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Feds Call Full-Tilt Poker a 'Global Ponzi Scheme' 436

blair1q writes "Popular (and heavily advertised) poker website Full-Tilt Poker was sued today by the U.S. government, following an investigation that revealed it to be a massive Ponzi Scheme. The principals in the company set up a complicated system to direct funds from subscribers' poker accounts into their own bank accounts. This was in contravention of their own claim that users' money was untouched. Players' accounts amounted to $390 million, but the company only has $60 million in the bank, having over time distributed $440 million to its own directors and executives."
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Feds Call Full-Tilt Poker a 'Global Ponzi Scheme'

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  • by suso ( 153703 ) * on Tuesday September 20, 2011 @07:21PM (#37462068) Homepage Journal

    I wonder if there is any precedent or international agreement that the US government has to abide by in order to get monies back to international players? Probably not. Can you imagine players begging the US for their money and us just saying "well, we'll have it to you as soon as we can." *years and years pass.*

    • by Old Wolf ( 56093 )

      It's sure as hell not giving money back to any players. They don't give a flying about the players, they view the players as willing participants in illegal operations. I don't think the nationality ff the player really makes a difference.

      One time the feds set up a racket to rip off US players and used the funds to buy weapons (with no money taken off the actual illegal casino), []

  • ...I suggest people think about this sort of thing. Not all businesses are scams, but the people raking in millions of dollars a year aren't earning it. Their inheriting it, winning it or stealing it, and they deserve to be taxed at a higher rate.
    • Yeah, why isn't GE paying any taxes?

    • Wha...? If someone is making money by doing something harmful/fraudulent, then that thing should be illegal. In this case, it already is. And so any money made this way (or goods purchased therewith) will be seized to the extent possible.

      How on earth you do you go from "Some successful businesses don't deserve their profits and are actively harmful" to "Let's punitively tax all of 'the rich' in the hope we snare the bad ones"?

  • Banks don't have cash on hand to pay every account holder should they all choose to cash out their accounts.
    • The FDIC ensures that your money is safe, even in the event of a bank run. There is no such assurance for Full-Tilt Poker.
    • I think the difference is, tellers don't take home their cash drawers.

    • Bank has given loans that when payed back they can pay all their customers.
      Bank don't tell customers that they have all money they owe in an account that can be payed out directly if all customers wants that.

      Full Tilt poker did that but had alot less money then they owed. Full tilt poker was basically bankrupt while telling their customers that all their money was safe.

      • There is a good reason that casinos have to be able to cover every bet they make. Looking over the rules (beware, this thing is dense to the point of being dangerous) [] it seems that in Nevada casinos do, in fact, need to have enough cash on hand or available the very next business day to cover all bets and chance events that are conceivable to within a rather generous statistical margin.

        The comparisons to fractional reserve banking, though provoki

    • Banks don't have cash on hand to pay every account holder should they all choose to cash out their accounts.

      They don't have enough cash to pay every account holder if they came in to collect on same day. They do, however, have enough assets and accounts receivable (outstanding loans) to cover. It may take some time but, they could, in principle pay off all their account holders.

      Full Tilt, on the other hand, doesn't have the money in any form. What they owe to their subscribers can not be paid. The money isn't on loan to another entity who is obligated to pay it back. It is "spent". That's a big difference.

    • by jjohnson ( 62583 )

      The bank loans out your money with the plausible expectation of being repaid, and a repayable debt is an asset. They may not have cash on hand to cover every depositor, but they have assets to do so. In the event of a bank run, they could borrow against those assets to get the cash they need.

      Full-Tilt poker was actually removing money from the pool of player's money, and paying it to themselves, reducing the actual assets held by the company, not just cash-on-hand. If every player cashed out, there'd sim

