Dept of Justice Calls Full Tilt Poker “A Global Ponzi Scheme”

via the WSJ:

“Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” said Preet Bharara, U.S. Attorney for the Southern District, in a statement. “

Forbes adds:

“Federal prosecutors in Manhattan said on Tuesday they were filing legal papers as part of a civil money laundering complaint that alleged Full Tilt Poker improperly used funds of online poker players to pay members of its board of directors, including famous poker players Howard Lederer and Christopher “Jesus” Ferguson, $440 million since April 2007.”

Unreal.  What blows my mind about this is that online poker is ALREADY a tremendous business model.  Customers deposit money and play against each other, with “the house” – FullTilt Poker in this case  – taking a tiny cut of each hand played.  The business is easily scalable, and once it’s up and running it becomes a money printing machine.  Customer funds flow around a virtual whirlpool, with little bits constantly leaking out into the coffers of The House – LEGALLY!  The House doesn’t have to steal the money – they get it in the end anyway!   If you don’t like the whirlpool analogy, imagine an old-school hourglass.  The sand inside the top of the hourglass is the sum of customer funds, and it’s constantly trickling into the bottom: the House accounts – as the customers pay “rake” for every hand they play.

It boggles my mind that FullTilt would steal from their players when they already had one of the most tremendous business models on the planet.

 

EDIT:  via Paul Kedrosky, an amazing excerpt from the complaint, emphasis mine:

“As described more fully below, in or about thesummer of 2010, Full Tilt Poker’s payment processing channels were so disrupted that the company faced increasing difficulty attempting to collect funds from players in the United States.Rather than disclose this fact, Full Tilt Poker simply credited players’ online gambling accounts with money that had never actually been collected from the players’ bank accounts.  FullTilt Poker allowed players to gamble with — and lose to other players — this phantom money that Full Tilt Poker never actually collected or possessed.  When other players won these phantomfunds, their accounts were credited with money that Full Tilt Poker did not actually possess, but now nevertheless owed to these players.  As a result, Full Tilt Poker soon developed a massive shortfall between the money owed to United States players and the money actually collected from United States players, with Full Tilt Poker having credited approximately $130 million in phantom money to U.S. players’ online accounts that was never actually collected from players’ bank accounts.  Full Tilt Poker never disclosed this shortfall to the public.”

previously:

1) Online Poker D-Day

2) You’re Gonna Get Your Online Poker Funds Back. (ummm – at least, the Government won’t confiscate them… but if the company stole them, you might not get them back

3) Pokerstars Cashout email

-KD

disclosures: I own shares in $PYGMF : the U.S. Pink Sheet stock of BPTY.L: Betwin.Party Digital Entertainment.   I never had money at FullTilt Poker.  I had money at Pokerstars, which was returned to me upon request after the Online Poker D-Day.

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