ISTANBUL, TURKEY – Selim Suner’s luck could have turned out very differently if not for an impulse to put ₺135 lira – roughly a hundred dollars –, into an online gambling website just weeks before he was set to take a leave of absence from his union job at the Turkish daily Sabah to complete his compulsory military service in 2008.
In a matter of days, his gamble had paid off and Selim found himself $3,000 richer and far more interested in learning about poker strategy than military tactics. During the six months he spent at the army training barracks, Selim devoured as much poker theory as he could before returning to the newspaper and joining his colleagues behind the picket line.
One year earlier, then Prime Minister Recep Tayyip Erdogan had availed himself of a legal technicality to seize the pro-Kemalist publication, which was subsequently purchased by a media group owned by his son-in-law using state funds, in what was among the earliest of many such maneuvers to assert control over the country’s media outlets during his political ascendency.
Tensions between Sabah’s new management and the Journalists Union of Turkey (TGS) inevitably led to the nation’s first press strike in almost three decades, auguring difficult times for the profession. Compounding matters was an impending disaster approaching from distant shores as the U.S. subprime mortgage crash was about to wreak havoc on the Anatolian economy and consolidate power for Erdogan’s anti-secular movement.
The thirtysomething graduate of the University of Marmara’s school of communication saw the writing on the wall and quit the paper shortly thereafter to pursue his lucrative new hobby using the severance package he received as a result of TGS’s successful lawsuit against Sabah to bankroll a professional, if short lived, online poker career.
Selim caught the tail end of the so-called “poker boom”, another U.S. import that had started in 2004 and had ensnared millions of people in a massive series of frauds and money laundering scandals, which finally came to an end when the Department of Justice (DoJ) indicted 11 online gambling executives and seized the top online poker domains on April 15, 2011.
Memorialized within the poker community as “Black Friday”, the crackdown signaled the beginning of the end of Selim’s foray into the world of online poker as Turkey and other countries followed suit and implemented their own regulations to curb fraud in the online gambling space.
By 2012, Selim’s professional poker career was over and as Turkey’s crackdown on independent media continued apace, his college degree was more likely to land him in one of Erdogan’s prisons than in an editorial meeting. Despite good fortune gracing him just enough to make it through the tough days ahead, all bets were now off in terms of his place in society and the economy.
Choose Your Adventure
Individual circumstances notwithstanding, Selim’s reality is hardly unique. Millions, if not billions, of people around the world are grappling with the sudden loss of their economic safety nets and trying to navigate the treacherous social terrain in a politically unstable environment.
Whether that reality is colored by the autocratic ambitions of an Erdogan in Turkey or the populist demagoguery that produced Donald Trump in the United States, doesn’t contribute to the clarification of the underlying causes. On the contrary, political narratives serve only to obfuscate their true nature and push us further into the carefully-laid traps of what York University professor, Kean Birch, calls “technoscientific capitalism”.
Speaking to Silicon Icarus about the “economic logics and forces” that are increasingly shaping science and technology, Birch explains how these are also shaping socio-economic discourse, through insidious narratives that seek to move people away from “collective notions of what it means to be a worker” towards a different understanding of their role in society and the economy as “sites of investment in their capacities, skills, expertise”.
Far from a degenerate gambler or thrill-seeking reprobate, Selim’s journey from a union-protected job to the risky world of online poker was the result of both external pressures and opportunity. Erdogan’s clamp down on the Turkish press created the conditions that led him to explore other options. Eventually, the government forced his hand just like it had compelled the nation’s casino industry to move operations to the Turkish-controlled territory of Northern Cyprus after outlawing them in 1996.
A legal nether region that has become a money laundering paradise for criminals, the TRNC is an important node of the global offshore network that incubated online poker and its bastard child, cryptocurrency markets. Unbeknownst to Selim and the millions of people who jumped on the online poker boom bandwagon, every hand they were dealt on the green-pixel felt of the virtual casinos was really part of a much bigger game being played by the forces of global “technoscientific” capital, who required a goodly supply of “fish” to sandbox an investor-led intellectual property (IP) regime, like so many poker chips in a tokenized economy.
Sharks at the Fish Market
“Fish”, as Selim explained to Silicon Icarus, is poker slang for bad players, and their presence at the table is indispensable for both good poker players and for the online poker business model, in particular. Without a constant stream of fish, also referred to as ‘net losers’, the math doesn’t work and nobody makes any money.
