Despite bans and restrictions-not only within the playauwptglobal.com U.S. however in Japan and other large international locations-online playing is a global 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 like the card sharks you see in high-stakes poker tournaments on Tv-the computer geeks or baseball-capped good ol' boys living the Vegas dream. Nor is the polished 34-12 months-old CEO of Montreal-primarily based Amaya Gaming Group Inc. a Hefner-style swinger or a reclusive mastermind, like different entrepreneurs who have hit the jackpot in the younger, chancy business of online gambling.

This past June, Baazov, who speaks in bursts of Internet advertising lingo-"platform-centric perspective," "time-based mostly leisure value"-confirmed that he is a brand-new kind of player: a numbers man who's positioned to rule the exploding world business of online poker. Baazov stunned the business when his small software program company introduced a deal to take over Rational Group Ltd., the world's largest online poker supplier and proprietor of the highest-ranked PokerStars and Full Tilt manufacturers, for $4.9-billion (all forex in U.S. dollars except in any other case famous).

Speak about massive bets-large cojones, even. Amaya borrowed $3-billion to do the deal, which closed in August. Yet PokerStars and another providers are shut out of their largest potential market: the United States. Congress clamped down on Internet gambling in 2006, and it is certainly not a sure thing that Baazov and his cohort will be capable of persuade lawmakers and regulators to let them back in. And then there's this: The politically powerful bricks-and-mortar casino business can be determined to keep online interlopers from poaching its business.

However, if anybody's going to break open the large piggy financial institution in a enterprise dogged by shady connotations, a squeaky-clean Canadian public company appears to go well with the half. The PokerStars deal helpfully put at arm's size a number of the business's legal dodginess (about which extra shortly).

Despite bans and restrictions-not solely within the U.S. however in Japan and other giant international locations-online gambling is a global phenomenon. In response to consultants H2 Gambling Capital, worldwide online playing 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 not to get too pumped up about PokerStars' U.S. prospects, even though it could begin with an enormous head of steam-by one measure, PokerStars and Full Tilt together have an estimated sixty six per cent of the online poker market outdoors the U.S. Following the acquisition, he granted simply two media interviews; he declined to be interviewed for this story. In a conference name with analysts after Amaya launched its second-quarter ends in August, he would solely say that the company is "dedicated to working with regulators to create responsible and tax-efficient means to regulate within their jurisdictions." Translation: Allow us to in, and we'll play by your guidelines.

Before that happens, nevertheless, Baazov nonetheless has lots of checkered history to beat-that of PokerStars and the entire on-line gambling enterprise.

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Pokerstars' roots actually return to Canada, too-the business, oddly enough, has a constant Canadian bloodline. In 2000, Isai Scheinberg founded a small agency known as PYR Software Ltd. within the Toronto suburb of Richmond Hill. Now in his late 60s, the publicity-shy Scheinberg was raised in Lithuania and has a master's diploma 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 serious card participant-he competed in the 1996 World Series of Poker in Las Vegas and received $3,337.

Online poker, by which small groups of card players "sit" at onscreen tables and compete against each other in actual time, was still in its infancy when Scheinberg collected those winnings. The first site to supply real-cash games was Planet Poker, launched in 1998 by Edmonton engineer Randy Blumer. Others quickly followed.

The fundamental enterprise mannequin remains to be the identical. Players deposit money with the site provider, and the site randomly offers playing cards. It makes cash the same way casinos do: by protecting a percentage of each pot-up to, say, four per cent. Savvy gamers-or addicts-usually have arms open on a number of tables directly. Bets are as low as 5 cents, though pots of a number of hundred dollars per hand are usually not uncommon. PokerStars additionally provides mass on-line tournaments, reminiscent of its weekly Sunday Million, which prices $215 to enter, and affords a assured minimum $1-million in payouts.

By 2000, the most popular poker sites included PartyGaming and Paradise Poker, which hosted about 2,000 gamers at peak occasions. But a lot of the gaming and administrative software was gradual and cheesy-looking. Scheinberg figured that he might develop far more powerful methods. He launched PokerStars in September, 2001, and it shortly impressed the then-small but growing variety of online fans. (The common number of non-tournament money gamers on PokerStars.com at any given time is now about 23,000, and for tournaments it set a world file of 225,000 in 2013.)

PokerStars' first major advertising coup got here in 2003 on the world's most famed reside tournament, the World Series of Poker, which is hosted in Las Vegas. The purchase-in for each contestant was $10,000, and PokerStars spent $370,000 to ship 37 gamers it had chosen in qualifying tournaments on-line. Dressed in PokerStars shirts, many of them looked like rubes among the seasoned execs. Yet on the ultimate day, a 27-yr-outdated PokerStars participant from Tennessee with the exceptional handle of Chris Moneymaker won the jackpot of $2.5-million.

