The selling and trading of action is an integral part of tournament poker, but one which is fraught with peril. Whereas it was once done mostly behind closed doors, between players themselves, it has become an increasingly visible and accessible part of the poker world thanks to forums and social media.
In some ways, this is a good thing, both in terms of transparency and allowing poker fans to engage with the tournament scene even when they can’t afford to play the higher buy-in tournaments themselves. The trouble is that, while high stakes poker players are by and large a canny bunch, constantly on the lookout for scams and angles, the recent proliferation of open-to-the-public action sales means that it’s easy for others to get into the action without properly understanding the risks.
Just now, an unfortunate incident was brought to light on the 2+2 forums, which should serve as a warning to anyone thinking about getting into the action market. Ben “KidCardiff6″ Warrington, a formerly well-respected tournament professional, has been caught engaging in one of the classic action-selling scams: the oversell. Warrington himself has confirmed the allegations.
Action sales are a necessary evil
There are plenty of ethical problems with selling action in the first place, but unfortunately, it’s a practice that’s never going to go away. In a nutshell, the way it works is that a player sells some percentage of their potential winnings in a tournament for a slightly higher percentage of the buy-in; the difference between those percentages is the “markup,” which is effectively a fee the player is charging the investor in return for playing poker with their money.
As it works in theory, the selling of action is great for the game and for everyone involved. The professionals who sell their action are able to insulate themselves from variance somewhat, and thus avoid having their bankrolled crippled during a downswing. That allows more players to stay in the game, boosting field sizes and generating additional revenue for the card rooms. The investors, meanwhile, should be turning a profit in return for taking on risk, so long as the markup is set correctly.
It’s very much the same way the stock market is supposed to work, and just like the real stock market, sometimes it works as intended and sometimes it doesn’t. Sometimes investors get a raw deal simply due to naivety on their part and/or the players’, paying excessive markup because they’ve overestimated the player’s actual edge. If that were the extent of the problem, we could call it a straightforward case of “buyer beware,” but unfortunately, the action market is also fertile ground for deliberate scamming.
How the oversell scam works
Ideally, players would hold a majority or at least a plurality of their own action, so that they still have as much at stake as anyone else. There’s what economists call a “moral hazard” which crops up when the player has offloaded too much of his risk. That is to say, the more action the player sells, the less of his own money is riding on the actual outcome of the tournament. To an extent, this is the whole point – reducing the player’s risk – but it starts to become a problem as the amount of money collected from investors approaches the actual tournament buy-in, as then the player’s incentive to play well starts to diminish.
For instance, if a player sells 80% of his action at 1.25 markup, he has collected 0.8 x 1.25 = 100% of the tournament buy-in, and is risking nothing himself except for his time. With nothing but time at stake, the player may then end up playing recklessly in the early going; if he manages to chip up and go deep, he’ll get 20% of the winnings, but if he busts out quickly, he loses nothing and has saved himself time and energy. It makes sense for the player, but could be a losing proposition for the investors if the player takes -EV spots in the process.
Even an honest player is likely to change his behaviour unconsciously when he has sold too much of his action. That’s bad enough on its own, but where we get into scam territory is when a player sells 100% or more of their action. At 100%, the player has made a fixed profit by way of the markup and has no financial interest in doing well in the tournament at all. Beyond 100%, the player has negative equity in the tournament and would actually like to avoid cashing, as they will have to pay out more than their winnings if they cash.
Obviously, no sane investor would take more than 100% of a player’s action, knowing that the player would then be incentivized to play badly, but a player who wants to pull off this scam can sell action to multiple people behind the scenes, without them knowing about one another. This is particularly easy to do when the player is also casually swapping small pieces of action with other players he knows.
For instance, the player could sell 45% of his action to one group of investors, then another 45% to another group, unbeknownst to the first. If he’s collecting 1.2 markup from each, he’s already up 8% of the buy-in no matter what happens. He could then agree to 5% action swaps with four other players in the tournament, putting himself at 110% sold. At that point, he could happily punt off his stack and pocket the 8%, while getting a 5% freeroll in each of the players he swapped with. As long as neither investment group finds out about the other’s existence, no one will ever be the wiser.
Ben Warrington has had a very successful online career, plus some modest success in the live game as well, with over $2 million in cashes online and over $750,000 live, including a pair of EPT Main Event final tables. He also had a successful coaching career with the website Tournament Poker Edge. Overall, he’s not the sort of person you would expect to find himself in a position of needing to pull a scam, and those who know him are for the most part expressing surprise and disappointment that he’d do anything of the sort.
