Feds Call Full Tilt Poker A Massive Ponzi Scheme
Manhattan’s U.S. Attorney Preet Bharara claimed on Tuesday that Full Tilt Poker and its board of directors operated the company “as a massive Ponzi scheme against its own players.”
Federal prosecutors in Manhattan said on Tuesday they were filing legal papers as part of a civil money laundering complaint that alleged Full Tilt Poker improperly used funds of online poker players to pay members of its board of directors, including famous poker players Howard Lederer and Christopher “Jesus” Ferguson, $440 million since April 2007.
Bharara announced the filing of a motion to amend a forfeiture and civil money laundering complaint that was filed in April, alleging that Full Tilt and board members Lederer, Ferguson and Rafael Furst, together with Full Tilt CEO Ray Bitar, defrauded poker players out of some $300 million by not maintaining funds at the company sufficient to repay players.
“Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” Bharara said in a statement. “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.”
Federal prosecutors have drawn up an amended complaint that names Bitar, Lederer, Ferguson and Furst, adding them to the original complaint which was filed seeking $3 billion from Full Tilt Poker and unrelated poker companies, PokerStars and Absolute Poker. The proposed amended complaint claims that in 2008 and 2009 Full Tilt sent emails to its players and posted messages on online poker message boards, assuring players that “unlike some companies in our industry, we completely understand and accept that your account money belongs to you, not Full Tilt Poker.” But the new complaint claims that the company did not have enough funds to repay players and that by March 31 Full Tilt only had $60 million or so in its bank accounts while owing $390 million to players around the world, including $150 million in the U.S.
Federal prosecutors claim that Full Tilt’s board members got rich because the company used player funds to pay them massive amounts of money that largely was transferred to their accounts in Switzerland and other overseas locations. Specifically, the feds allege that Bitar pocketed $41 million and Lederer got $42 million. Jesus Ferguson allegedly was allocated $87 million in distributions and received at least $25 million, federal prosecutors claim.
U.S. government lawyers believe that Full Tilt Poker started to face a growing cash crunch in 2010 because it could not collect funds from U.S. players due to the federal government’s efforts to disrupt the payment processors that facilitate the flow of funds in the online poker industry. Indeed, Bharara’s office believes that by August 2010 Full Tilt’s payment processing network had been severely disrupted and that the company could no longer withdraw money from U.S. players’ bank accounts. So instead, the feds claim, Full Tilt continued to credit player accounts without disclosing its inability to fund those credits, letting players make online poker bets with $130 million of “phantom funds” that resulted in a massive shortfall when other players won the bogus money in poker games.
According to the proposed complaint, when the U.S. government unsealed an indictment against Bitar and effectively shut down Full Tilt’s U.S. operations in April, Full Tilt’s leaders realized they were facing a serious cash crunch but continued to accept foreign player funds while facing $300 million in liabilities. In June Lederer allegedly told others at Full Tilt that the company only had $6 million and Bitar worried in an internal email about a “run on the bank.”
Full Tilt has previously denied any wrongdoing and recently tried to explain its actions to its many irate customers, saying it had been a victim of a massive heist perpetrated by a payment processor and the U.S. government’s moves against the online poker industry.
