WSEX Founder and Industry Innovator Commits Suicide
By Hartley Henderson - Exclusive to OSGA.com
Apr 24, 2013, 04:41
"The evil men do lives after them, the good is oft interred with their bones." That quote by Mark Antony in Shakespeare's play Julius Caesar is often used in obituaries for people who had many good qualities but generally kept to themselves. Steve Schillinger, one of the founders of World Sports Exchange (WSEX) took his own life on Friday after friends went to his condo to invite him to a party and found his body on the floor with a gun next to him. According to sources close to the scene Schillinger left a note stating that he could no longer live with the guilt of not being able to pay customers and his death coincided with WSEX shutting down its web site the same day. Since Schillinger didn't have any family in Antigua to tell his story I figured I would try to relay some information about his career in a short obituary based on information he relayed to me over the years as well as comments in magazines and newspapers.
Steve Schillinger was a successful stock trader on the Pacific Stock Exchange throughout the 1980s and 1990s and with the Internet becoming available to people for everyday use he devised a way to trade sports, the same way one trades stocks on a market. Teaming with fellow exchangers Jay Cohen and Haden Ware, Schillinger, moved to the island of Antigua where sports betting was legal. The three created the software for a betting exchange, raised operating capital and obtained a license from the Antiguan government which allowed them to take bets from anywhere in the world. While expensive, Schillinger told newspapers that Antigua had the best regulations and communication system which justified the $100,000 license fee. Building the product in a basement Schillinger and the others created a website that was simplistic yet very functional. The fact it didn't have a lot of graphics was one of the benefits to many customers since the site loaded quickly (a big concern with dial up modems at the time). With the sports exchange, bettors didn't wager against the sportsbooks at fixed odds like with traditional bookmaking sites but rather WSEX put up an interactive line and bettors could back a team (or contestant) or bet against them (lay). The line would change as the game or event progressed and bettors always had the opportunity of selling their position for a profit at any point or get rid of a losing position at a loss. The lines were always based on $100 so a game with a market of say 50-55 would yield $100 to anyone who backed the team for $50 (1/1 odds) or players could win $100 for a $55 if they laid the team (4/5 odds) and it lost. The difference in the back and lay was WSEX's vigorish. The concept was unique and it preceded both Betfair and Betdaq who turned the concept into billion dollar companies. The concept was immediately embraced by American bettors and WSEX flourished. They advertised everywhere and were featured in various U.S. newspapers and TV news reports. Schillinger, the senior member of the WSEX was seen as the numbers man and by all accounts was a brilliant individual who understood exactly when to move a line and how to create a market that would minimize risk to WSEX. He was especially proficient on golf, baseball and basketball. WSEX also offered a traditional sportsbook.
While many customers tried to take advantage of some errors in the early days of WSEX such as betting on golf markets before the company opened for business and thus taking advantage of early movers, Schillinger usually just processed the transactions stating that to him customer service was more important than a few hundred lost on some company mistakes. It was actually that type of attention to the customer that made Schillinger so admired by WSEX customers. If someone didn't't understand how the sports exchange worked, Schillinger gladly took the time to explain it to them in detail and even gave some pointers on when to recognize whether it was in their interest to hedge or even sell their whole market position. Schillinger was also known to be quite generous and WSEX was always contributing to various causes in Antigua. From all the people I spoke to who knew him (some were even neighbors), I was told that Schillinger was a very kind albeit soft spoken individual.
WSEX came into the news in a negative way in the late 1990s when the U.S. government targeted them and other offshore sportsbooks, claiming they all the sportsbooks were operating in violation of U.S. law. In the indictment the U.S. government stated that they conducted "a sting operation" by opening an account and placing a bet using both the telephone and Internet at WSEX and they received a payout when they won. But of course that was just business as usual. It made about as much sense as stating that the U.S. government conducted a sting operation on a grocery store by picking up a loaf of bread, taking it to the register and watched as the cashier took their money and gave them less money back along with the bread. Schillinger, Ware and Cohen along with another WSEX manager were named in the arrest warrants by the government and while those named in other companies either turned themselves in or simply ignored the warrant, Jay Cohen decided to return to fight the charges arguing that WSEX was operating legally per Antiguan law. Schillinger and Ware stayed in Antigua to operate the company while Cohen was more expendable since he was mostly involved in marketing and obtaining new clients rather than the day to day operations.
Cohen eventually lost his case and went to jail for 17 months but WSEX didn't miss a beat. Thanks to Schillinger and Ware's knowledge of sports WSEX continued to be one of the preferred offshore sportsbooks and the company was given the top rating by all watchdog sites. Things went well until 2006 when the UIGEA passed in Congress. Some processors already withdrew their services to WSEX after Cohen was found guilty but as long as NETeller operated things were fine. But when NETeller withdrew from the U.S. market and funds at NETeller were seized by the DoJ in January of 2007 things turned. It's not quite certain what happened but from what I was told by other Antiguan operators, WSEX was forced to turn to 3rd party processors and it appeared they made some poor choices in the operators they chose as funds were constantly seized or simply disappeared after rogue processors left without a return address. The company was also dealt a blow thanks to the Stanford Bank scandal. When it was found out that Alan Stanford was the Antiguan version of Bernie Madoff, U.S. banks refused to deal with any Antiguan banks and thus WSEX lost all payment options aside from 3rd party processors, many which couldn't be trusted. Consequently slow pay became the norm from around 2009 onward. After 2009 customers waited long periods of time to get paid and in some cases they were never paid.
Despite those facts Schillinger informed me that it was his mission to turn the company around and pay every player what was owed to them. Naively he believed, like Cohen, that the WTO could be the company's salvation if the country won its lawsuit against the USTR but the U.S. government refused and still refuses to talk seriously with Antigua about the U.S. commitments despite Antigua's win. In fact very recently the U.S. threatened Antigua with serious ramifications if it used the judgment it was awarded in 2010 which allowed Antigua to produce computer and music products without adhering to copyrights and trademarks. WSEX attracted some new investors the last couple of years to help keep them operating and the investors made some strategic changes but after losing their partnership with Matchbook, after giving up their Antiguan license for a Cyprus one (a jurisdiction known to be very soft) and after being downgraded to an "F" by almost every watchdog site, the final outcome was inevitable. On April 20, WSEX closed its doors for good and Schillinger as a man of honor and conviction couldn't live without the company he devoted almost 2 decades to nor could he live knowing players wouldn't be repaid.
Schillinger was 60 years old. It's unknown about family although sources in Antigua told me that they remember family visiting him in Antigua during the company's heyday. Schillinger along with the other WSEX managers clearly made some business errors but he will be remembered as a pioneer with the development of the sports exchange which has taken off in Europe and appears to be ready to take off in the United States in horse racing.
Contact Hartley via email at hartley[at]osga[dot]com.