Unlike their brick-and-mortar counterparts, the online casino business presents minimal risk to the operators. “It’s impossible to lose money” if you simply follow the rules, Selim assured me. When it comes to online poker, success largely boils down to making sure the pots are filled with money wagered by net losers, for the most part, and designing the proper incentives for the professional or competent players, so that they continue to patronize your virtual establishment.
On September 11, 2001, PokerStars came online. Destined to become the largest online poker company in the world in just a few years’ time, its debut was naturally overshadowed by other events on that fateful day. Isai Scheinberg, a former senior programmer for IBM Canada, incorporated the business with his son, Mark, as a subsidiary of his Costa Rica-based Rational Entertainment Enterprises, Ltd.
Poker was still a very niche market then, with known links to organized crime and negative connotations among the general public. A movie released in 1998 called Rounders, starring Matt Damon as an amateur poker player, who aspires to win the World Series of Poker (WSOP) – an actual tournament broadcast on television by ESPN since 1987 –, began to move the needle ever so slightly in its favor.
When the movie’s storyline, minus the Cold War revivalist sub plot, played out in real life just five years later at the 2003 edition of the WSOP, Rounders achieved cult film status, as attested to by several professional poker players, who credit the flick with motivating their career choice. But, it was ESPN itself, that did the heavy lifting and brought the glamorous poker scene to millions of virgin eyeballs through its newly-expanded coverage of the WSOP and the dramatic victory of amateur poker shark, Chris Moneymaker.
Just like his celluloid counterpart, the preposterously-named Moneymaker seemed to come out of nowhere to beat legendary, 10-time champion Phil Ivey, in the semifinal round to reach the title game and take the $2.5 million pot, etching his name in the annals of poker lore. Widely considered to be the beginning of the so-called poker boom, much is made of Moneymaker’s amateur status, despite the fact that he was not the first to win the famous contest.
Nevertheless, it was an important detail to highlight because of the true ‘first’ some of the sponsors were eager to promote. Moneymaker had made it into the big event through an online qualifying tournament hosted on PokerStars; the first time online entry methods were allowed in the thirty-plus year history of the WSOP. Unsurprisingly, brand recognition for PokerStars shot through the roof and the company, which had moved its offshore operation to the Isle of Man by then, tapped an endless sea of fish to move through its cybernetic dams and create overflowing rivers of profit.
Boom and Busted
Russ Hamilton was caught red handed defrauding fellow poker players out of millions of dollars by the Kahnawake Gaming Commission (KGC) in 2009. The 1994 WSOP champion and his accomplices at UltimateBet (UB), the online poker website used to commit the long-running heist, had been joining UB’s digital poker tables since at least 2004, via super-user accounts that allowed them to see everyone’s cards and steal as much money as their conscience permitted.
For Hamilton and company, that amounted to $23 million over the course of six years. When the scandal broke, UB tried to blame the company that owned the gaming software, Excapsa, and did its best to hide the identity of the criminals in its midst, while also reimbursing some of the victims through dark backchannels. In reality, there was no separation between the two companies.
Leaked audio recordings revealed that Hamilton and Excapsa executive and UB legal counsel, Dan Friedberg, conspired to mislead the public in an effort to do damage control. In the audio tapes, since unaccounted for, Friedberg is heard suggesting the idea of framing a former UB consultant, who would have taken “advantage of a server flaw by hacking into the client” after Hamilton readily admits to taking the money, himself.
Friedberg, who’s recently made his way back into the news due to his role as the Chief Regulatory Officer for the now infamously defunct cryptocurrency exchange, FTX, is only one of many direct ties between the online poker boom era and today’s cryptocurrency markets. Just like Excapsa never truly relinquished UB, but simply sold off the particular subsidiary that controlled UB in a related-party transaction, the entire crypto industry is a wholly-owned subsidiary of the offshore institutional finance networks that gestated the online poker space from the start.
Formed in 2004 to acquire the assets of the company that created UB, Excapsa’s original CEO was transplanted from the same role at a company called CryptoLogic, which had developed the world’s first online gaming software in 1995 and used none other David Chaum’s eCash to process payments. David Chaum, of course, is hailed as the “father of cryptocurrency” and considered an éminence grise of the cypherpunk movement by the Bitcoin brethren.