The recognition of online poker and other forms of Internet gambling exploded. A slew of recent websites launched, including Full Tilt, now based mostly in Ireland, in 2004. PartyGaming, which offered casino games equivalent to blackjack and roulette as well as poker, astonished the London Stock Exchange with its IPO in June, 2005: Its share worth soared in the primary two months, and its market capitalization shot up from $8.5-billion to more than $12-billion. Analysts anticipated PokerStars to journey the surge and go public, too.

In these days, the trade seemed to revel in its unhealthy-boy image. Leading suppliers located their headquarters or computer 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 developer who launched the playing site Bodog in 2000. His own lifestyle was his simplest promotional software, that includes wild events with scads of bikini-clad "Bodog Girls" at his compound in Costa Rica, and more partying in Hollywood and Hawaii with stars reminiscent of Al Pacino and Snoop Dogg.

Ayre delighted in thumbing his nose on the U.S. Department of Justice. Even earlier than Congress enacted its 2006 restrictions on Internet playing, the feds alleged that Bodog was violating existing legal guidelines prohibiting the usage of phones or different communications units to accept bets. But Bodog collected $7.3-billion in wagers in 2005, ninety five per cent of it from the U.S. Yet Ayre reportedly paid no private or company 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, subsequent to the headline "Cyber bookie Calvin Ayre sticks it to Uncle Sam."

PokerStars, too, turned up the amount with glamour and celebrities. Like different online poker sites, it relies closely on sponsoring reside tournaments with dozens of high professionals. Team PokerStars includes Toronto-born Daniel Negreanu, whom Scheinberg played poker with in the 1990s, and Liv Boeree, essentially the most well-known feminine participant. In the mid-2000s, PokerStars also started signing endorsement deals with actors and professional athletes, including Jason Alexander and Boris Becker, and Mats Sundin in Canada. One of the primary photos you now see on PokerStars' web site is Rafael Nadal holding two aces and proclaiming: "The perfect and easiest poker software program I've ever used; A hundred per cent secure and fast to set up."

The heady early era ended in 2006 when Congress passed the Unlawful Internet Gambling Enforcement Act the day before adjourning for midterm elections. Then-Senate majority chief Bill Frist, a Republican from Tennessee, pulled a so-called midnight drop by tacking the act on to a a lot bigger bill regarding port security. The act banned anybody from accepting funds for illegal online playing.

The poker and playing websites cried foul, however the influence was swift and painful. PartyGaming's share value plunged by virtually 60 per cent in sooner or later. Like other leading sites, it pulled out of the U.S. market instantly. But PokerStars continued to function. Scheinberg's lawyers advised him that poker was a game of skill wherein players bet in opposition to one another, not a sport of chance, like blackjack or roulette, wherein they play against the home. PokerStars vaulted past PartyGaming to grow to be the biggest online poker site on this planet.

But then came what the trade 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 providers-PokerStars, Full Tilt and Cereus (which operated Absolute Poker and UltimateBet). It also charged eleven gaming and financial executives with bank fraud and cash laundering. Prosecutors accused the banks and funds processors of utilizing elaborate ruses to accept bets illegally, together with disguising them as payments to non-existent online merchants promoting things like jewellery and golf balls.

Eight of the eleven executives have since pleaded guilty to some expenses. The other three, including Scheinberg, haven't entered pleas. Scheinberg would not set foot within the United States, and he reportedly has travelled by non-public jet moderately than on industrial flights, for worry of a plane 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 whereas it only had $60-million in its financial institution accounts. The Justice Department dropped civil lawsuits in opposition to the two corporations. And PokerStars agreed that Scheinberg wouldn't serve in management or as a director.

The following year, PokerStars prolonged another olive branch. Prosecutors alleged that Scheinberg's son Mark, who was serving as Rational's chairman and CEO, received distributions from his firm that had been subject to the 2012 agreement. The younger 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 positioning, but solely with some issue. That they had to affix a overseas-based mostly virtual non-public network to disguise the domicile of their laptop, or they may journey to Mexico, Canada, the United Kingdom or different nations the place PokerStars nonetheless operates, and set up residency there.

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

But PokerStars wanted an interim casino authorization from New Jersey regulators. The American Gaming Association, the highly effective lobby group for the casino trade, mounted a furious marketing campaign against PokerStars, denouncing it as a company "constructed on deceit, chicanery and the systematic flouting of U.S. law." In July, 2013, PokerStars threw in the towel and abandoned its bid for the Atlantic Club.

