Reading the Full Tilt Poker “Ponzi” Complaint

From the amended complaint against online poker outfit, Full Tilt Poker, wherein the Feds call FTP a “global ponzi”. Strong stuff.

5.  As described more fully below, one of the PokerCompanies, Full Tilt Poker, not only engaged in the operation ofan unlawful gambling business, bank fraud, wire fraud, and moneylaundering as alleged in the Complaint, but also defrauded itspoker players by misrepresenting to players that funds depositedinto their online player accounts were secure and segregated fromoperating funds, while at the same time using player funds to payout hundreds of millions of dollars to Full Tilt Poker owners.Full Tilt Poker was able to accomplish this massive fraud, inpart, because it illegally conducted business in the UnitedStates but maintained its personnel, operations, assets, andaccounts principally overseas.

6.   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.

7.   As of March 31, 2011, Full Tilt Poker owedapproximately $390 million to players around the world, includingapproximately $150 million owed to players in the United States.At that time Full Tilt Poker had only approximately $60 millionon deposit in its bank accounts.  As of the filing of this Amended Complaint, Full Tilt Poker still owes players over $300million.

8.   Meanwhile, from approximately April 2007 untilApril 2011, Full Tilt Poker, and its Board of Directors, Bitar,Howard Lederer (“Lederer”), Christopher Ferguson, a/k/a “Jesus”(“Ferguson”), and Rafael Furst (“Furst”), all owners of Full TiltPoker, distributed approximately $443,860,529.89 to themselves and other owners of the company.  Payments to the Full Tilt Pokerowners stopped only after April 15, 2011.

105. Full Tilt Poker’s repeated representations that(1) player funds were held separately from operating accounts,(2) player funds were “safe” and “available,” and (3) it did notallow play on credit but instead allowed play only with “cleared”funds were, in reality, lies.  In truth and in fact, Full TiltPoker provided no protection whatsoever to deposits it receivedfrom players in the United States and other countries, and simplyused the funds it claimed it was holding on account for itsplayers to cover business expenses and to pay hundreds of millionsof dollars in distributions to professional poker playersaffiliated with Full Tilt Poker and others who owned interests inTiltware LLC.  As a result, according to a balance sheet preparedby Full Tilt Poker, as of March 31, 2011, Full Tilt Poker owed players from around the world over approximately $390,695,788 buthad only approximately $59,579,413 in its bank accounts.  FullTilt Poker relied on new deposits from players to ensure itsability to fund withdrawals to players’ accounts.

106. Rather than protect player funds as promised, FullTilt Poker distributed hundreds of millions of dollars to its owners.

More here.

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  3. Isildur1 and the Week That Changed Online Poker
  4. FT Tilt Emerges
  5. School Auctions Trader’s Poker Lessons For Fund-Raiser

Comments

  1. Kid Dynamite says:

    paul – but doesn't this mean that the players who lost on FullTilt didn't actually lose real money, if it was never removed from their bank accounts???

    • Paul Kedrosky says:

      Good point. Reminds me of one of my favorite ponzis (summarized atgmmreceiver.com) where the judge pointed out how lucky the plaintiffswere that the ponzi-runners never got around to taking their money outof their accounts.

    • Andy says:

      Ponzis are far from the worst investments out there. Madoff never suffered a capital loss, or wasted his clients' money on transaction costs.

    • @mchristo says:

      That isn't what it means at all. Only *some portion* of player deposits from the last couple months of operations were not debited from players bank accounts. Also in the months leading up to black friday, FT's payment processors or the company itself was committing massive ACH fraud, likely to shore up their balance sheets because of the impending indictments.

  2. But What Do I Know? says:

    "Jesus" is a crook? Say it ain't so!

  3. jason says:

    send them all to jail

  4. Esteban says:

    Can't wait to see Jesus and The Professor in orange jumpsuits. Hey, at least you get to play cards in prison. Those two will have more cigarettes than they'll know what to do with.

  5. rick says:

    They will never go to jail. I was playing while on vacation in miami. I rented this fully furnished condo on the beach ocean front. It has high speed Wifi included and I played like the whole time I was there. I wish I did not do that and I should have gone to the beach more. Check them out for furnished vacation rentals at travelfurnish.com

  6. s jay says:

    I don't see a mention of the fact that the Feds were successful, over a multi-year period, in seizing $115M (per Forbes article) of FullTilt funds that were deposited in US banking institutions for distribution of payouts to players. FullTilt also claims a $42M theft by one of their payments processors. This is on top of the (somewhat oblique) mention in the indictment that the Feds were quite successful in blocking collection of deposits to FullTilt (though these funds may be included in the $115M claimed in the Forbes article). I recall reading about players` payout checks, which were written against US banks, bouncing a few years ago. This was a result of the first Fed seizures of US-based payout funds. FullTilt's response to this was to cover all the bounced checks with other funds, and it was millions of dollars! This astonished me at the time, not only because it implied how huge the profits were, but also because it was such a brazen countermove against the Fed attempt to shut them down by cutting off the flow of payouts to their customers. In effect, they re-raised the Feds. Once they started down this path, they were doomed. They had exactly one chance to make a good laydown against the Feds, the first time it became obvious that the Feds were very, very serious about doing anything and everything to shut them down. Fatally, they decided instead to make a check-raise all-in semi-bluff into the nuts. Obviously, one underestimates the power of the US government at one's peril. But to characterize all of this as a Ponzi scheme, that seems to me to be (rather clever) prosecutor-speak. BTW, where do all those seized funds end up? I'm out a measly $600 over this fiasco, but I'm just saying…

  7. wbracken258 says:

    "As of March 31, 2011, Full Tilt Poker owed approximately $390 million to players around the world, including approximately $150 million owed to players in the United States.At that time Full Tilt Poker had only approximately $60 million on deposit in its bank accounts."

    This is different from Groupon how?