Appearances are deceiving, however, especially in the poker world, and that’s precisely why it’s important to take precautions when investing, no matter how reliable someone might seem. It’s easy to forget the nature of tournament poker, even as one is in the process of investing in a tournament player. $3 million in combined cashes does not mean that a person has anything resembling $3 million in the bank. The bulk of that money will have gone to other tournament buy-ins, and much of what’s left after that has likely gone to various investors. Add in living expenses over the years, and $3 million in cashes doesn’t actually equate to very much money in the bank at all.
According to Warrington’s confession and apology, he never set out to scam people, and has always been straight with his investors in the past. In his version of things, he played “a big schedule” of tournaments at this year’s World Series of Poker, holding at least 40% of his own action throughout. He only ended up with three small cashes to show for it, for a combined total of a little over $15,000. He didn’t specify exactly how many tournaments he played or their combined buy-ins, but I would guess at least $50,000 and probably a fair bit more, depending on how many of the higher buy-in events he played.
His bad run culminated in a Day 1 bust-out in the Main Event, which apparently put him on tilt. He says he should have been smart enough to leave Vegas at that point and shake it off, but he felt sure he could do well in a $5000 tournament at the Venetian and wanted to stick around for that. In the meantime, he made the classic mistake of playing pit games – and some cash-game poker – in an attempt to win back some of his losses. This didn’t go well for him and he found himself in the spot of needing to sell additional action for the Venetian tournament in order to scrape together the money to actually play it. He couldn’t resist gambling with the money he’d raised this way, however, and had to keep going back to the well, ultimately finding himself with over 100% of his action sold.
He claims that he still played to win, but this is extremely hard to believe, since “winning” would have meant losing for him. Still, he likely would have gotten away with it had he not decided to double down on his scam. The tournament in question was a re-entry event, and he had collected money for two entries. Rather than enter the second time (and presumably punt off his stack again), he decided to pocket the second buy-in and simply tell his investors that he’d busted the second bullet as well.
That’s where things went off the rails. One investor by the name of Mark Herm found his instincts telling him that something was off, so he asked Warrington to produce receipts for both entries. Rather than coming completely clean or trying to lie his way out of it, Warrington changed his story, saying that he’d ultimately decided to unregister for the second entry and was going to refund half of Herm’s money.
Herm was having none of it, of course, and although Warrington did quickly reimburse him for the unfired second bullet, Herm decided he needed to make the story public. Once that happened, Warrington’s other investors came forward, adding up the pieces they’d bought and realizing that he’d oversold on top of having lied about the second entry. Warrington was forced to come clean, and has promised to pay back everyone involved, but his reputation is in ruins and TournamentPokerEdge.com has already confirmed that they’re severing ties with him. Without coaching income and likely unable to sell any action in future, Warrington may need to find a new line of work, or at least lie low for a while.
@AlbinoTraveler We were as shocked as anyone to hear this happened, and we do not intend to release any videos from him in the future.
— TournamentPokerEdge (@TournPokerEdge) July 17, 2015
I’ve said it before and I’ll say it again: the only solution to both the ethical dilemmas and outright scams involved in the secondary poker market is transparency.
First and foremost, if you’re thinking about buying someone’s action, do your homework on them. Ask for details about previous deals they’ve done, and make sure those who’ve done business with them before having nothing but good things to say about them. This wouldn’t have helped in the case of Warrington’s investors, of course, because by all accounts he had been honest in his dealings up until the combination of a downswing and gambling addiction got the better of him. That sort of “breaking bad” is sadly common among poker players who find themselves in a hole, so dealing only with people who have good reputations isn’t a total safeguard from being scammed, but it’s a good start.
Obviously, any allegation of scamming or failing to make good on loans or other payments is a complete no-go, but there are other red flags as well. Beware of doing business with anyone who has a reputation for poor communication with backers or has been slow to pay out in the past. Prior to engaging in full-blown scams, a lot of unscrupulous players and gambling addicts will get into a cycle of robbing Peter to pay Paul; evasive behavior and delays in payment can indicate that the person has already gambled away the money owed or used it to pay off a previous debt, and is scrambling for a new way to raise the funds to make good on the deal. This behavior eventually catches up with them and you don’t want to be the person owed money when it all comes crashing down.
Secondly, make your deals public in some way. Arrange it on Twitter, or have the person you’re backing post the details somewhere publicly visible, such as on a forum. As well as providing a paper trail in case the person decides to just take the money and run, it makes it enormously more likely that if the player is overselling, they’ll be found out. It’s still no guarantee, but there’s no better deterrent to crime than likelihood of getting caught, so making your deals public is much safer than relying on someone’s reputation alone.
Alex Weldon (@benefactumgames) is a freelance writer, game designer and semipro poker player from Montreal, Quebec, Canada.
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