Despite bans and restrictions-not solely in the playauwptglobal.com U.S. however in Japan and different giant nations-online gambling is a world phenomenon. Based on consultants H2 Gambling Capital, worldwide online playing revenues have quadrupled over the past 10 years to $36.9-billion.ANGUS ROWE MACPHERSON/The Globe and Mail

David Baazov doesn't look just like the card sharks you see in high-stakes poker tournaments on Tv-the pc geeks or baseball-capped good ol' boys living the Vegas dream. Nor is the polished 34-year-old CEO of Montreal-based Amaya Gaming Group Inc. a Hefner-style swinger or a reclusive mastermind, like other entrepreneurs who've hit the jackpot within the younger, chancy business of on-line playing.

This previous June, Baazov, who speaks in bursts of Internet advertising lingo-"platform-centric perspective," "time-based entertainment worth"-confirmed that he's a brand-new type of player: a numbers man who's positioned to rule the exploding world enterprise of online poker. Baazov stunned the business when his small software program firm introduced a deal to take over Rational Group Ltd., the world's largest online poker supplier and owner of the highest-ranked PokerStars and Full Tilt manufacturers, for $4.9-billion (all foreign money in U.S. dollars until in any other case noted).

Discuss large bets-huge cojones, even. Amaya borrowed $3-billion to do the deal, which closed in August. Yet PokerStars and some other suppliers are shut out of their largest potential market: the United States. Congress clamped down on Internet gambling in 2006, and it's not at all a positive thing that Baazov and his cohort will be capable of persuade lawmakers and regulators to let them again in. And then there's this: The politically powerful bricks-and-mortar on line casino enterprise is also determined to maintain on-line interlopers from poaching its enterprise.

However, if anybody's going to break open the enormous piggy bank in a business dogged by shady connotations, a squeaky-clear Canadian public firm appears to suit the part. The PokerStars deal helpfully put at arm's length some of the business's authorized dodginess (about which more shortly).

Despite bans and restrictions-not only within the U.S. but in Japan and other giant countries-online playing is a worldwide phenomenon. In keeping with consultants H2 Gambling Capital, worldwide online gambling revenues have quadrupled over the previous 10 years to $36.9-billion. Add to that another potential $3.5-billion within the U.S. if the market opens up.

Baazov has been careful to not get too pumped up about PokerStars' U.S. prospects, regardless that it might start with a huge head of steam-by one measure, PokerStars and Full Tilt collectively have an estimated 66 per cent of the online poker market outside the U.S. Following the acquisition, he granted just two media interviews; he declined to be interviewed for this story. In a conference name with analysts after Amaya launched its second-quarter leads to August, he would only say that the corporate is "dedicated to working with regulators to create accountable and tax-efficient means to regulate within their jurisdictions." Translation: Allow us to in, and we'll play by your guidelines.

Before that occurs, nonetheless, Baazov nonetheless has plenty of checkered historical past to overcome-that of PokerStars and the whole on-line playing enterprise.

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Pokerstars' roots truly go back to Canada, too-the enterprise, oddly sufficient, has a constant Canadian bloodline. In 2000, Isai Scheinberg founded a small firm known as PYR Software Ltd. in the Toronto suburb of Richmond Hill. Now in his late 60s, the publicity-shy Scheinberg was raised in Lithuania and has a master's degree in arithmetic from Moscow State University. After graduating, he moved to Israel and fought in the 1973 Yom Kippur War. He joined IBM in Israel, and then transferred to the company's Canadian arm. Schein- berg was additionally a critical card player-he competed in the 1996 World Series of Poker in Las Vegas and gained $3,337.

Online poker, wherein small teams of card gamers "sit" at onscreen tables and compete in opposition to each other in real time, was still in its infancy when Scheinberg collected those winnings. The first site to supply real-cash video games was Planet Poker, launched in 1998 by Edmonton engineer Randy Blumer. Others quickly adopted.

The essential enterprise mannequin remains to be the identical. Players deposit cash with the location supplier, and the positioning randomly offers cards. It makes cash the identical way casinos do: by protecting a share of every pot-up to, say, 4 per cent. Savvy players-or addicts-typically have hands open on a number of tables directly. Bets are as little as five cents, though pots of several hundred dollars per hand will not be unusual. PokerStars additionally offers mass on-line tournaments, resembling its weekly Sunday Million, which costs $215 to enter, and gives a guaranteed minimal $1-million in payouts.

