it is for many Pokerstars fanboys to admit, their favorite site stole from them. The amount of money stolen is actually comparable to the published figure of superuser cheating thefts ($22 million) by UB. Unfortunately, while UB's reputation is completely tainted (and rightfully so), Pokerstars still rides high in most people's minds. While it's obvious that Pokerstars was nowhere near as unethical and dishonest as UB, it's ironic that Pokerstars stole a similar amount and got away with it, simply because they did so in a much less obvious and offensive fashion.

If you still don't agree, perhaps you should look at this another way:

Let's say, hypothetically, that instead of going under, Full Tilt quickly paid out player balances. However, instead of paying full balances, they subtracted a certain percentage of rakeback payments that were made to accounts over the past few years, and only paid the remainder.

If this had occurred, people would have screamed bloody murder.

"You can't confiscate our rakeback after-the-fact!", they would have yelled.

"That rakeback money was part of my player balance! You can't just take that away from me!", they would have cried.

"What gives you the right to just grab a percentage of the rakeback you gave me and keep it for yourselves?", they would have angrily questioned.

Now read those questions again, and realize that Pokerstars did exactly that. They took away a certain percentage of everyone's rakeback money. It just didn't feel like they were doing it because, unlike Full Tilt, Pokerstars' rakeback was expressed as a separate balance (in FPPs), and not combined into the player balance. However, it's still the same thing. FPPs were your rakeback, this rakeback was promised to you by Pokerstars, and they stole a percentage of it after Black Friday.

These are the cold, hard facts.

Pokerstars may be the least of the three big online poker evils, but don't for a second think that they weren't evil at all.

[Dan Druff]

Bonus Afterthought: Affiliates Get Screwed

While this didn't affect most players, people working in the affiliate industry also got royally screwed by Pokerstars.

Affiliates, who are simply third parties that get paid to direct new customers to Pokerstars, were not paid for their work in March and April of 2011.

They received this e-mail in May, 2011:

Dear [affiliate],

We are writing to you regarding your affiliate payments for March 2011 and beyond. Due to the recent steps taken by the United States Department of Justice, PokerStars has had to cease all real money services to customers who are present in the US. In keeping with that obligation, PokerStars has had to cease all promotion of the PokerStars brand in the US. As a result of these actions we regret to inform you that we are unable to pay our affiliates in respect of accumulated fees connected to US traffic delivered.

The decision to withhold payment in respect of US traffic is based on clear legal advice received from PokerStars' external legal advisors and has been taken after much consideration in order to protect all parties involved.

All operations outside of the US will continue as usual and you will receive payment in respect of non-US traffic according to the terms of your agreement.

We do thank you for your hard work in promoting PokerStars and hope that you will continue to support us in the future in driving traffic from outside of the US.

Kind Regards,
PokerStarsPartners.com

Again, notice the "NOT ME!" language, attempting to shift the blame to the DOJ.

This, combined with the FPP debacle, should be plenty of evidence that Pokerstars always takes what they can get away with, and isn't particularly concerned with acting fairly and ethically.

As long as Pokerstars can manage to avoid the legal and PR fallout from their actions, they seem just as willing to steal as the lesser-respected big sites in the industry.

[WillieMcFML]

are you getting owned on twitter right now or no?

i don't feel like doing the fpp math

edit:
i've never understood your beef with pokerstars

no one person or corporation is perfect

stars paid us players and can ship you every hand you have ever played at their site within half an hour

IF they didn't pay out 100% value for their bonus program, who fucking cares

they were operating a business in a legal grey area, you were a customer of a business in a legal grey area and you knew that when you depoisted

their company took a huge hit on bf, losing billions? in potential revenue

the hit their company took > the hit their customers took over some supposed fpp/vpp shenanigans

grade on a curve and they are the most honest company in the history of everything

[Dan Druff]

No, I'm not getting owned on Twitter. Whoever is manning the Pokerstars account at 2:30am is dropping a bunch of meaningless bureaucratic-type responses to what I wrote.

Here's the exchange. To make it readable, Pokerstars is in blue, I am in black, and other people are in red.

PokerStars ‏
@toddwitteles The author of this thread has completely mis-interpreted the process involved in the FPP conversions. >>


ToddWitteles
@Pokerstars Feel free to explain where I misrepresented the conversions. I was a victim of this myself, so I'm pretty familiar with it.


Pokerstars
@toddwitteles Only whole bonuses could be redeemed. It's not possible to convert FPPs, allowing US players to do so would have been unfair.

Pokerstars
@toddwitteles Whole bonuses only could be redeemed, which is the exact same way that non-US players can redeem FPPs today.


