The US Attorney’s office in Manhattan has accused the board members of Full Tilt Poker of pocketing more than $440 million worth of winnings that should have been paid out to players.Those board members include champion poker players Howard Lederer and Christopher “Jesus” Ferguson.
Earlier this year, Full Tilt’s domains and bank accounts were seized by the Justice Department as part of investigation into illegal online gambling.
Today’s filing is an amendment to the forfeiture complaint, claiming that the company did not keep enough money on hand to actually pay players their winnings, but instead directed those funds to members of the board.
The owners are accused of continuing to pay themselves out of player winnings, even after the Justice Department had seized millions in company assets and made it nearly impossible to play players back.
All the while, the company assured poker players that their money was safe in Full Tilt accounts.
In 2008, Full Tilt told players that their playing accounts were kept totally separate from the company’s operations accounts, but that was never the case.
The complaint alleges that in March of this year, Full Tilt Poker owed players around the world $390 million, including $150 million in the U.S., but had only $60 million in its bank accounts.
According to the DOJ, the owners were informed of June that the company could not afford “a run on the bank” of more than $6 million. Yet, the company continued to take new deposits from international players.
Compounding the problems were Full Tilt’s issues with its (illegal) payment processing system. The company was unable to withdraw money from U.S. bank accounts to fund player gambling accounts. However, they continued to credit more than $130 million in player funds (that it never actually accepted) simply to maintain the image of financial stability.
The company has been charged with money laundering and other civil crimes related to running an online gambling operation. Federal law makes it illegal to process financial transactions related to gambling.
Full Tilt and other poker companies, Absolute Poker and PokerStars.net, were accused of setting up phony transactions and companies in order to process and hide gambling activity.
Full Tilt also faced a hearing in the UK today, that could result in the company having its gambling licence revoked. No updates have released from that hearing, which was not open to the public.
1:52pm | NOT a ponzi scheme.
After thinking about it some more, we’ve decided that calling this a “ponzi scheme,” while effective PR, is not accurate. In any poker game, winners are paid by the money put in by the losers. In that sense, all gambling is a ponzi scheme, as there is no scenario in which everyone walks away with a profit. However, in the very specific sense of a fraudulent investment where first investors take their profits from new investors, that’s not what happened here.
It’s not even clear that Full Tilt’s board committed theft or embezzlement (which is why they have NOT been charged with that.) The truth is that there are no regulations about how much cash a game operator must have available for withdrawals or how different accounts must be segregated. That’s because the entire operation itself is illegal (according to the government) and not subject to the strict gaming laws of a place like Nevada. The company did business running games and paying winners for years, with few problems for those who wanted their money back.
What Full Tilt may have done – and this is at the heart of the DOJ complaint – is commit fraud, by lying to players about the status of their money and accounts. They told players that all their funds were sitting in a segregated bank accounts ready for withdrawal at any time. That was not true and gave a misleading picture of the financial stability of the company.
Full Title actively misled and deceived players about the nature of the business and continued to enrich themselves (allegedly) even after the criminal complaints made it impossible for players to retrieve their money. That may be dishonest and even criminal, but that doesn’t make it a ponzi scheme.
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