Amaya Acknowledges Kentucky Judgment, Hints at Scheinberg Clawback Contingency

Amaya Gaming, the parent company of PokerStars, this morning acknowledged in a brief statement the massive $290 million judgment granted against it and several other pre-Black Friday, US-facing poker firms, in connection with those companies’ allegedly illegal offering of online poker to Kentucky residents from 2006 to 2011.  A Franklin County Circuit Court judge in Kentucky, Thomas Wingate, issued the massive judgment targeting the international giant on November 20th.

kentucky-stampThe complete statement, distributed by Amaya’s Vice President of Corporate Communications, Eric Hollreiser, confirms the basics of the November 20th judgment while reaffirming some of the elements of the case as reported yesterday in FlushDraw’s thorough feature on the case.  News of the judgment broke via Kentucky-based news outlets yesterday.

The acknowledgment from Amaya confirms that the company is bracing for a long legal fight, meaning that a final decision in the case might well be years down the road.  That final decision is likely to come in a courtroom other than Wingate’s county-level operation, as the judge has shown a determination — in both this and a related domain-seizure case — to stretch the law to benefit the Commonwealth of Kentucky’s financial interests.

In the current matter, that involves the use of an antiquated anti-gambling clawback law originated in the late 18th century, when Kentucky first achieved US statehood.  That law, seeking to protect the families of destitute gamblers, was “modernized” in 1942 and 1958.  Amaya has termed the entire action by Kentucky as “frivolous and without merit.”

Amaya’s statement also indicates the company would likely initiate its on legal clawback effort against original PokerStars co-founders Isai and Mark Scheinberg, plus other secondary owners, in the event the case’s final deposition includes a substantial financial payment to Kentucky.  Amaya Gaming was not the owner of PokerStars or now-sister site Full Tilt, another of the case’s defendants, during the time the alleged Kentucky law-breaking services occurred.  Amaya only acquired Stars and Tilt in the summer of 2014.  Yet as noted below, should its legal options fall short, “Amaya intends to seek recovery against the former owners of the PokerStars business.”

The Amaya presser also shows how gargantuan the granted judgment is, in relation to the overall revenue generated by PokerStars in that period from Kentucky residents.  The granted judgment is for $290 million — and Kentucky’s legal representatives believe PokerStars should be on the hook for $250 million of that, and have also asked for trebled damages.

Amaya’s statement indicates the amount Kentucky currently seeks is outlandish, and Amaya is also asking Judge Wingate to clarify how and why he reached the settlement figure that he did.  The company’s acknowledgment states that during the entire four-plus years of operation covered by the lawsuit, PokerStars generated just $18 million of aggregated gross revenue from Kentucky players.

Here’s the complete Amaya statement on the case:

Amaya Provides Clarity Regarding Pre-Acquisition Dispute in Kentucky

Montreal, Dec. 17, 2015 – Amaya Inc. (NASDAQ: AYA; TSX: AYA) today provided clarity regarding a dispute in the Commonwealth of Kentucky relating to certain activities of the PokerStars business during a period between 2006 and 2011, approximately three years prior to Amaya’s acquisition of the brand. Amaya believes the action is frivolous and without merit.

This civil proceeding was initially filed in 2010 under an antiquated 18th century Kentucky statute. The Commonwealth claims that it is entitled to recover alleged losses of Kentucky residents who played real-money poker on the PokerStars website during the period between October 12, 2006 and April 15, 2011. A similar action filed against PokerStars in Illinois was dismissed by that court earlier this year.

During the five year period at issue, PokerStars generated aggregate gross revenues in the Commonwealth of Kentucky of approximately US$18 million. Nonetheless, the Commonwealth sought an award as high as US$290 million and requested it be trebled. The trial court subsequently indicated that this amount is incorrect and has not yet entered a final order awarding damages. Any such final order would be subject to appeal.

Amaya intends to vigorously dispute any liability that may be ordered at the trial court level, and believes that there are a number of compelling legal arguments reserved for consideration, including, without limitation, the lack of standing to bring this proceeding in the name of the Commonwealth and the Court’s failure to properly apply the law.

To the extent the PokerStars entities may be ultimately obligated to pay any amounts pursuant to a final adjudication following exhaustion of all appeals and other legal options, Amaya intends to seek recovery against the former owners of the PokerStars business.

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