The Full Ponzi Poker Scheme
I’m not sure what all the hours that I logged on Full Tilt Poker are worth anymore. It appears as though the Department of Justice wishes that time that I spent, and the money that I deposited to be viewed upon in the same manner as a purchase of a PlayStation game. I could spend countless hours clicking buttons, claiming that there was a skill element in my wins, and then walk away with nothing but time wasted.
The Department of Justice opened old wounds in poker players’ souls yesterday and then poured salt directly on them. The most recent revision to the civil complaint originally filed on April 15th now includes the names Howard Lederer, Chris “Jesus” Ferguson, and Rafe Furst. The last one bothers me the most. The DOJ’s chief lapdog, US Attorney Preet Bharara went so far as to call the Full Tilt Poker concept a full fledged Ponzi Scheme, aimed at taking away customer money without the intent of giving it back, and instead distributing it among it’s chief board members and owners (of which there are purportedly 19). “Full Tilt was not a legitimate company, but a global Ponzi scheme. Full Tilt insiders lined their own pockets with funds 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,” said Bharara. This giant mess got even messier, if that was even possible.
Let’s try and summarize the list of events:
April 15th, 2011 – The Southern District of New York unveils a lawsuit against the heads of PokerStars, Full Tilt Poker, Absolute Poker/UB, and a great number of Payment Processors that were acting as 3rd parties, taking money from American poker players, and transferring it to the site. However, the payment processors weren’t actually taking payments for “poker.” Instead, they were labeling them for various other transactions in hopes of disguising them from the credit card companies so that the payments would actually process. This prevented the credit card companies from flagging the transactions as “illegal gambling” and the payment processors would hold the money for a period of time before allegedly sending it onto the sites.
That day, all of the online poker rooms mentioned closed their doors to the US marketplace, and US Poker Players could no longer log onto the sites to play real money poker. In essence, the DOJ suit ended online poker for US players, causing the poker community to dub the date in infamy as “Black Friday.”
End of April 2011 – PokerStars and Full Tilt Poker enter into agreements with the DOJ to temporarily regain their websites and access to their seized bank accounts to get their money to reimburse players their online poker bankrolls. PokerStars gets this done in a few days. Full Tilt Poker, well they didn’t do squat other than send a message that they were “fervently working on getting players their money back,” letting the public know that this was their “top priority” through a series of misguided press releases through Two Plus Two. I’m not sure why they felt that this was the best avenue for communication, but the reality is, they didn’t have any real communication with the rest of the poker world at all. Silence was their answer, and remained so for months.
June 29th, 2011 – After months of not responding to the general public on anything, and months of not paying their licensing fees, the AGCC (the gaming commission that holds Full Tilt Poker’s gaming license to operate) suspended Full Tilt Poker from operating its functions across the world. While their US games were already shut down, the rest of the world could still play to this point. This took away the license of Full Tilt completely and things began to look bleaker by the second. Full Tilt had been allegedly trying to sell their company, and the AGCC actions made it virtually impossible to sell a company that was so far upside down, and now had no clear cut ability to recover their losses. After all, who’s going to pay $400 million for a company that’s $350 million upside down, and has no promise of income in the future?
September 19th – The US Department of Justice names Lederer, Ferguson, and Furst as defendants in an amendment to the complaint, and seeks massive financial amounts from them directly based on payments received over the course of their involvement with Full Tilt Poker as an owner/shareholder.
Basically, it’s looking increasingly unlikely that for those of us that have money on Full Tilt Poker, that we’ll ever see it. It’s pretty shocking actually as I never expected this, nor do I think that anyone that played the game of poker online ever really expected this either. But it’s our new reality. That money, that opportunity, and all of that hard work, vanished like it was possessions in a house of burning flames, that we’ll return to only when the fire department has finished dropping buckets of water on, only to rummage though the damage to see if there is anything left among the ashes. In short, we all got screwed and lied to.
The new complaint lists some interesting tidbits of information, namely that on March 31st, Full Tilt owed players worldwide more than $390 million. That’s a rough figure based on the sum of all their player’s bankrolls on the site. However, the site had less than $60 million in bank accounts across the globe. For you math wizards, that’s a more than $330 million upside down difference.
To make matters even worse, the DOJ points out more than $443 million in payments to the company’s principles in ownership, specifically listing $41 million to Lederer, $25 Million to Ferguson, $11.7 million to Furst, and more to the other 16 big wigs that weren’t specifically named. The numbers make things look bad…I mean, really bad.
Things that make Full Tilt look slightly better is that more than $130 million was never collected by Full Tilt due to the 3rd party payment processors getting the hell out of Dodge once the DOJ filed suit on April 15th. No word yet on whether or not that money will ever be found again, but even if it is, Full Tilt is still more than $100 million upside down.
From a personal standpoint, I’m deeply saddened by all of this. I feel completely and utterly betrayed as I’d laid a great deal of faith in Full Tilt Poker. I feel utterly ashamed and humiliated to have ever promoted the site or to have encouraged others to participate in what appears to be a very poorly run business.
The saddest part is the now knowing that it didn’t have to be like this. I don’t know that Full Tilt Poker really ever thought that this day would come or that this reality was even possible. In my heart of hearts, I don’t really want to believe that the higher-ups from Full Tilt were intentionally screwing us the players out of money. I think that it just got too big for them too fast, and they just mismanaged their way out of keeping themselves financially solvent. They spent their money egregiously and they got caught with their pants down at the exact wrong moment. I think that their greed got the best of them, and that they really did this without expectation.
But I also don’t know how things would’ve been much different had the DOJ not stepped in either. It would have likely just continued this spiral of gobs of money being spread around the owners pockets and still not covering their balances. I mean, they DID have $60 million in the bank, which was more than enough to cover the people that were ACTUALLY withdrawing. And there was no way to really predict a mass exodus from the site.
The trouble is, it DID happen. And they clearly weren’t prepared for it. Because when it all hit the fan, they had more than $400 million in payments gone to 19 individuals, whereas we as consumers are going to be the ones that get screwed. All of us with balances on the site have waited more than 5 months without being granted access to our information on our money, and the latest news that they’re this far upside down doesn’t make me feel any better.
In fact, the naming specifically of Rafe Furst sickens me. Rafe personally asked me to be a member of the Bad Beat on Cancer advisory council, and I still remember it happening and how filled with joy that I was that I could be taking a proactive step towards the fight against cancer. The fact that he was possibly in on the whole thing just sickens me to no end. I’m just completely shocked about the whole thing. I don’t believe Rafe to be a bad guy, but this doesn’t make me feel all that great either. It makes me feel even worse to hear that he’s moved to Mexico in the last month as well. I’m a wreck about this, and like most players and supporters of the game, just devastated. This is probably a post in itself so I’ll get into this one later.
This story has a long way yet to go until it reaches its conclusion. However, I don’t see players getting anything more than pennies on the dollar back for their deposits. At this point, any more than 15% of players bankrolls refunded would be a blessing, and when the dust finally settles, that may be all that we get. That’s about all that it’s worth any longer. And it sickens me.
I’ll write a little more on this later.