CryptoLogic’s pioneering software allowed the first real money wager to be placed at InterCasino, itself one of the first online gambling websites. Established in 1996 by a bookie from Toledo, Ohio, InterCasino was incorporated in Antigua and Barbuda very soon after the UK Commonwealth nation officially governed by King Charles III passed the seminal Free Trade & Processing Zone Act, that inaugurated the offshore online gambling license racket.
By 1998, there were at least 60 offshore online bookmaking operations spread throughout Central America and the Caribbean thriving off of a predominantly American customer base. Soon, many of these websites began offering visitors new ways to gamble through virtual slot machines, cybernetic Black Jack tables and the biggest hit of them all, online poker.
According to the American Gaming Association, as many as 1 in 5 Americans got hooked on the popular game of bluff after the highly-publicized 2003 WSOP championship. In 2006, American lawmakers passed the Unlawful Internet Gambling Enforcement Act (UIGEA), making it illegal for online gambling operations to utilize regular banking channels to carry out transactions.
DoJ enforcement of the UIGEA would not arrive for another five years, during which the American online poker market continued to grow exponentially, as PokerStars continued to play godfather to its smaller competitors, partnering with UltimateBet long after the Hamilton scandal and other newcomers, like Full Tilt Poker, to draw more people into the online poker scene.
The General’s Retirement Fund
Isai Scheinberg was sentenced to time served and a $30,000 fine by a New York District Court judge on September 24, 2020, almost a decade after charges were brought against him and ten other online gambling executives on “Black Friday”. Pleading guilty to one count of violating the UIGEA, the former PokerStars CEO had ignored attempts by the DoJ to reach a settlement for years.
After all, the company had never defrauded its customers or embezzled funds like Full Tilt Poker, whose CEO was named in the same original DoJ complaint and convicted of bank and wire fraud, along with all the other defendants. Not only that, but PokerStars alone assumed the responsibility of making all American online poker fraud victims whole to the tune of $731 million, which kept public outrage over the scandal to a minimum.
Scheinberg’s acquiescence was more than exemplary, further complying with the DoJ’s request to sell PokerStars and its parent, Rational Group, to a Canadian company as a means to erase all notions of impropriety from the online poker industry, even though U.S. authorities couldn’t freeze a single penny in his bank accounts, which were all far from their reach in offshore jurisdictions.
Perhaps the incredibly lenient sentence was done merely to maintain appearances. A symbolic gesture to avoid backlash against the federal law enforcement entity, while keeping Scheinberg from spilling the beans about what had all the hallmarks of a government-aided market restructuring and consolidation.
In 2014, after PokerStars acquired Full Tilt Poker as part of the DoJ-brokered deal to cover Americans’ losses, Scheinberg’s company was sold to Montreal-based Amaya Gaming Group for a whopping $4.9 billion. The sale turned Amaya, which had also briefly acquired CryptoLogic and InterCasino in 2012, into the largest online gambling company in the world at the time, facilitated by $3 billion from outside investors, including BlackRock.
Not long after the deal finalized, Amaya’s CEO, a young Israeli Internet gaming entrepreneur, was forced out of the company over spurious accusations of insider trading by a Canadian securities regulator. Once he finally resigned in 2016, Amaya was rebranded as the Stars Group and soon thereafter sold to an Irish holding company named Flutter Entertainment, which is the largest online gambling firm today with major sports betting assets like FanDuel.
Sitting on Amaya’s board throughout this entire process was former NATO Supreme Allied Commander for Europe, General Wesley Clark. In 2016, the Panama Papers revealed that Clark had been a member of Amaya’s corporate governance committee at the time of the PokerStars acquisition, as well as an independent director of Amaya, Inc., since 2010.
According to the documents, General Clark retained the services of an Isle of Man law firm to facilitate the incorporation of Amaya Intellectual Holdings Ltd., a subsidiary which was intended to hold all of the company’s intellectual property assets and for which Clark was to be the sole shareholder.
