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The Sky’s the . . . er . . . Limit!

COMMENT: Sometimes life presents us with events that are both significant in and of themselves, and metaphorically portentous. These qualifications apply to a story about Cantor Fitzgerald operating a sports betting operation with no limit on the size of wagers!

Major bond trader Cantor Fitzgerald recently got into the sports gambling business.  But unlike other bookies, the Cantor Fitzgerald won’t have an upper cap in the bets it takes.  The article points out that it handled multiple bets over $500k during this year’s Super Bowl.

Keep in mind that Cantor Fizgerald’s offices in the twin towers took a direct hit on 9/11 and it was in those offices that a number of highly questionable, high volume financial transactions allegedly took place right before the planes impacted.  A German company, Convar, was hired to to reconstruct those transactions with the damaged computer hard drives, then Convar was bought by Kroll, and we’ve never seen a follow up on that news story.

The new  “unlimited bets” sports betting subsidiary could be really useful for money-laundering. Might that have been part of the business model  from the beginning?

Cantor started developing mobile gambling technology in the mid 2000’s, but it really got into this business in a big way in 2008 when it bought Las Vegas Sports Consultants, the biggest odds-maker in Vegas.  Cantor’s revenues from this subsidiary were $400 million last year and are projected to top $1 billion.  The guy running the unit started off as a stable boy working at race tracks and then jumped into bond trading in the 80’s.  He was busted from running a multi-million dollar cocaine distribution ring in Wall Street in 1986.

The author notes how the “take-all-comers” and “no upper limit” approach raises enormous risks for the firm, but the managers claim that the will mitigate that risk through volume.  This is essentially  the same BS excuse Wall Street made before the derivatives meltdown.  It will be interesting to see how big a hit Cantor might take from one bad Super Bowl outcome (like a star player getting injured in the middle of the game).  Recall in this regard, the significant involvement of organized crime in the NFL and sports gambling.

Mr. Amaitis’ s background–horseracing and cocaine dealing–augurs poorly for the future of this enterprise.

“Taking Risks, Making Odds” by Susanne Craig; The New York Times [Dealbook]; 12/24/2010.

Miles away from the glamour of the Las Vegas Strip, past foreclosed homes and dusty tracts of desert, the Wall Street bond powerhouse Cantor Fitzgerald has placed millions of dollars of its own money on the table.

At the M Resort Spa Casino, Lee Amaitis, a former bond trader who now runs Cantor’s operations here, held court in a dimly lighted plush orange V.I.P. booth lined with large Champagne bottles. Leaning forward, he talked excitedly about the ambitious plans for the Cantor Gaming subsidiary. . . .

. . . . Cantor Fitzgerald is one of the biggest brokers of United States government securities, considered among the safest places to put one’s money. Cantor Gaming handles some of the riskiest. It runs the sports book at the M Resort, a relatively new casino popular among Las Vegas locals. It has or will soon start handling the sports betting operations at the Vegas Hard Rock Hotel and Casino and at the recently opened Cosmopolitan of Las Vegas and the Tropicana Las Vegas, all on or near the Strip.

And Cantor is banking on the next frontier in gambling: a license that would allow sports betting on mobile devices anywhere in Nevada, as long as the bettor had an account at a casino.

Wall Street executives usually protest when their business is compared to a casino. But there is a logic to privately held Cantor’s Vegas subsidiary, casino industry experts say.

“Guys who trade Treasuries are doing it for basis points, and sports betting is not much different,” said Jeffrey B. Logsdon, an entertainment and gaming analyst for BMO Capital Markets. “Trading a million dollars in Treasuries is different than trading a billion. Sports betting is the same. You want the spread, volume and you see yourself as a match maker.”

Still, for Cantor it is a potentially huge risky bet. Unlike most sports books, which typically cap wagers at anywhere from $1,000 to $10,000, Cantor Gaming’s book has a take-all-comers policy, exposing it to losses if it cannot hedge its bigger bets. During Super Bowl XLIV this year, it handled a few bets in excess of $500,000.

Cantor’s push into Vegas is being led by the 61-year-old Mr. Amaitis, whose past includes a conviction in his 20s for dealing cocaine. Cantor Gaming, Mr. Amaitis says, mitigates its risk through volume.

And Cantor hopes to have another advantage through richer data. In 2008, Cantor Gaming bought Las Vegas Sports Consultants, the world’s largest odds maker. It sets the odds for more than 40 percent of the casinos in Las Vegas, and Cantor used that data to expand into what is known as in-running betting, which lets people wager on portable devices on sporting events in progress. . . .

