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After more than one month since Purple Lounge suddenly went off line, its parent company, Media Corporation, has announced that the site will not resume operation. The Board of Media Corp announced this week that all employees of Purple Lounge have been laid off, that the poker site’s assets will be liquidated. Players’ funds will be looked into by the liquidators, along with other financial liabilities and debts.

Media Corp, a publically traded company on the London Stock Exchange (symbol: MDC), stated that they have loaned Purple Lounge “well over £1 million” since it acquired the site in October of 2009. The Board has essentially washed their hands of any wrong doing, saying that they do not expect any “further liabilities” to Media Corp regarding Purple Lounge other than the “realization of the above loan”. It appears that players will be paid out of whatever funds remain after Media Corp receives their money back, if there are any left over.

Earlier this year, Purple Lounge had moved networks from Microgaming over to Entraction in attempts to increase their revenues. But by the end of April, players had noted that they were unable to connect to the Purple Lounge Casino, and then the site closed down completely on April 24th.

The Lotteries and Gaming Authority of Malta (LGA) had provided Purple Lounge with an online gaming license since they first opened. Their license to operate was terminated on the 23rd of April, one day before the site went offline. The LGA has stated outright that they have no authority or liability to intervene on players’ behalf because there were no pending complaints against Purple Lounge at the time their license was revoked. It should be noted that the LGA did not update their website to reflect the termination of Purple Lounge’s license until May 1st.

The LGA also claims that the site was “compliant with Remote Gaming Regulations” while they still maintained their Maltese gaming license. This seems hard to believe, as it is obvious that player funds were most certainly not kept segregated from other funds such as operating capital, as is required under the terms of the LGA gaming license they were issued.

This is not the first time that the LGA has been criticized for its failure to protect players and their funds. Earlier this year the Everleaf Gaming Network (EGN) underwent unspecified “sanctions” by the LGA after finding some “irregularities” in their operation. EGN still has an LGA license to operate, yet most of their American players have no feasible method to withdraw their funds. Players on EGN from other countries who do have viable withdrawal methods are still waiting weeks to get their cash outs.

The LGA has shown that they will only step in so long as the site in question is still licensed by their organization. But this ends up being a catch-22. When players really do need serious assistance from the regulator, the licensing organization simply drops the license and claims that they are not liable. This is especially easy for an out of country licensing body to do with the inside information that they have of the sites they deal with.

A site like Purple Lounge does not simply go defunct overnight. There are always warning signs of impending financial and operating procedure trouble. This is exactly what the licensing organization (in this case, the LGA) should be aware of and also be taking proactive steps in order to protect players. Simply terminating a site’s license and washing their hands of any wrongdoing is absolutely abhorrent and players are right to be outraged at this abuse of trust by the LGA.