California AG Closes Another Cardroom due to Financing Problems

California’s cardroom sector has found itself in the center of a scandal once again. California Attorney General, Xavier Becerra, has recently called for the closure of Magnolia House Casino in Rancho Cordova. According to Becerra’s words, the venue “was seriously underfunded, threatening significant losses to patrons and players.” Baccera added that “the cardroom would remain closed until it could demonstrate that it has addressed its funding issues.”

More About the Result of the Venue

There are several indicators that show Magnolia’s modest performance. The operator failed to maintain a separate insured supplied with enough cash to cover the entire value of gaming chips in circulation. Despite selling these chips to Magnolia’s contracted ‘third party provider of proposition player services,’ it failed to deposit the total sum into the designated .

Third-party proposition players operate as the casino’s house. Here we have third-party s playing against other players in poker. Additional claims confirm that Magnolia’s operators combined third-party funds with its operating capital “to cover operation expenses it could no longer meet.” This reminds us of the Full Tilt Poker case, which has been found in liquidity crunch after the 2011 ‘Black Friday’ online poker problems.

Other Issues

Management didn’t provide the requested documents to the Bureau of Gambling Control (BGC) which asked for information this past December. Despite extending the responding period, the Magnolia operator “failed to provide any documents as requested and provided misleading and incomplete information.” The venue disregarded five written warnings as well as two notices issued by the Bureau of Gambling Control between June 20 and December 24, 2019. According to officials’ words, the Magnolia “failed to take adequate, if any, corrective action” related to issued warnings.

There are also claims that Magnolia’s majority owner, Thomas Sheridan, missed disclosing his interest in a limited liability company when he went through suitability vetting for the cardroom license. After being given 48 hours to deposit the full amount of funds to an official and 72 hours to cover the possible shortfall in its chip liabilities, the operator once again failed to meet the obligation. As a result, the venue has been closed and it should meet all requirements for evenutal reopening. It includes submission of weekly financial reports to BGC Authority as well as unveiling the sources of available funds.

Situation in California

The shut down of the Magnolia venue occurred only one month after California reached a settlement with the Hawaiian Gardens Casino which breached Bank Secrecy Act and deceived gambling regulators. The settlement worth $3 million was one of the latest penalties issued to state cardroom operators which failed to meet regulatory obligations.

The state of California has recently issued the proposal for introducing stricter rules applicable to the cardrooms’ house-banked games. Despite insisting on their rights to run these games, regulators could impose additional conditions and hinder cardrooms to operate the previous chances.

Source:

“Seriously underfunded’ cardroom shut down by California AG“, Steven Stradbrooke, calvinayre.com, January 7, 2020.