PokerStars has demonstrated once again why it has a special place in the hearts of so many players. Upon hearing news of the demise of PKR, the people at PokerStars jumped into action and quickly announced a plan to bail out every single PKR player who had money on the failed 3D poker site.
Anyone who had money on PKR when it went bankrupt will be made whole again courtesy of PokerStars’ new plan to reimburse players for 100% of what they lost on PKR with no strings attached. These reimbursements are not “bonus funds” and no fees will be deducted from players’ PKR balances.
In the announcement on the PokerStars blog, they explain that the majority of PKR players also have accounts at PokerStars and reimbursements will be sent there. Those who do not already have a PokerStars account will be able to sign up for one and then contact PokerStars to have their balance shifted to that new account.
In our last post discussing the closure of PKR, we noted the risks posed to player funds should PKR go into administration. PKR used the minimum level of account segregation necessary, meaning customer funds were kept separate from business accounts. Thus, when PKR went into administration, customer funds were considered a part of PKR business assets and players were treated as unsecured creditors.
PokerStars saved the day by reaching an agreement with the administrator working the PKR case to make this all happen. From the looks of things so far, PokerStars will be footing the bill entirely. We have no idea how much money in total that represents, but it PokerStars says that some 60,000 players were affected by PKR’s sudden closure.
If you’re wondering why PokerStars would offer to so generously bail out players of a competing poker site, the blog post announcing reimbursements explains it best with the following:
“We expect that some players will choose to use that bankroll to play with us and we will gain some new customers, which is certainly a good business decision on our part. However, the motivation behind this move is simple: to do what’s right.”
Players affected by the sudden closure of PKR can learn more about claiming funds and see the answers to frequently asked questions here.
Lesson Learned: Segregation of Funds is No Guarantee
Something distressing many players have learned in the aftermath of this debacle is that segregation of funds is far from a guarantee that players will be paid in the case of insolvency. What also matters is the type of segregation implemented by the poker site.
The UK Gambling Commission requires that all licensed operators keep player funds segregated from operating funds to prevent Ponzi-style schemes we’ve seen in the past (where poker sites must constantly attract new deposits in order to pay out withdrawal requests), but that does not mean you are 100% protected if the entire business goes bust.
UK licensing conditions name three different types of player funds protection: basic, medium and high. Poker operators must disclose which of these three types of segregation they operate under as licensees of the UKGC. I know for sure that this is something I will be making sure to note moving forward in looking for safe places to play.
From the Gambling Commission, we have these definitions for each type of segregation:
- Basic: Customer funds are kept in accounts separate from business accounts but they would form part of the assets of the business in the event of insolvency.
- Medium: Customer funds are kept in accounts separate from business accounts; and arrangements have been made to ensure assets in the customer accounts are distributed to customers in the event of insolvency. The arrangements falling in the medium category include Quistclose accounts and insurance arrangements.
- High: Customer funds are held in a formal trust account which is legally and in practice separate from the affairs of the company; and is verified by and subject to controls by an independent trustee or external auditor.