By 2000, the most popular poker websites included PartyGaming and Paradise Poker, which hosted about 2,000 gamers at peak instances. But a lot of the gaming and administrative software program was slow and cheesy-trying. Scheinberg figured that he may develop way more highly effective programs. He launched PokerStars in September, 2001, and it shortly impressed the then-small however rising number of on-line lovers. (The typical number of non-tournament cash players on PokerStars.com at any given time is now about 23,000, and for tournaments it set a world document of 225,000 in 2013.)

PokerStars' first main advertising and marketing coup got here in 2003 on the world's most famous reside tournament, the World Series of Poker, which is hosted in Las Vegas. The buy-in for every contestant was $10,000, and PokerStars spent $370,000 to send 37 players it had chosen in qualifying tournaments online. Dressed in PokerStars shirts, lots of them seemed like rubes among the seasoned pros. Yet on the final day, a 27-year-outdated PokerStars participant from Tennessee with the remarkable handle of Chris Moneymaker received the jackpot of $2.5-million.

The popularity of online poker and other types of Internet playing exploded. A slew of recent websites launched, together with Full Tilt, now based in Ireland, in 2004. PartyGaming, which provided casino video games comparable to blackjack and roulette in addition to poker, astonished the London Stock Exchange with its IPO in June, 2005: Its share value soared in the first two months, and its market capitalization shot up from $8.5-billion to greater than $12-billion. Analysts anticipated PokerStars to journey the surge and go public, too.

In those days, the trade seemed to revel in its dangerous-boy picture. Leading suppliers positioned their headquarters or pc servers in tax havens-PokerStars on the Isle of Man, and betandwin (now generally known as Bwin.Party Digital Entertainment after taking over PartyGaming in 2011) in Gibraltar.

Among the many glitziest early successes was Saskatchewan-born Calvin Ayre, a software program developer who launched the playing site Bodog in 2000. His personal way of life was his simplest promotional device, featuring wild events with scads of bikini-clad "Bodog Girls" at his compound in Costa Rica, and extra partying in Hollywood and Hawaii with stars comparable to Al Pacino and Snoop Dogg.

Ayre delighted in thumbing his nostril on the U.S. Department of Justice. Even earlier than Congress enacted its 2006 restrictions on Internet gambling, the feds alleged that Bodog was violating existing laws prohibiting the usage of phones or different communications units to just accept bets. But Bodog collected $7.3-billion in wagers in 2005, 95 per cent of it from the U.S. Yet Ayre reportedly paid no personal or corporate revenue tax in Costa Rica or the U.S. In March, 2006, Ayre was featured as cover boy for Forbes journal's annual rating of the world's billionaires, next to the headline "Cyber bookie Calvin Ayre sticks it to Uncle Sam."

PokerStars, too, turned up the volume with glamour and celebrities. Like other online poker sites, it relies heavily on sponsoring live tournaments with dozens of top execs. Team PokerStars contains Toronto-born Daniel Negreanu, whom Scheinberg played poker with within the 1990s, and Liv Boeree, the most effectively-identified feminine player. Within the mid-2000s, PokerStars also began signing endorsement deals with actors and professional athletes, including Jason Alexander and Boris Becker, and Mats Sundin in Canada. One in all the primary pictures you now see on PokerStars' website is Rafael Nadal holding two aces and proclaiming: "One of the best and best poker software program I have ever used; One hundred per cent safe and quick to set up."

The heady early era ended in 2006 when Congress passed the Unlawful Internet Gambling Enforcement Act the day earlier than adjourning for midterm elections. Then-Senate majority leader Bill Frist, a Republican from Tennessee, pulled a so-called midnight drop by tacking the act on to a much larger bill regarding port safety. The act banned anyone from accepting payments for unlawful online playing.

The poker and gambling websites cried foul, however the impact was swift and painful. PartyGaming's share value plunged by virtually 60 per cent in in the future. Like other main websites, it pulled out of the U.S. market instantly. But PokerStars continued to function. Scheinberg's lawyers informed him that poker was a sport of talent in which gamers bet in opposition to each other, not a game of chance, like blackjack or roulette, by which they play towards the house. PokerStars vaulted past PartyGaming to change into the largest online poker site on the earth.

But then got here what the industry calls "Black Friday"-April 15, 2011. The U.S. Department of Justice seized the U.S. Internet addresses of the three largest remaining online poker suppliers-PokerStars, Full Tilt and Cereus (which operated Absolute Poker and UltimateBet). It additionally charged 11 gaming and financial executives with bank fraud and money laundering. Prosecutors accused the banks and funds processors of using elaborate ruses to simply accept bets illegally, including disguising them as funds to non-existent online merchants promoting issues like jewellery and golf balls.

