Monday, January 13, 2014

MGT Capital Investment's Fumbles Player Confidence

MGT Capital Investment (MGT) owns 65% of Daily Fantasy website Fan Throwdown. 

On January 9th this was sent to Fan Throwdown Members:

Hello FanTD User,
If you are receiving this notice, it means that you are on our master list of users who have met or exceeded the total in winnings that would require a tax form to be submitted. We would like to take this opportunity to inform you of our policy on this matter, as well as ask you to please submit the required forms as soon as is convenient for you. 
For any user who has a total in gross winnings that equals or exceeds $600 for any calendar year, the government requires us to get a W9 form for US citizens, and a W8 form from users outside the US. 
This total does not take losses or withdrawals into account, and is strictly a total in winnings that you have been awarded in one year’s time. Please understand that filling out the required form is NOT an agreement to pay tax on this amount, it is strictly the information WE need to report these winnings to the government as we are required to by law. How this affects your yearly tax burden is between you and the IRS, and our participation does not in any way affect that process. 
Please note that any pending withdrawals are held from processing for any users who are required to send the tax forms and have yet to do so. 
If you have any questions or concerns on this matter, please do not hesitate to contact us.
This immediately started a forum thread on a website where members of the daily fantasy community were outraged that Fan Throwdown was not taking losses into account when reporting information to the IRS. This issue also was backing up cash-outs - as players needed to submit this info in order to withdraw money from the website.

On January 10th this was sent to members of Fan Throwdown:

To our players and the broader DFS Community:
In the last day or so we have received feedback about FanThrowdown’s policy regarding the issuance of 1099-MISC tax documents for calendar year 2013. We became aware that due to the lack of communication (and miscommunications) in this process, the DFS community concluded that FanTD was not sensitive to this issue. I can assure you that this perception could not be further from the truth. For those of you who do not know me, I am the CFO and a director of MGT Capital Investments, Inc., the parent company of FanTD. As you can appreciate, in my position, I need to obtain all relevant facts prior to jumping to uncertain conclusions, particularly with respect to such sensitive information as FanTD’s tax reporting obligations to our players.
I requested our tax advisors conduct deeper research, and based on those findings plus the Company’s independent research, we will report 1099-MISC tax documents utilizing “Net Winnings” which will consist of Gross Winnings less Entry Fees. We express our sincerest apologies for any concerns or misunderstanding by not providing certainty on this matter sooner. 
Several months ago, when MGT invested into FanThrowdown, we saw an asset with great potential for growth in an exciting new industry. Our initial goal was to repair the longstanding technical issues by attracting exceptional engineering talent and then to deploy daily contests with greater accessibility and speed. We now face the need to strengthen the management team at FanThrowdown and we will be making immediate changes to address the situation. 
With respect to player deposits, please be assured that MGT is a New York Stock Exchange company with a $25 million market value, $5 million in cash, and no debt. There is absolutely no need for concern with respect to the safety and integrity of your funds. 
Thank you again for your feedback—we believe we have always demonstrated immense respect for our players and will continue to do so. 
It remains our goal to aggressively improve MGT’s Daily Fantasy Sports ventures with our player’s best interests in mind. 
Best regards,
Robert Traversa
MGT Capital Investments, Inc.
500 Mamaroneck Avenue, suite 204
Harrison, NY 10528
Bold emphasis added by me.

Inside the same thread, connections are made that one of the owners of is a registered sex offender.

Member EmpireMaker2 in the forum thread I link to earlier made this post approximately on January 9, 2014:
Also seems like the owner of fanthrowdown is a registered sex offender. Payments to the site go to JONATHAN LICATA not Mongero. He changed his last name to his mother maiden name presumably after this happened. Let me know if you need anymore evidence.
A link was later posted to a news story blurb that described the crime.

It remains to be seen how these developments will filter through the daily fantasy community which is fragmented among several websites that allow customers to play fantasy sports games for cash against others.

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