Shiny Techno-economic Objects
Intellectual property (IP) is irrevocably linked to the rise of online gambling and its gradual amalgamation with blockchain and cryptocurrency-based market dynamics, a.k.a. tokenomics, that comprise GameFi (gaming finance). These are some of the iterations of what Birch defines as “entities constructed from various kinds of techno-scientific and political economic practices, knowledges claims, discourses [and] processes” or the techno-economic objects driving the process of assetization described by Birch and his colleagues:
“By asset, we mean something that can be owned or controlled, traded, and capitalized as a revenue stream, often involving the valuation of discounted future earnings in the present – it could be a piece of land, a skill or experience, a sum of money, a bodily function or affective personality, a life form, a patent or a copyright…”– Assetization: Turning Things into Assets in Technoscientific Capitalism | Birch, Muniesa Page 93
Out of online poker’s ashes emerged minions of technoscientific capitalism to seal the pipes of the metaverse and guarantee the IP dividends of the likes of Clark and others who stand to gain from the “particular kinds of national advantage” afforded by IP policies in the so-called knowledge economy. People like Scott Augustine, a graduate of Notre Dame University, who used to be “a regular feature” (a high stakes player) on Full Tilt Poker before becoming an instructor at poker coaching site, CardRunners – a Full Tilt partner just prior to the embezzlement revelations –, and who no doubt helped funnel plenty of fish to its virtual poker tables.
Today, Augustine heads up operations for Austin-based tokenized video platform, Rokfin, where he made use of all he’d learned during his days running $50 tables to design the company’s blockchain-based feedback-communication protocol or the “mint-and-burn” mechanism which undergirds its proprietary crypto token.
Taking a cue from long-time friend and fellow poker player, Brian Townsend, who believed that poker was close to “becoming a solved game” once all the “right mathematical decisions” were known, Augustine distinguishes between “fiat reward systems” (a.k.a. payment for services rendered) and tokenization in an article he penned in 2019.
Describing the uses that game theory has to “predict human behaviors”, Augustine goes on to describe how blockchain can be used to apply this capability for rewarding “content creators for sharing great videos, journalists for posting high-quality articles, and consumers for watching ads.” So long as said “high-quality” content is not critical of the technology, that is. Rokfin CEO Martin Floreani has been known to ban creators who don’t toe the tokenized party line.
The Offshore Trick
Often couched in propagandistic terminology and clichés like “freedom” and “democratization”, the process of assetization is rooted in Western capital’s failure to secure a commodity-based trade regime for IP during the last quarter of the twentieth century, leading to the strategic shift into an asset-based approach that has seen the wholesale transfer of wealth – much of it created in the aftermath of the 2008 financial crisis – into offshore entities, while the rebel client states were brought back in line.
Protracted negotiations and resistance to direct efforts by transnational corporations like IBM, Pfizer and Monsanto in the late 1970s and 80s to make IP part of the prevailing commodity-based trade order, led to the abandonment of the WTO and gains they had made through the General Agreement on Tariffs and Trade (GATT) talks to push their agenda forward.
Pfizer CEO Edmund Pratt, who had led the campaign on behalf of American interests through his position at the office of the U.S. Trade Representative during both Reagan administrations, found that countries like India were unwilling to stop providing affordable medications to their population through their sizable generic pharmaceutical industry, in order to satisfy the profit demands of Western R&D companies.
Not even Reagan’s decision to make IP a matter of national security helped change the reality that no one was about to tie their economic future to the rentiership model proposed by those who stood to gain the most from such policies. As the new millennium approached, more and more ‘developing’ nations began dropping out of bilateral trade agreements, rife with onerous terms and enforced by a small clique of lawyers working on behalf of private enterprise.
“Shifting away from international trade law towards international investment law,” Birch points out, “created a lot of advantages for investors,” and became “very handy as a way of managing profits and shifting profits to low tax jurisdictions”, where companies like Apple “end up with an enormous amount of money just sitting around avoiding tax.”
Parking vast stores of wealth offshore to dodge the tax man is only half the story, and in the case of the United States, largely irrelevant given the U.S. Federal Reserve’s ability to ‘print’ money at will. In fact, the trillions of dollars funneled to the investor class (and not the economy, a.k.a. ‘main street’) in the aftermath of the 2008 financial crisis, together with re-written banking laws designed to empower hedge funds and institutional investors was a critical development in the transition to IP as an asset.
In this dynamic, dodging the tax man by keeping wealth offshore works as a weapon against Global South countries and client states, which don’t have the benefit of a money printer and are growing increasingly dependent on the information and communication technology (ICT) infrastructure emanating out of the Global North, through the very corporate entities operating outside of their sovereign jurisdictions.
