Flutter Faces $4m SEC Settlement Over PokerStars’ Russian Activities

March 7, 2023
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Flutter Entertainment has agreed to pay $4m to settle allegations that payments made by PokerStars to Russia-based consultants violated federal anti-bribery laws, according to a U.S. Securities and Exchange Commission (SEC) settlement published on Monday.

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Flutter Entertainment has agreed to pay $4m to settle allegations that payments made by PokerStars to Russia-based consultants violated federal anti-bribery laws, according to a U.S. Securities and Exchange Commission (SEC) settlement published on Monday (March 6).

Per the SEC’s nine-page order, Flutter neither admitted nor denied any guilt and voluntarily offered to pay the settlement amount that relates to the activities of PokerStars in Russia prior to Flutter’s acquisition of The Stars Group.

The SEC found that between May 2015 and May 2020, while shares in PokerStars’ parent entities were registered with the agency, the company paid approximately $8.9m to consultants in Russia in support of its operations in the country and efforts to see online poker become regulated.

The SEC also found that PokerStars failed to both devise and maintain a sufficient system of internal accounting controls over its operations in Russia with respect to third-party consultants, as required by the U.S. Foreign Corrupt Practices Act (FCPA).

PokerStars specifically failed to consistently make and keep accurate books and records regarding its consultant payments in Russia, or subject the consultants to written contracts as required by company policies.

Some of the money PokerStars paid out to the consultants include reimbursement for New Year’s gifts to individuals including Russian government officials, which company policy policies prohibited.

PokerStars also allegedly reimbursed a consultant’s payments of some $22,000 to the Russian agency responsible for administering internet censorship filters.

During the period in question, that agency, Roskom, “on numerous occasions blocked the company’s online poker sites, thereby negatively affecting the company’s operations in Russia,” the SEC said.

London-listed Flutter acquired The Stars Group (TSG) and its leading PokerStars and Sky Bet operations for $12.2bn in 2020.

In a statement on Tuesday, Flutter said: "This is a legacy issue, related to a period prior to Flutter’s ownership of TSG. As highlighted by the SEC, following our acquisition of TSG we made significant changes to implement a framework of controls in line with Flutter’s existing standards. We are pleased that this matter has now been concluded."

The SEC said Russia was a “significant source of revenue” for PokerStars even though the country was considered “a so-called ‘gray market’ where poker was neither affirmatively permitted nor explicitly prohibited.”

PokerStars “employed various consultants to lobby Russian government officials as part of its efforts to promote the legalization of poker in Russia and expand the company’s operations in the Russian market. Despite the company’s efforts, poker was never legalized in Russia,” the SEC said.

The SEC acknowledged Flutter’s cooperation in the matter, saying the company had shared facts developed in its own internal investigation. Flutter also has enhanced its internal accounting controls and compliance processes, while discontinuing its relationships with the Russian consultants, the SEC said.

Flutter withdrew entirely from the Russian online poker market following Russia’s invasion of Ukraine in early 2022.

That decision to leave the Russian market cost the company £50m in adjusted EBITDA last year, Flutter said its preliminary annual results statement released last week.

The SEC settlement comes after Flutter has said it is actively evaluating a secondary listing of its shares on a U.S. exchange.

It is also the second high-profile regulatory settlement struck by the FanDuel owner with U.S. state or federal authorities on a matter inherited through its acquisition of The Stars Group.

In 2021, Flutter also entered into a $300m settlement with the state government in Kentucky to resolve litigation related to PokerStars’ former operations in the state prior to 2011.

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