Feds Call Full Tilt Poker a Global Ponzi Scheme
Prosecutor Seeking Penalties Against Board Members and Two Poker Champions
by Adam Hilliard on September 21, 2011
Federal prosecutors on September 20 accused executives at Full Tilt Poker, a now-defunct online gambling portal, of lying to customers in order to pay more than $440 million to board members and owners of the site.
Howard Lederer and Christopher Ferguson, who are both accomplished poker champions and members of the Full Tilt’s board, were charged by the U.S. Attorney’s Office for the Southern District of New York. They are accused of knowingly profiting from the scam.
As stated in U.S. attorney Preet Bharara’s complaint Full Tilt Poker “defrauded players by misrepresenting that their funds on deposit in online gambling accounts were safe, secure, and available for withdrawal at any time. In reality, Full Tilt Poker did not maintain funds sufficient to repay all players, and in addition, the company used player funds to pay board members and other owners more than $440 million since April 2007.”
In April of 2011, Full Tilt Poker and other online gambling portals were taken offline amid charges of bank fraud, illegal gambling, and money laundering. Since that time, the Full Tilt site bears only the seal of the Department of Justice. It only exists in order to repay funds to players.
That may prove quite difficult to do, however, as the company on March 31 the firm owed $390 million to players, but had only $60 million in its bank accounts. How did this happen? According to Bharara, “In order to maintain its false image of financial security, Full Tilt continued to credit player accounts without disclosing its inability to fund those credits. When players gambled with these phantom funds and lost to other players, a massive shortfall developed.”
Rather than cut their losses, the prosecutor charges that the company just forged ahead, accruing debt even after the April charges had been filed. By June, debts had been lowered to $300 million, but the company had only $6 million in funds available.
“Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” Bharara said in a press release, “Full Tilt insiders lined their own pockets with funds picked from the pockets of their most loyal customers while blithely lying to both players and the public alike about the safety and security of the money deposited with the company.”
Attorneys for Full Tilt have yet to comment on these charges. Lederer and Ferguson are facing possible fines for their involvement as well as the forfeiture of any money received through the scam.
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