Fantasy Aces Customers Appear Screwed, NY Puts DFS Operators on Notice

About two weeks ago, customers of the daily fantasy sports site Fantasy Aces noticed that there problems receiving cashouts. Normally, Fantasy Aces processed withdrawals very quickly, but many players were a week out from their cashout requests and hadn’t heard anything. Then the site announced it was being acquired by Fantasy Draft, so while players were still upset with the cashout delays, at least it sounded like there was a reason for it. Then the deal went south, Fantasy Aces went under, and players have been left holding the bag. Now the New York State Gaming Commission is reaching out to all of the state’s licensed DFS operators, requesting proof of player funds.

fantasy acesFantasy Aces, which, while clearly nowhere close to as big as industry leaders DraftKings and FanDuel, was a fairly popular DFS site. The company filed for bankruptcy on January 31st. This is certainly unfortunate, but sometimes things happen and businesses fail (bankruptcy does not mean Fantasy Aces is necessarily gone for good, but one would guess that it probably is). According to the Chapter 7 filing, originally brought to light by, Fantasy Aces has only about $2,200 in bank accounts marked as “Player Accounts.”

The obviously problem here is that every DFS regulation requires operators to keep player deposits readily available and separate from operating funds. Even without regulations, responsible operators do this. That the accounts are nearly empty is concerning and it does not look like customers should expect to get anything back.

It appears that Fantasy Aces was well aware of a significant problem, which would explain the cashout delays. Less than a week before the bankruptcy filing, Fantasy Aces announced that it was going to be acquired by FantasyDraft, but days later, FantasyDraft backed out, citing “issues identified during our due diligence.”

With the financial life preserver yanked away, Fantasy Aces filed for bankruptcy. Fantasy Aces customers received an e-mail which read, in part:

After spending over a year attempting to secure long term capital, including recent negotiations with two notable companies which subsequently failed to close, we are left with an unresolvable financial burden and have spent every waking minute attempting to find a solution for our players most importantly. We have unfortunately exhausted every possible financial option with no success. We fought as hard as we could, in the end without a major infusion or acquisition we just were not able to make it. Our site is temporarily shuttered and all accounts are on hold during this time while we work with the bankruptcy court in finding the fastest possible solution for our players.

No solution has been forthcoming. Players can’t access their accounts and the Fantasy Aces website simply says, “An update coming shortly, please stand by.” One reported figure has the amount owed to customers at $1.3 million.

Which brings us to last week, when the New York State Gaming Commission sent letters to the state’s licensed DFS operators, requesting proof that player funds are safe, kept separate from operating funds. Legal Sports Report acquired a copy of the letter, which it presumes was sent to the operators who were granted temporary licenses in August 2016 following the state’s legalization and regulation of daily fantasy. Five operators received the initial temporary licenses: DraftKings, FanDuel, Draft, Yahoo!, and FantasyDraft.

The letter reads, in part:

Racing, Pari-Mutuel Wagering and Breeding Law Section 1404(1)(l) requires a temporarily permitted interactive fantasy sports operator “ensure authorized players’ funds are protected upon deposit and segregated from the operating funds of such operator or registrant and otherwise protected from corporate insolvency, financial risk, or criminal or civil actions against such operator or registrant.”

The Gaming Commission requests documentation that clearly illustrates the legal mechanism and internal controls associated with such a segregated account by which player funds are protected from “corporate insolvency, financial risk, or criminal or civil actions against such operator or registrant.” Accordingly, please include any documentation with banks or other depository institutions that establishes the restricted purposes of any accounts established for players’ funds and prize funds and the identity of all those authorized to transfer funds out of such accounts; a copy of your internal controls governing the receipt and disbursement of player funds to such players and the funding and disbursement of contest prize accounts; your procedures for players to withdraw funds from their player accounts in the event of operator insolvency.

The DFS providers are asked to include their most recent financial reports, the last six months of bank statements for accounts that deal with player funds and prize money, the dollar amount currently held in segregated accounts (minus prize payouts), the dollar amount that has been transferred from player funds to operating funds (minus prize payouts) in the last six months, and the total dollar amount of prizes that will be owed on pending contests.


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