Meet Michael Katz. Katz is an American poker player from a small town in New Jersey. Throughout his career, Katz has won well over half a million dollars playing online poker. However, on 15 April 2011, the United States indicted three major online poker sites – PokerStars, Full Tilt Poker, and Absolute Poker, for violating the Illegal Gambling Business Act of 1955. The online poker community soon dubbed this date “Black Friday,” since it essentially ended online poker for Americans. As a result of Black Friday, Katz no longer obsessed over poker and instead was able to concentrate on other aspects of his life, including his family and his own start-up businesses. You could stop reading now and believe that Michael Katz lived happily ever after with his winnings and his family. Unfortunately, the true story has a far more miserable ending. This is the story of how a man lost over $300,000, and in the processes, exposed one of the biggest scams in the Bitcoin world.
Due to the technology aspect of Katz’s business ventures, he soon found out about Bitcoin.
“The more I read about it, the more I became sure that this was the future and a boatload of money to boot. I wanted as much bitcoin as possible before it took off ‘to the moon’ as they said, and I started accepting payment for my services in bitcoin as well as investing in them at $80 per coin.”
However, the price of bitcoin soon skyrocketed before Katz could get enough money to truly heavily invest in the cryptocurrency. This only increased his desire to obtain as many BTC as possible.
“The desire to increase my bitcoin holdings was so strong, and at one thousand per coin so unattainable, that I did something I’ve never done before. I recklessly took the coins I had to sports betting. I didn’t dream of hitting the game winning three, I dreamed of becoming rich off bitcoin and had somehow convinced myself (go ahead and laugh) that the only avenue to accomplish this was sports betting.”
Initially, Katz used BitBook and won tens of thousands of dollars in BTC. However, like many gamblers, Katz was unable to control his excitement and continued betting more until he lost most of his winnings. Eventually, BitBook shut down, and Katz had a few coins left over. Around this time, another site – CoinBet, was offering a 200% deposit bonus, and Katz “needed a change of betting scenery.” So despite some negative stories about CoinBet, Michael Katz “took the plunge”.
CoinBet has received a lot of press coverage and praise. The site was the first since Black Friday to offer real-money online gambling in the United States and was trusted by thousands of users. As such, Katz’s move to CoinBet two months ago seemed like a logical one.
However, Katz soon began losing even more and “was completely freefalling”.
“I was losing just about every bet and immediately re-depositing. The bitcoins I had tried to stretch were being swallowed up.”
Furthermore, Katz discovered that the supposedly “award-winning” website was chock-full of bugs. Deposits took hours to credit, and the mobile version of the site was practically impossible to use. Meanwhile, Katz’s rollover requirement was growing.
Quick definition – When a sportsbook has a rollover requirement, it means that a bettor must wager a certain amount before he/she can withdraw funds. This is a necessary requirement since many sportsbooks offer a signup bonus. For instance, suppose a bettor deposits $100 into his account with a 200% bonus. This would mean that the user begins with a bankroll of $200. If there were no rollover (minimum wager) requirement, the user could simply withdraw those funds and walk away with a $100 profit. So to prevent this scenario, sportsbooks use rollover requirements.
Once a user clears his bonus on CoinBet, the rollover requirement is supposedly met, yet after repeatedly losing his wagers, Katz noticed that his rollover requirement continued to climb. He decided to email customer support since it seemed like the rollover was cumulative:
Although customer service informed Katz that there is no cumulative system, Katz’s account info indicated otherwise, as he had a staggering $2.2+ million wagering requirement. Eventually he decided he wanted to leave the site and asked the customer service rep how he could go about withdrawing his money.
You guys pride yourselves on fast cashouts so I would like to cash out $150,000 in Bitcoins. I can’t imagine I haven’t hit some rollover requirements considering I’ve wagered well over 200k today and roughly 30 individual bets.”
Eventually, Katz received the following explanation:
This “explanation” completely contradicted the previous emails since it essentially stated that bonuses were cumulative. Furthermore, Katz had zeroed out his account multiple times. Or so he thought.
Apparently there was a “glitch” in the system where user accounts would always be left with a few cents instead of reaching absolute zero. Furthermore, the main page would not show the cents left in the account, and instead displayed “0 USD”. The cents would only be displayed in a secondary section under the transactions page.
“This is beyond shady totally unreasonable. In the prior e-mail [Paul] also offers to zero out the balance and reset the rollover requirement, while also cutting the wagering requirement to 1/4th what it is, but of course none of that happens.”
At first, Katz wanted to expose CoinBet’s shadiness to every possible forum. However, he stumbled upon CoinBet’s Terms and Conditions that state:
By joining CoinBet.cc, you agree to keep all experience, winnings, losses, payouts, disputes, and gameplay confidential and are forbidden from releasing any information publicly, including but not limited to, message boards, news agencies, forums, blogs, or other websites, without the express written consent of CoinBet.cc. Any information publicized without the express written consent of CoinBet.cc will result in immediate termination of the account in question and forfeiture of any winnings or account balances.
These ridiculous terms prevented anyone from discrediting CoinBet. If a user spoke out against the site, he/she would risk losing all of his/her money. Katz emailed Paul, “Since at this point I cant be sure whether you have any intention of letting me cashout (ever) i’m going to start a tracking thread on bitcointalk.org detailing exactly whats happened here so i have a running record with the community.” Paul responded with the following:
Katz decided he only had one way out:
“I decide my best chance to see the money is to just clear this new, absurdly high requirement. If I risk posting now, the chance of seeing my money becomes roughly nil. I start to bet like a complete mad man. I have to put in roughly two hundred thirty $10,000 bets to clear this which is simply insane, but it’s now become bet it or lose it.”
But to make matters worse, CoinBet soon rolled out a new site that was missing the rollover requirement counter. This meant that Katz would have to manually calculate millions of dollars in rollover and document it all. So Katz played through $2.2 million at 1.8 odds, then ANOTHER $2.2 million at 1.9 odds. Surely it would seem that he had met the rollover requirement. But nope. CoinBet said otherwise. Katz decided to try to negotiate with CoinBet while the company continued stalling with vague excuses. Eventually, CoinBet gave Katz a few options. He could:
Clearly, all of these were terrible options. Katz finally gave up and informed CoinBet that he would publicly disclose his experience with the company. CoinBet reminded Katz that doing so would result in him permanently losing his account and all the money associated with it. However, at this point Katz realised that it was highly unlikely that he would see his money again, and so on 18 April 2014, Katz publicly disclosed this story on Bitcointalk under his username – “BitcoinzRulez”. Within 24 hours, CoinBet.cc was shut down without explanation.
Unfortunately, the Bitcoin world is full of scams and shadiness. While the cryptocurrency is continuing to gain legitimacy, it’s still a dangerous place out there.
“its their scammy world, i’m just donating to the crooks…”
Last modified: April 21, 2014 00:09 UTC