Eight of the 11 executives have since pleaded guilty to some costs. The opposite three, including Scheinberg, haven't entered pleas. Scheinberg doesn't set foot within the United States, and he reportedly has travelled by non-public jet relatively than on industrial flights, for worry of a aircraft being rerouted to a U.S. airport in an emergency.

However, there was a thaw between PokerStars and the Justice Department in July, 2012. The company agreed to a $731-million settlement and to buy Full Tilt, which had gotten into deep monetary bother, owing $160-million to American players alone while it only had $60-million in its financial institution accounts. The Justice Department dropped civil lawsuits in opposition to the 2 firms. And PokerStars agreed that Scheinberg would not serve in management or as a director.

The following 12 months, PokerStars extended one other olive department. Prosecutors alleged that Scheinberg's son Mark, who was serving as Rational's chairman and CEO, acquired distributions from his company that had been subject to the 2012 settlement. The youthful Scheinberg was not one of the 11 defendants in that case, however in June, 2013, he agreed to pay $50-million to settle the matter, with out admitting any wrongdoing.

Still, PokerStars remained shut out of the U.S. market. It was attainable for Americans to play on the site, however solely with some problem. That they had to hitch a international-based mostly digital non-public community to disguise the domicile of their pc, or they could journey to Mexico, Canada, the United Kingdom or other countries where PokerStars nonetheless operates, and set up residency there.

PokerStars figured its best technique was to seek a licence in one of the three states that, Washington however, allowed and regulated Internet gambling. In December, 2012, PokerStars was in discussions to buy the Atlantic Club Casino Hotel in Atlantic City, New Jersey, for $15-million. That was in anticipation of a brand new law-handed in February, 2013-that allowed the state's land-based casinos to additionally provide online playing. (In 2012, Delaware authorized online playing, and Nevada created a regulated system.)

But PokerStars needed an interim casino authorization from New Jersey regulators. The American Gaming Association, the powerful foyer group for the on line casino industry, mounted a furious marketing campaign in opposition to PokerStars, denouncing it as an organization "built on deceit, chicanery and the systematic flouting of U.S. regulation." In July, 2013, PokerStars threw within the towel and abandoned its bid for the Atlantic Club.

By that point, the Scheinbergs had been running out of choices in the U.S. They needed an exit technique.

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Enter the at-first very unlikely suitor: Baazov. Amaaya was only a fraction the scale of PokerStars ($145-million a 12 months in revenue, versus greater than $1-billion for Rational Group). But Baazov, who was born in Israel and grew up in Montreal, had a promising observe report. He bought his begin in advertising and marketing during the dot-com boom, and spotted the massive potential in online gambling within the early 2000s.

In 2005, he based Amaya, which makes digital gaming machines and software program for on-line gaming and lotteries. It went public on the TSX Venture Exchange in July, 2010, at $1 a share. Its revenue and share price climbed steadily, and Amaya graduated to the TSX in October, 2013. It also impressed the market with a number of acquisitions: gambling software program makers Chartwell Technology in 2011 and CryptoLogic the next year, and Cadillac Jack, a manufacturer of electronic gaming machines, additionally in 2012.

Baazov had a grand imaginative and prescient for the playing business and his company, too. In a June, 2013, interview, he talked about the significance of attracting or acquiring as many shoppers as you possibly can. You then try to maximize revenue from each with offerings in a full suite of "adjoining verticals"-land-based mostly and on-line on line casino games, sports betting and so forth.

Around that point, Baazov made his first overtures to Rational Group, to which Amaya was already pitching software. Rational was skeptical, however Amaya was persistent-and it was in a position to acquire financing.

Indeed, Amaya had impressed two important monetary companies. In April, 2013, the quick-rising and aggressive Bay Street investment dealer Canaccord Genuity issued a glowing 57-page research report on Amaya. "We consider that Amaya is on the cusp of a transformation after a flurry of acquisitions supporting robust development in 2013 and 2014 whether the U.S. opens or not," the report mentioned. Canaccord, which has been on a roll within the mid-vary mergers-and-acquisitions market, was lead underwriter for Amaya's $40-million (Canadian) share issue in June to lift money for future progress.

Last 12 months, Amaya also received the backing of some of the powerful investment banks on Wall Street, big Blackstone Group. Last December, its GSO Capital Partners division, which focuses on debt financings and leveraged buyouts, refinanced $160-million price of debt from Amaya's Cadillac Jack acquisition.