Pratt’s IP trade regime model had been all but abandoned by the mid 1990s, when Isai Scheinberg was part of the two-man team sent by IBM to represent the company at the Unicode Consortium, a non-profit organization comprised of state and private enterprise actors tasked with furthering the global adoption of and maintenance of the interoperable character coding technology known as the Unicode standard.
Scheinberg’s contribution to the development of the standard has been noted by colleagues, who remember the Lithuanian-born Israeli as one of its strongest proponents and praise his marketing talents as a boon to its diffusion. Created at Xerox Palo Alto Research Center (PARC) in the late 1980s, Unicode has just released version 15.0 and maintains its reputation as “the foundation of modern computer architectures and the character infrastructure of the Internet and the World Wide Web”.
Unicode was developed at Xerox PARC’s Business Units under the stewardship of Satjiv S. Chahil, who was the department’s General Manager until 1988. Chahil, whose career also began at IBM acclimating the consumer public to Automatic Teller Machines (ATMs) in the late 70s, is hailed as Silicon Valley’s top marketing guru.
More than any other person, Apple, Inc.’s long-time VP of Worldwide Marketing is credited with driving the mass adoption of everything from CD-ROMs to DVDs, broadband technology and practically every other core product category that has taken us one step further down the road of “digital convergence”.
After leveraging his deep connections in Hollywood and the music industry on behalf of HP, Sony and other major technology players, Chahil recently joined the board of a “layer-0” DLT (decentralized ledger technology) startup that is building a tokenized data management system targeting the energy sector, called Inery Blockchain as its senior advisor.
Simon Murray, Inery’s Chairman, is a “Hong Kong-based” British businessman with a “vast network” that includes past chairmanships at Glencore, Deutsche Bank, and Gulf Keystone Petroleum – operator of one of the largest oil fields in the Kurdish region of Iraq, which quadrupled production from 23,000 to 100,000 barrels a day under Murray’s watch and is a geopolitical hotspot for the United States and Turkey, which has a pipeline running directly from the Shaikan field to the port of Dörtyol.
Murray’s involvement with blockchain is notable for a man whose personal history includes fighting on the French side against the Algerian National Liberation Front during the African nation’s war for independence. A member of the French Foreign Legion, Murray’s links to offshore financial networks spans more than four decades, from his early years working at Jardine Matheson, a “Bermuda domiciled” holding company that has been doing business in China since Imperial times, to his current Cayman Islands-based private equity firm, GEMS, which manages Murray’s energy and mining investments.
Fate of Tate
Once we begin to peel the layers back on technoscientific capitalism, it begins to look a lot like the same old networks that have been exploiting natural resources and cheap labor for centuries, dressed up in shiny, futuristic costumes. There is, however, one significant difference.
Behind the fancy jargon, like tokenomics (the supply and demand dynamics of cryptocurrency-based markets), NFTs and web 3.0, is really just the specter of late-stage capitalism, desperately trying to generate sustainable profits in the face of zero-cost marginal production by conjuring up “new kinds of asset classes,” particularly around human capital.
Technoscientific capitalism is betting that we, as a society, will assume what Belgian philosopher, Michel Feher, has called the “investee condition” and partake in activities that produce dividends for Gen. Wesley Clark’s IP holdings or turn a profit for Simon Murray on his blockchain energy futures contracts, or even raising the monetary exchange value of some crypto in a former poker player’s cold wallet.
Whether through content creation, content consumption or the literal sweat off our brow measured and tallied in the twisted fantasies of entrepreneurs who want to make physical “movement part of global GDP“, the replacement of labor with various forms of assetized human capital raises serious questions about what kind of society we are creating.
Seen from an assetization perspective, Birch warns, a tokenized economy can very well lead to a situation in which we have “significant winners and losers, where you have some people that are incredibly successful” and a vast majority who are not, and where “the more successful you are, the more you are able to leverage further capital money to reinforce your position,” and in turn create “the virtuous cycle for you and locks in everyone else to your success.”
We are already beginning to see how this plays out and the inherent dangers to culture and society with distasteful characters like Andrew Tate and other social media personalities, who thrive on polarizing discourse and controversy for no other purpose than to fill their bank accounts.
“Unseen things, unpredictable things” can happen, Birch concludes, “on the basis of people producing content on the techno-scientific infrastructure that exists”. I would simply add that even though everything in life carries risk, gambling with your life in someone else’s game brings no reward.