NEW YORK — An Internet poker company that was blocked from operating in the U.S. in the spring as part of an online gambling crackdown was "not a legitimate poker company, but a global Ponzi scheme," federal prosecutors said Tuesday.
The popular Full Tilt Poker website illegally raided player accounts to fund operations and make lavish payments to its owners, Justice Department lawyers said in a revised civil lawsuit filed in New York.
Over four years, the company used $444 million in player money to pay board members, including well-known professional poker players Christopher Ferguson and Howard Lederer, investigators said.
The poker site had promised players that their accounts were protected and wouldn't be touched. But authorities say that, as of March, the company had only $60 million left in its bank accounts to cover the $390 million it owed to players. It routinely mingled player money with its own finances, and took cash from some customers to pay out winnings due to others, prosecutors said.
"Full Tilt was not a legitimate poker company, but a global Ponzi scheme," U.S. Attorney Preet Bharara said in a statement. "Not only did the firm orchestrate a massive fraud against the U.S. banking system, as previously alleged, Full Tilt also cheated and abused its own players to the tune of hundreds of millions of dollars."
A lawyer for the site, Barry Boss, was traveling Tuesday and not immediately available for comment. The Associated Press could not immediately locate Ferguson, Lederer or their representatives for comment.
Federal authorities initially sued Full Tilt Poker in April as part of a broad crackdown on the most popular online poker sites in the U.S. They also filed criminal charges against the company's two top executives, Nelson Burtnick and Raymond Bitar.
Those charges are pending, and the men are still being sought by authorities. Previously, they have issued statements through a publicist condemning the charges as unfounded.
Executives at two other sites, PokerStars and Absolute Poker, also face charges and civil suits seeking millions of dollars in gambling proceeds.
U.S. lawmakers made it a crime to accept money in connection with unlawful gambling in 2006, but some big card-playing sites continued to operate anyway, saying their off-shore status or methods of processing payments put them outside the law's reach.
Many of the companies did business by having gamblers deposit money in special online accounts. Those accounts were then used to pay losses and receive winnings.
In its revised lawsuit against Full Tilt, Justice Department lawyers said that even though the company had assured players that those accounts "are segregated and held separately from our operating accounts," they were actually drained regularly for other purposes, including paying the company's owners and board members.
Bitar got $41 million and Lederer got $42 million, the lawsuit said. Ferguson was supposed to get $87.5 million, although he may have only received $25 million of that amount so far, federal prosecutors claimed.
Thanks to four4me for the tip.
Well, the Federal Government should recognize a Ponzi Scheme when it sees one.
Most of what they do is a Ponzi Scheme!
Well said!
they kept 25 dollars of my money , another poplar website i was on gave me back my money 2 months after black friday 4-15-11... the 25 dollars i lost is no big deal ,,,but i feel sorry for the pros an people on the sight that lost so much money...since 2006 its been kinda shakey ground for online poker in the U.S because there was a law passed making it ilegal to play for money.... there was still ways to make a deposit an play for real money in America..... probly wasnt a good idea to have kept more than 2 or 3 thousand in the account if you were good enough to be a pro or someome just earning a little extra money...
Boy, That's the truth
. Sounds just like our Social Security System .
it's a good thing I cashed out half my money in January 2011.
looks like the other half I will never see again
Stars is the only site I play on now
guys like Durrrr kept like a million on there
prolly wont get that back but who knows
send The Professor to prison
What is the federal government all in an uproar about Ponzi Schemes for?
They said the Poker outfit promised the players money would never be touched - and it was.
That's the same thing the feds told us about the money we put into Social Security - that it would never be touched. But it was touched. It was all looted and spent and replaced with worthless IOU's.
Social Security is now the biggest Ponzi Scheme in the history of the world.
The thought of the federal government going after somebody for running a Ponzi Scheme is a GD joke.
Yeah, more like a turf war.
Yep, I'm not too crazy about Perry but he hit the nail on the head on this one.
Hahahahaha I cant believe I considered dropping out of college to become an online poker pro on that exact site. I seriously dodged a bullet there.. I only played freerolls after reading Chris Jesus Ferguson's journey to turn a freeroll dollar into over $100,000. Guess I should really count my blessings I didnt lose any real money there. I think I'll just stick to Powerball and Mega Millions.
"The popular Full Tilt Poker website illegally raided player accounts to fund operations and make lavish payments to its owners"
The Justice Department caused the problem when they closed down Full Tilt and confiscated millions of dollars from US banks. While it's true Full Tilt didn't have enough money to cover all their accounts, they never expected to be closed down or expected their US players to demand to be paid in full the money they had in their accounts all at the same time.
Full Tilt is a foreign based company and are subject to the laws in their jurisdiction. They and other foreign based poker companies continued to operate in the US after the online banking bill was passed in 2006 because the full force of the bill was extended. When the major sites were shut down in April to US players, at least two bills were on the tables in Congress to legalize online poker in the US.
In the US, it's common for Savings and Loan type banks and credit unions to loan out a large percentage of deposits and they too could not withstand a "run" on their banks if the majority or all of their depositors demanded to be paid in full; all in the same week. When many Wall Street companies were given their share of the 2008 $880 billion bailout money, several of them gave lavish bonuses to their CEOs, directors, and employees. Despite public outcry, none of those activities were illegal.
"Over four years, the company used $444 million in player money to pay board members"
The board members were also investors and the amount in the player's accounts was probably close to $444 million on any given day. It's not unusual for companies to pay their CEOs outrageous salaries and give their board members stock options when their companies operate at a loss. For this to be a true Ponzi Scheme, Full Tilt would have to make little or no profit and 100% of payments to the board members would come straight out of the players account funds.