. . . . In two years, Cantor Gaming has grown into a force in Nevada. So far this year, the sports book at the M Casino has taken in more than $400 million in wagers, almost 20 percent of all the money bet on sporting events in Nevada, Mr. Amaitis says. He contends that the number will grow to $1 billion, or almost 40 percent of the market, in 2011.

The firm is not profitable; most of its revenue is reinvested in new technology. But Mr. Amaitis predicts the company will be profitable on an operating basis in 2011.

Mr. Amaitis has long had passion for sport and betting. As a boy he would head to the track after school. At the age of 16, Mr. Amaitis, a Brooklyn native, landed at job as a stable boy at New York’s Aqueduct racecourse and worked his way up to racing official.

In his late 20s, he switched careers, becoming a bond trader at Fundamental Brokers. In 1986 he was arrested at work, accused of being part of a multimillion-dollar drug ring that was peddling cocaine at Wall Street firms. He pleaded guilty to possession as part of a plea bargain. The indictment was dismissed, and he was sentenced to a year’s probation and a $5,000 fine. . . .

. . . . In 1995, Mr. Amaitis accepted a job at Cantor from a friend, Howard Lutnick, the firm’s chief executive and chairman. A year later he was dispatched to London to oversee Cantor’s European operations. It was there that Mr. Amaitis got the idea for Cantor Gaming. . . .

. . . . Mr. Magliarditi joined the Vegas Hard Rock Hotel and Casino in June, leading to the Hard Rock’s recent decision to hire Cantor to run its sports book. Cantor Gaming pays rent to operate in the casinos, and the casinos get an undisclosed cut of the profit.

Cantor Gaming’s decision to take huge wagers is what sets it apart from others. A Cantor Gaming executive, Andrew Garood, said while this strategy had helped Cantor Gaming expand and attract professional bettors and high rollers, there had been some dicey moments.

For instance, in November 2009, the Indianapolis Colts were two-point favorites going into a game with the New England Patriots. The Colts won the game by just one point. Cantor lost money on both the game and the spread.

“I don’t see any difference between Las Vegas Boulevard and Wall Street,” said Mr. Garood, a former derivatives trader who joined in Cantor in 2000. “Over time we can’t lose, but there will be games where we take a hit.”

Discussion

One comment for “The Sky’s the . . . er . . . Limit!”

  1. Your Drug War in action: Mexican drug cartels are now using horse racing to launder their US proceeds. Not just betting on horses, mind you, but actually buying stables and raising their own horses. Then they use the proceeds to buy more US ranches and property. So, anyways, it sounds like horses named “Zeta” tend to do well at the track:

    LA Times
    Drug cartel accused of laundering money through horse racing

    By Richard A. Serrano

    June 12, 2012, 2:15 p.m.
    WASHINGTON – The unlikeliest of marriages – the most violent Mexican drug cartel and the world of U.S. quarter horse racing – ended with the arrest Tuesday of one of the top men in the Los Zetas drug trafficking ring after U.S. officials began suspecting an uncanny run of good fortune at the track and the laundering of millions of dollars in drug proceeds.

    Arrested were Jose Trevino Morales, his wife, and five associates. They were taken into U.S. custody after scores of FBI agents in all-terrain vehicles and helicopters raided horse stables and ranches near Ruidoso, N.M., and Lexington, Okla.

    Working on a tip from more than two years ago, law enforcement officials learned that the Zetas were laundering up to $1 million a month through the quarter horse industry. In federal charges unsealed in Texas, Trevino and the others were indicted for laundering drug profits by “purchasing, training, breeding and racing American quarter horses.”

    While Trevino and other alleged Zetas leaders were fielding winners at the track – with many of their horses named after the cartel itself – their organization was carrying out some of the most violent murders in Mexico. Just last month the dismembered bodies of 49 people were discovered in bags there, and authorities saw it as the work of Trevino’s brother, Miguel Angel Trevino, the No. 2 leader of the Zetas and the world’s most wanted narcotics smuggler. He also was indicted in the alleged horse-racing scheme.

    James Phelps, a Southwest border expert and assistant professor at Angelo State University in San Angelo, Texas, said a cartel and horse racing would seem a perfect match to hide funds.

    “When you have hundreds of billions a year in your industry and you can’t ship the bulk of the cash back, it has to go somewhere,” he said. “They are buying huge ranches in locations across the Southwest and mountain states. It’s just a very viable way to launder the cash.”

    Posted by Pterrafractyl | June 12, 2012, 2:25 pm

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