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Kahnawake Gaming Commission issues statement regarding UltimateBet scandal

24 July 2008

With the cloud of cheating scandal still hovering over UltimateBet, The Kahnawáke Gaming Commission (KGC) -- which licenses both UltimateBet and Absolute Poker -- released a statement Wednesday updating its progress on the investigation into UltimateBet, which along with Absolute Poker is owned by Tokwiro Enterprises ENRG. The owner of Tokwiro Enterprises is Joe Norton, former Grand Chief of the Kahnawáke.

The KGC admits in its press release that its actions were not "well communicated to the poker industry or public at large" and says it is attempting to dispel an "incorrect perception" that it was "doing nothing" in the wake of a second cheating scandal within the last year.

The cheating allegations, which surfaced in January, marked the second time in less than a year that a Tokwiro property has had to investigate unfair play at of its poker rooms. In January, the KGC fined Tokwiro's Absolute Poker $500,000 after it was revealed players with "superuser" accounts that could see hole cards of opponents had cheated. And this past May, UltimateBet's owners, Tokwiro Enterprises ENRG, admitted UltimateBet's security had been breached by former employees and accounts with access to opponent's hole cards were used to cheat in high-stakes games.

"The investigation has concluded that certain player accounts did in fact have an unfair advantage, and that these accounts targeted the highest limit games on the site," UltimateBet said in a statement. "The individuals responsible were found to have worked for the previous ownership of UltimateBet prior to the sale of the business to Tokwiro in October 2006. Tokwiro is taking full responsibility for this situation and will immediately begin refunding UltimateBet customers for any losses that were incurred as a result of unfair play. "The fraudulent activity was enabled by unauthorized software code that allowed the perpetrators to obtain hole card information during live play. The existence of this vulnerability was unknown to Tokwiro until February 2008 and existed prior to UltimateBet's acquisition by Tokwiro in October 2006. Our investigation has confirmed that the code was part of a legacy auditing system that was manipulated by the perpetrators. Gaming Associates, independent auditors hired by the KGC, have confirmed that the software code that provided the unfair advantage has been permanently removed." In separate press releases in June and July, UltimateBet admitted that more accounts than were originally announced in May were part of the cheating scandal, and moved to refund money to affected players.

Below is a complete transcript of the KGC's response to the unfair play at UltimateBet:

Mohawk Territory of Kahnawáke

July 23, 2008

Kahnawáke Gaming Commission (the "KGC") has been continuously regulating online gaming for over 9 years – longer than most, if not all, other jurisdictions. During that period of time, the KGC has proven to be a world leader with regulations and methodologies that have established a regulatory environment in which online gaming can be conducted fairly and securely. The KGC's success as a regulator is evidenced by the fact that a significant percentage of the online gaming industry has chosen to locate and operate within Kahnawáke.

Given the length of time that it has regulated this new industry and the significant number of licensees under its control, the KGC's record has been exemplary. As commentators have correctly noted, even the most well regulated industries are not immune from abuse. Examples can be found in the banking, securities and land-based gaming industries. The fact that the online gaming industry is new and is technologically driven creates additional regulatory challenges. Throughout its history, the KGC has met these challenges and its regulations have been emulated in a number of other jurisdictions around the world.

Over the past several months, it was discovered that individuals within two of the KGC's licensees – Absolute Poker and Ultimate Bet – had created and carried out a scheme to cheat players. In both cases, the improper conduct of these individuals was brought to the attention of the licensees, and the KGC, by affected players. The KGC acknowledges the diligence and sophistication displayed by these players and the role they played in bringing these matters to light. The first case involved Absolute Poker. After a thorough investigation carried out by the KGC and its agents, Gaming Associates, the KGC rendered its decision in this matter on January 11, 2008. This decision concluded that the cheating that took place was not initiated, nor did it benefit, Absolute Poker as a corporate entity, or its directors or principal ownership.

The decision imposed a number of sanctions and conditions on Absolute Poker, including twenty-four specific directions for changes to its management and systems. The KGC was provided evidence that all players affected by the cheating that took place were fully reimbursed for their losses. Shortly after its decision was rendered in the Absolute Poker matter, the KGC first became aware of similar allegations of cheating involving individuals within Absolute Poker's sister company: Ultimate Bet.

Over the past several months, the KGC has been closely involved in an in-depth investigation of the Ultimate Bet cheating allegations. Significant efforts have been expended to identify and correct the flaws in Ultimate Bet's system that permitted the cheating to take place; to identify the individuals that were responsible for the cheating and to ensure that all affected players were fully reimbursed. Unfortunately, the KGC's actions were not well communicated to the poker industry or public at large, creating an incorrect perception that the KGC was 'doing nothing'. The KGC's investigation into the Ultimate Bet matter has yielded a number of key findings which, within the next several days, will enable the KGC to issue its decision on the appropriate steps to be taken.

It should be stressed that the KGC's primary concern throughout both matters was to ensure that affected players were fully reimbursed and that corrective measures were implemented to prevent against any further incidents of cheating. Both of these objectives have been accomplished – as evidenced by the fact that the recent concerns that have been raised about the Absolute Poker and Ultimate Bet matters are not being driven by affected players.

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Kahnawake Gaming Commission issues statement regarding UltimateBet scandal is republished from Online.CasinoCity.com.