Full Tilt Poker Ponzi Scheme: Online Poker Is More Sinister Than We Thought
Ponzi schemes are all the rage in sports at the moment.
For example, there's New York Mets owner Fred Wilpon, who may or may not be a victim of Bernie Madoff's infamous Ponzi scheme. There's also convicted Ponzi schemer Nevin Shapiro, who recently threw the University of Miami into chaos.
And now, it sounds like there could be another Ponzi scheme to throw into the mix. This one, perhaps not surprisingly, involves online poker.
Recently, the U.S. Department of Justice filed a complaint that alleges Full Tilt Poker was, at its heart, a Ponzi scheme.
We know that the site was investigated and eventually shut down by the feds on April 15 for being in violation of gambling, bank fraud and money laundering laws, but one of the questions at this point is exactly how the site took in and distributed money.
Per Reuters, this is how the U.S. Attorney's complaint explains things:
According to a balance sheet prepared by Full Tilt Poker, as of March 31, 2011, Full Tilt Poker owed players from around the world over approximately $390,695,788, but had only approximately $59,579,413 in its bank accounts. Full Tilt Poker relied on new deposits from players to ensure its ability to fund withdrawals to players’ accounts.
Rather than protect player funds as promised, Full Tilt Poker distributed hundreds of millions of dollars to its owners.
The complaint goes on to accuse Howard Lederer and Chris Ferguson, widely-known poker players and defendants in the case, of pocketing millions of dollars from the scheme.
Seeing as how there was a $330 million gap between what the site owed and what the site actually had, they're clearly not the only ones who did.
Do you think Full Tilt Poker will ever pay off its debts?
It seems that Full Tilt Poker was certainly guilty of running a Ponzi scheme, which, if you don't mind the Wikipedia definition, is an "operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation."
If you're at all curious as to how Full Tilt Poker is (or was) any different from your garden-variety casino, it's a simple matter of government regulations.
Casinos are heavily regulated, and online poker sites like Full Tilt never were. That's what led to their rise to power and ultimately their shutdown.
In fact, when you put the big picture in perspective, whether or not Full Tilt Poker and other online poker sites were guilty of running Ponzi schemes almost seems like a petty complaint. These sites broke all sorts of laws, and they did so willingly. Calling them Ponzi schemes is merely adding fuel to the fire.
The more troubling part, if you ask me, is how the aforementioned $330 million gap is going to be accounted for. That's a lot of money that belonged to the site's myriad of players, and my fear is that it may never be paid back.
According to FoxBusiness.com, that could be a possibility.
The site owed $390 million to its players back in March, and that total has since decreased ever-so-slightly to $300 million.
In other words, Full Tilt Poker is already being slow to pay back its debts. Speeding up the process is going to be difficult, seeing as how the site already has limited funds at its disposal.
For that, you can blame the site, if you weren't already, of course.
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