Department of Justice: Full Tilt Poker a 'Global Ponzi Scheme'
Howard Lederer, Chris Ferguson, Rafe Furst, Ray Bitar Allegedly Defrauded Players out of $440 Million
Note: This article has been updated to include additional information retrieved from Full Tilt Poker’s Insolvency As a Result of Paying Owners From Players Funds Its Inability to Collect Deposits from U.S. Players which can be obtained, starting on page 71, on the United States District Court’s Amended Complaint here.
On Tuesday morning the U.S. Department of Justice accused Full Tilt Poker’s board members Howard Lederer, Chris Ferguson, and Rafe Furst of working with CEO Ray Bitar to defraud poker players out of more than $440 million over the past four years.
After Tuesday’s amendments to April’s original indictment swept more names from the beleaguered site into the thick of legal trouble, Manhattan’s U.S. Attorney Preet Bharara said in a statement that “Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” while “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.”
The government is also alleging that on Mar. 31 Full Tilt only had about $60 million in the bank while owing about $400 million globally, including $150 million to U.S. customers.
At a rate of about $10 million per month, Full Tilt paid “distributions” to its board of directors, in addition to loaning money to various “professional” poker players. This summer Full Tilt alleged that Phil Ivey (not named in Tuesday’s amendments) had borrowed from the company.
Starting around August 2010, the company began noticing a difficulty in collecting funds from the bank accounts of depositors. The site secretly began to credit funds to players’ online gambling accounts that it had never actually collected. Full Tilt continued to operate as usual, paying millions to its stakeholders.
As players inevitably lost, $130 million in “phantom funds” existed within the site’s accounts. Despite concerns about what CEO Ray Bitar described as a “run on the bank,” by early 2011, the company was insolvent, but, again, continued making payments to the defendants.
After the indictments in April, Full Tilt allowed players to believe that its international business was separate from, and unaffected by, its United States operations. In early June, Lederer reported to others at Full Tilt Poker that there was only approximately $6 million left in the bank.
At the present time, Full Tilt Poker nor the individual owners who received more than $443 million in distributions have repaid any of the hundreds of millions the company owes to players around the world.
The aforementioned “FTP Insider Defendants” are liable to the government for a sum of money representing the amount of property, funds, or monetary instruments involved in the money laundering offenses in an amount that is no less than $41 million for Bitar; $41.8 million for Lederer; $25 million for Ferguson; and $11.7 million for Furst.
The site has publicly blamed various circumstances and scenarios for why it has not paid its players, as the company is allegedly looking for outside investors.
Full Tilt is currently in discussions with the Alderney Gambling Control Commission over its suspended license.
Update 1:30 PST: Frank J. Fahrenkopf, Jr., President & CEO, American Gaming Association, statement on DOJ Action against Full Tilt Poker
I have two simple questions: ‘How much and for how long?’ How much money that we don’t know about is being swindled from U.S. consumers and how long will it take before we change laws to protect those consumers?
This morning we called on Congress to institute an effective online poker regulatory system to protect American consumers and released an online poker Code of Conduct that would ensure online poker companies are operated honestly, legally and responsibly.
This afternoon the Department of Justice (DOJ) accused one of the most well-known offshore online operators, Full Tilt Poker, of bilking players out of more than $300 million. The U.S. attorney who made the accusation called Full Tilt Poker, ‘…not a legitimate poker company, but a global Ponzi scheme.’
Tomorrow Congress should begin changing the laws to protect consumers from such schemes.
We applaud the DOJ for this latest action, but every time a shady website is shut down, an even shadier one pops up. The type of illegal activity the DOJ is accusing Full Tilt Poker of will continue to happen in the absence of the same tough, stringent regulations and enforcement that successfully govern bricks-and-mortar casinos. The Code of Conduct we released today details the type of measures that will help ensure American consumers are protected. The time to act is now, or millions of Americans playing online will continue to face a risky environment. Congress needs to establish federal guidelines so that states that choose to can regulate and license online poker, and bring the jobs and revenues associated with this billion dollar industry to the U.S.
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