  • Casino Reserve (Score:4, Interesting)

    by rogueippacket ( 1977626 ) on Tuesday September 20, 2011 @07:42PM (#37462278)
    Real casinos are not required to keep cash on hand for the full value of the chips they give players, and the reason is quite simple - the games are designed such that the casino will always make money! This is even more true in a virtual casino! Every once in a while, someone wins a lot of money, but it's usually at the expense of other players or nothing that can't be recovered in a day or two. However, now that the cat is out of the bag, a lot of players may end up trying to cash out at once.
  • I posted in past discussions of on-line power about the absurd number of ways that players could and would be cheated, but was always modded down and responded to with stuff like They have no need to cheat or steal, they get a cut of each game and would never risk that". So no pity for those taken who stupidly believed it just couldn't happen. And I'll be going to a casino in either Atlantic City or Pittsburgh in the next few week, so if any of you have money that you can no longer gamble in on-line poker
  • Sounds just like the fractional reserve banking system...
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Haven't you ever watched It's A Wonderful Life? In fractional reserve banking, the money has been lent by the bank. Those loans are assets. They are nonliquid assets, which means the bank can't just pull all the money out of their vault if everyone comes and wants to cash out, but they are assets, and they will eventually be repaid.

      In a Ponzi scheme, there isn't enough money in the system - it has been taken out. It is gone. The only way to keep the system running and seemingly healthy is to keep adding new

      • by sl3xd ( 111641 )

        I wish parent hadn't posted as AC; parent needs to be modded up, and now nobody gets karma...

    • by cmholm ( 69081 ) <> on Tuesday September 20, 2011 @08:40PM (#37462864) Homepage Journal

      It may seem like a fractional reserve banking system... to those that don't know how a regulated casino is managed. A legitimate casino will always hold sufficient cash to cover all of the chips in play. What ever chips the croupier wins from the players at the point the table closes... only then can the casino take the money to the bank.

    • by lgw ( 121541 )

      You think America has a fractional reserve banking system? Think again. For many years now America has had a zero reserve banking system. Only demand (checking) accounts have even a fractional reserve requirement. There are no reserves required for svaings accounts, CDs, etc.

      That's not necessarily a problem, if the consumer understands that his savings account is really just a share of outstanding loans, but of course no one thinks that way.

    • At first jab I really wanted to take a jab at that, I really did. Some others have posted some excellent points this way and that about FRB (I'm tired of typing it) and looking at it all I'm inclined to think that FRB is done well. Really well. Take a look at all the wonderful things a healthy strong credit system can and has done. Lines of credit to smooth out payroll and unexpected expense, people building homes and investing into the community and economy at large, new business and old alike benefiting f

  • by BoRegardless ( 721219 ) on Tuesday September 20, 2011 @08:07PM (#37462570)

    Know when to Fold Em.

    If you don't know who mark is at the poker table, you are it.

  • by llZENll ( 545605 ) on Tuesday September 20, 2011 @08:17PM (#37462648)

    except for the fact that you don't go to jail if you choose not to play online poker.

    • by cmholm ( 69081 ) <> on Tuesday September 20, 2011 @09:05PM (#37463090) Homepage Journal

      >> So in other words is exactly like social security, except for the fact that you don't go to jail if you choose not to play online poker.

      That's cute, and completely inaccurate.

      Any retirement investment method is counting on the gradual growth of the value its investments over time. Most methods assume investment into activities that will result in value-added business from which surplus value can be extracted. Since any one investment has a risk of either under-performing or going completely tits-up, risk is managed by making a diverse group of investments.

      The US Federal Government is "invested" in the prosperity of the US. Social Security is therefore diversified over an entire national economy, recovering taxes from a range of activities. The advantages of this "ultimate index fund" are low administrative overhead and risk.

      Both private and public retirement plans are predicated on the assumption that there is long term growth in the investments, the basis for the continued function of a modern market economy. If/when this isn't the case, the paradigm falls apart, and members of a cash economy would need to salt away the entire value needed to provide for their post-earning years.

  • This site seems legit, let's give them our money!
  • by ub3r n3u7r4l1st ( 1388939 ) on Tuesday September 20, 2011 @09:44PM (#37463342)

    Consider these sites can close player's account at any time, without an explanation. Back in 2006 when UIGEA weren't enacted yet, some of my friends lost tens of thousands of dollars from account being frozen due to "management decision", with no chance of appeal.

    Now we finally see some possibility to regulate the industry. But before full legalization can happen, there are previous scores that need to be settle first.

  • by Sean ( 422 ) on Tuesday September 20, 2011 @09:53PM (#37463398)

    > accounts amounted to $390 million, but the company only has $60 million in the bank

    So then Full Tilt Poker is just like a major US bank, except with more reserves.

"This is lemma 1.1. We start a new chapter so the numbers all go back to one." -- Prof. Seager, C&O 351