Serious takeover discussions and due diligence between Amaya and Rational additionally began that month. Baazov had secured a commitment letter from Blackstone saying it could be the anchor for up to $3-billion of the financing.

Still, the scale of the deal and how fast it closed shocked many individuals on the street and in the net playing trade. Canaccord Genuity and Deutsche Bank have been lead advisers, with Canaccord leading the underwriting for the sale of $640-million worth of subscription receipts that were transformed to stock when the deal closed in August. And GSO bought $600-million of a $1-billion preferred share problem.

The hefty purchase worth and the $3-billion in debt Amaya has issued worries some folks in the business. Angelo Dalli, CEO of Malta-based gaming-platform firm Bit8, says that "PokerStars most likely acquired the higher deal." However, he says, "Baazov acquired a long-time period future asset and a very robust brand." In a approach, it was a win-win. But in the short term, Dalli says, "the winner is PokerStars, definitely."

The deal allowed the Scheinberg household, which reportedly held 75 per cent of privately owned Rational, to money out. Isai and Mark Scheinberg will not have any position with the company. The elder Scheinberg stays a fugitive from U.S. justice. Baazov says PokerStars will keep its headquarters on the Isle of Man.

Baazov's prospects could improve dramatically if he can persuade a U.S. state to let PokerStars again in. New Jersey seems to be the best opportunity. Still struggling to rebuild after Hurricane Sandy in 2012, it desperately wants income. However the state's land-based casinos are in dire straits. Three Atlantic City casinos closed this summer time alone, together with the Trump Plaza. Indeed, the complete land-based industry is suffering from over-development. Within the case of latest Jersey, competition from new casinos in neighbouring New York State and Pennsylvania is draining away its customers.

Soon after the Amaya-Rational deal was introduced, George Rover, New Jersey's assistant attorney basic and deputy director of its division of gaming enforcement, said, "We're looking ahead to working with Amaya as we begin a complete evaluation of their acquisition of PokerStars. The Division has at all times maintained that the licensing process could possibly be reactivated if there have been considerably modified circumstances, and by all accounts, this acquisition has resulted in the removing of all beforehand present possession pursuits."

But a combative Calvin Ayre, who remains to be a fugitive from U.S. justice himself, thinks that Amaya could also be in for a rough ride from the feds and regulators in other international locations. He should know. In 2007, Ayre signed a licensing agreement with the Morris Mohawk Gaming Group in Kahnawake, Quebec, that gave it control of Bodog's North American playing operations, and he introduced his retirement. But he stored making an attempt to advertise Bodog as a shopper brand in Europe and Asia, and in 2009, he launched CalvinAyre.com, a gambling news site. In 2012, nevertheless, federal prosecutors in Baltimore indicted him on sports betting and cash laundering charges that date again to actions earlier than Congress's 2006 gambling clampdown. Ayre denounced those fees as "an abuse of the U.S. criminal justice system." He was additionally placed on the U.S. Immigration and Customs "Wanted" checklist.

Answering questions by e-mail from his new home base of Antigua, Ayre says that the Scheinbergs cleverly unloaded a hot potato on Amaya. "I feel the Scheinbergs clearly got the better of that deal. They know that taking PokerStars public will cause major modifications in its business model." Amaya used to simply supply software to playing sites; now it's an operator. Although PokerStars not affords real-money online poker within the U.S., it still serves many grey markets like Canada where on-line gambling's legal status is uncertain. "I expect them to be forced out of the Canadian market and lots of different markets on this planet now," says Ayre. "The strain will come from regulators in the United States, the U.K. and Canada to get out of all gray markets."

Ayre thinks that the web trade is maturing, however regulators nonetheless treat it as if it had been toxic. "Over-regulation goes to stifle competitors and erode client worth, identical to all authorities gatekeeping does in all industries," he says. "The Internet is basically self-regulating already for gaming services."

I. Nelson Rose, a professor at Whittier Law School in California who's an knowledgeable on gambling and gaming regulation, says that Amaya's authorized chances of success "are a hundred per cent political probabilities." The important thing might be to dangle the carrot of elevated income in front of the state politicians and regulators, and to make peace with land-based mostly casinos by convincing them that letting PokerStars again in will broaden the market for everybody.

In news releases and conference calls with analysts, Baazov has repeated that he's glad simply to have acquired Rational's present buyer base of greater than 86 million registered users worldwide. In an interview with London's Sunday Times in July, he stated that "now we have five most important development initiatives, and America isn't any.