By that point, the Scheinbergs were running out of choices within the U.S. They needed an exit strategy.

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

In 2005, he based Amaya, which makes electronic gaming machines and software 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 in regards to the importance of attracting or buying as many shoppers as you may. You then attempt to maximise income from each one with choices in a full suite of "adjoining verticals"-land-based mostly and online casino video games, sports betting and so on.

Around that time, 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 ready to obtain financing.

Indeed, Amaya had impressed two necessary financial corporations. In April, 2013, the fast-growing and aggressive Bay Street funding seller Canaccord Genuity issued a glowing 57-web page research report on Amaya. "We believe that Amaya is on the cusp of a transformation after a flurry of acquisitions supporting strong 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 boost money for future growth.

Last yr, Amaya also gained the backing of some of the highly effective funding banks on Wall Street, large 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 started that month. Baazov had secured a commitment letter from Blackstone saying it would be the anchor for up to $3-billion of the financing.

Still, the scale of the deal and how briskly it closed stunned many people on the road and in the online playing industry. Canaccord Genuity and Deutsche Bank were lead advisers, with Canaccord leading the underwriting for the sale of $640-million value of subscription receipts that have been transformed to stock when the deal closed in August. And GSO bought $600-million of a $1-billion preferred share concern.

The hefty buy price and the $3-billion in debt Amaya has issued worries some people within the business. Angelo Dalli, CEO of Malta-primarily based gaming-platform firm Bit8, says that "PokerStars most likely got the better deal." Then again, he says, "Baazov acquired an extended-term future asset and a very sturdy model." In a means, it was a win-win. But within the short time period, Dalli says, "the winner is PokerStars, positively."

The deal allowed the Scheinberg household, which reportedly held 75 per cent of privately owned Rational, to cash out. Isai and Mark Scheinberg will no longer have any position with the corporate. 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 may improve dramatically if he can persuade a U.S. state to let PokerStars again in. New Jersey seems to be the best alternative. Still struggling to rebuild after Hurricane Sandy in 2012, it desperately needs income. But the state's land-based mostly casinos are in dire straits. Three Atlantic City casinos closed this summer season alone, together with the Trump Plaza. Indeed, the complete land-based industry is suffering from over-building. In the case of recent Jersey, competition from new casinos in neighbouring New York State and Pennsylvania is draining away its clients.

Soon after the Amaya-Rational deal was announced, George Rover, New Jersey's assistant attorney basic and deputy director of its division of gaming enforcement, stated, "We are looking ahead to working with Amaya as we start a complete evaluation of their acquisition of PokerStars. The Division has all the time maintained that the licensing process could possibly be reactivated if there were significantly modified circumstances, and by all accounts, this acquisition has resulted within the elimination of all beforehand existing possession interests."

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 tough experience from the feds and regulators in different nations. He must know. In 2007, Ayre signed a licensing settlement with the Morris Mohawk Gaming Group in Kahnawake, Quebec, that gave it control of Bodog's North American playing operations, and he announced his retirement. But he saved trying to promote Bodog as a client brand in Europe and Asia, and in 2009, he launched CalvinAyre.com, a playing information site. In 2012, nevertheless, federal prosecutors in Baltimore indicted him on sports activities betting and cash laundering prices that date again to activities before Congress's 2006 gambling clampdown. Ayre denounced these fees as "an abuse of the U.S. criminal justice system." He was also placed on the U.S. Immigration and Customs "Wanted" record.

Answering questions by e-mail from his new dwelling base of Antigua, Ayre says that the Scheinbergs cleverly unloaded a scorching potato on Amaya. "I believe the Scheinbergs clearly received the best of that deal. They know that taking PokerStars public will cause main changes in its business mannequin." Amaya used to only supply software program to gambling sites; now it's an operator. Although PokerStars now not provides real-money online poker within the U.S., it still serves many gray markets like Canada the place on-line playing's authorized standing is uncertain. "I count on them to be compelled out of the Canadian market and many other markets on this planet now," says Ayre. "The strain will come from regulators within 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 were toxic. "Over-regulation is going to stifle competition and erode consumer worth, just like all authorities gatekeeping does in all industries," he says. "The Internet is basically self-regulating already for gaming companies."

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

In news releases and convention calls with analysts, Baazov has repeated that he is joyful simply to have acquired Rational's existing customer base of greater than 86 million registered customers worldwide. In an interview with London's Sunday Times in July, he mentioned that "we now have five major development initiatives, and America isn't any.