ToddWitteles
@Pokerstars So you feel it was fair for Pokerstars to keep 1-2499 FPPs from each US player?

ToddWitteles
@Pokerstars Also, if converting FPPs directly at 1.6c each was so unfair, how come you did it for Washington state players earlier?


Pokerstars
@toddwitteles 1.6c per FPP was only available for the 250,000 FPP bonus if you were Supernova+ in whole blocks of 250,000. As it is always.


ToddWitteles
@Pokerstars I doubt non-US players would have found it "unfair" for full value of FPPs of US players. Unlike US, they could keep playing

ToddWitteles
@Pokerstars Non-US players have the option of still playing & redeeming at optimal time, US players don't. Why pretending not to see that?

ToddWitteles
@Pokerstars Also you still haven't explained why Washington State players got 1.6c per FPP when they were banned if this is so "unfair"

ToddWitteles
@Pokerstars You are using fallcious logic that banned US players are in same boat as non-banned non-US players & should be treated the same.

ToddWitteles
@Pokerstars Bottom line is that u advertised FPP being worth 1.6c on 2+2, encouraged hoarding, then screwed ppl who believed what u wrote.

ToddWitteles
@Pokerstars Reputable company keeps their word & makes things right, while a sleazy one takes what they can get away with keeping.

ToddWitteles
@Pokerstars Be glad you're not in the US or a class-action suit against you for this would be 100% successful, and you know it.


Pokerstars
@toddwitteles I doubt it. Also you are overlooking the fact that we were not required to pay out FPP values, we chose to as we felt it right



Pokerati
@ToddWitteles Fake @Pokerstars Boss says: uh duh, dude, we had to. we still got to scrape up $1 billion from somewhere!


ToddWitteles
@Pokerstars If u paid nothing for FPPs, non-US players would've left in droves. Let's not pretend that was done out of kindness.


Pokerstars
@toddwitteles I understand and appreciate your concern about the miss-leading advertising of the 1.6c conversion. I apologize for that.

Pokerstars
@toddwitteles All players should be treated the same, and are. Regardless of location, skill or VIP level. The rules are the same for all.


ToddWitteles
@Pokerstars LOL at your bureaucratic answers, but at least I thank you, whoever you are, for taking the time to respond, and I mean that.


ajfsports
@PokerStars @ToddWitteles pretty sure you could have added a payment purchase for fpp's under 2499 to be paid at par



Pokerstars
@toddwitteles You're welcome, I understand your frustration about this and am always here to answer questions as best I can.


ToddWitteles
@Pokerstars If you would like to post an official response, feel free to add to the PokerFraudAlert thread:


Pokerstars
@toddwitteles It seems there would be value in a statement being added to that thread. I will see what can be done. Thanks.

[Dan Druff]

are you getting owned on twitter right now or no?

i don't feel like doing the fpp math

edit:
i've never understood your beef with pokerstars

no one person or corporation is perfect

stars paid us players and can ship you every hand you have ever played at their site within half an hour

IF they didn't pay out 100% value for their bonus program, who fucking cares

they were operating a business in a legal grey area, you were a customer of a business in a legal grey area and you knew that when you depoisted

their company took a huge hit on bf, losing billions? in potential revenue

the hit their company took > the hit their customers took over some supposed fpp/vpp shenanigans

grade on a curve and they are the most honest company in the history of everything

My "site=joke" stuff while I played on there wasn't really serious, and was a combination of chat tilt and a gimmick I used to rile up other regulars on the site.

My only real beef with Stars was how they handled the FPP situation.

There is no question that they were the best of the big online poker companies, which is why this was even more disappointing.

I can't feel sorry for the "hit" they took on Black Friday, because they had a business that made over a billion dollars in 8 years, and they managed to do all of that while operating against US law.

The bottom line is that they promoted their FPPs in a certain manner, and then reversed course and screwed the people like me who took them at their word.

I lost over $2000 personally in FPP value because I was saving them as Stars had encouraged me to do.

Had the DOJ seized my FPPs and refused to allow Stars to cash them out, I would blame the DOJ, and Stars would be absolved of any blame themselves.

However, in this case, Stars chose to steal FPP value just because they could, and that was highly disappointing. The DOJ would have happily approved a more fair plan, which is why their hiding behind the "It's the only thing we can do according to our agreement with the DOJ" excuse is such BS.

It's not fair that Stars made so much money raking my pots over the 8 years I played there, only to screw me on my FPP value on the way out.

Am I happy that Stars turned out to be far more reputable than Full Tilt and UB? Of course. However, they shouldn't get credit for being so ethical and kind-hearted, because in reality they still angled to steal what they could because they could get away with it.