Directors of one of the internet's biggest gambling sites have been accused of running a massive Ponzi scheme that bilked players out of about $330 million. In court documents filed Tuesday, federal prosecutors accused those operating Full Tilt Poker of withdrawing more than $443 million from players' bank accounts and …
$60m in reserves, $390 owed
Better liquidity than the banks then!
It isn't right but you can see where Full Tilt are coming from. Gamblers lose money, the House takes it. Assuming business continues, we can assume that gamblers will lose the money in their accounts anyway. Full Tilt has just taken it a little earlier than they really should.
Since when have gambling and corruption been strangers? What did you expect?
How this turns into a shot at the banks I dont know.... anyway...
Full Tilt is/was a site that hosts only poker games. The gambling takes place against other players only not against Full Tilt.
Full Tilt would provide the games and take care of getting money onto the site, for that they would take a fee known as rake. The rake is where the profitability comes from.
Essentially the players funds should have been segregated from the operational funds, but they were not and were used to fund the lifestyles of the directors.
The rake would have been around a 5% per game/hand so it would have taken a long time for gamblers to "lose all there money to the house". This site was a cash cow, relatively low overheads and 24/7 earnings. The directors got greedy and thought it was ok, but then Black Friday came along and the flow of money stopped (so perhaps I see the bank link now)
Full Tilt was the 2nd largest poker operator in the world and was pure poker, no other form of gambling available, which is why it was popular, as well as having arguably the best software.
I know people that have lost a lot of money in this and all they did was place their trust in a company that gave the perception they were always working in the interest of poker. This turns out it probably isn't true now. So I hope they do some prison time for it.
Well, these are the allegations.
They also kicked a puppy once. Maybe.
I believe we were told that they were closed down because online gambling is simply illegal in the U.S.? Except on native reservations or something.... They weren't (I thought?) U.S. based but Uncle Sam got 'em anyway. Something like that.
But a prosecutor's allegations shouldn't pass without scrutiny and criticism. If there's an alleged offence then there has to be a trial.
"...place their trust in a company that gave the perception they were always working in the interest of poker."
Just about all businesses give the perception that they are working in the interest of the product or the customer. For a start up, altruism is likely high on the list of mission statements of many businesses, until that is the greed kicks in. After that the perception is still maintained but it's just a veneer covering the realigned motives of the directors and shareholders.
were u thinking of google and "Do no Evil" when you wrote this?
"For a start up, altruism is likely high on the list of mission statements of many businesses, until that is the greed kicks in."
Still small fry
compared to the true master of Ponzi schemes - Bernie Madoff still by far and away holds his title with $65 billion to his name!
... and of course in Washington ...
some Republican fool is screaming that there needs to be LESS regulation in the online-gaming business.
I'll see your two Representatives and raise you a Senator.
Not such a bad idea.
The reason this has all blown up is that the big US gambling corporates are losing market share to the online companies, so they're using persuasive techniques (and definitely not campaign donations, let's be clear) to persuade the US government to do one of the things it does best - stifling foreign competition. That's what the whole saga is about - corporate profits in the gambling industry.
The end result, of course, will be the same for gambling as it was for the US motor industry.
Gambling is ALWAYS in the house's favo(u)r.
Definition of a gambler: Someone who can't do math(s).
Re: comic URL
Nice, but beating the house isn't allowed, no matter how you do it. Each time a mathematician cleans them out, they change the rules.
Gamblers are people who consider their losses a reasonable payment for the entertainment value of playing. This isn't *always* because of a mental incapacity, but if you are playing for real money on the internet then you'll have a hard time convincing me that you shouldn't be protected from your own stupidity.
I guess we should ban sex as well then
Or anything where their is a chance of injury or loss.
Poker isn't gambling
Not if done right, anyway. It certainly has no house odds.
Anyone know if the Christopher Ferguson mentioned in the article is Chris "Jesus" Ferguson? I really hope not - bad enough to see a name as big as Howard Lederer involved, but a past WSOP Main Event champion as well would be a major black mark on the game's reputation.
... yes it is that Chris Ferguson.
Different games, different math. But it is, after all, the Americans who introduced the double-zero to roulette wheels.
Poker is a game where it can be argued that skill plays an important part, maybe enough that in some places it is not, in law, a game of chance. Part of that skill is in calculating the odds of winning against what you have to bet, and the value of the pot. So math does matter, and a good Poker player is less of a gambler than you might think. But judging the reactions oif the other players is also part of the game, and that isn't the same on-line.
On the other hand, I know how a bookie works out the odds on a horse race. It reflects what is bet on which horse, not a horse's chance of winning. Blackjack, there's card counting which can beat the house advantage, but if they think you are doing it, they will invite you to leave the casino.
There are ways to come out ahead, but they depend on the system being honest. And that's where this outfit seems to have gone wrong. But how convenient for gambling operations in the USA that they were able to find out.
Global Ponzi scheme
Isn't that the stock market?
nah, the stock market is based on some form of mythical endless 'growth' but also has a recurring glitch known as 'recession'. They are both a con where the rich get richer and the lower orders pay for it all. Both rely on enough mugs joining in to make it all seem legitimate.
Hmm, so are the regular banks next? The way I understand it, this is common practice among all our banks. But I guess the law only applies to some and not to others. Close cooperation between state and companies is sickening. One law for all is a dream. =/
You're not playing the house
You're playing other players, the house takes a rake per hand of course.
What FTP were doing is taking your bankroll before you lost it to other players as most people recycle their winnings rather than withdraw funds.
big difference with the banks
In principle the banks always have "assets" that exceed their obligations - for example if I owe the bank £10k then they have an asset worth £12k+ (by the time you count interest)
This does of course assume that the banks have made a reasonable allowance for bad debts - but this can be modeled and predicted, its how banks have always worked. They have clearly got it wrong in a big way recently - but that is only because it all got a bit over complex.
the difference is that they only hold a certain amount of liquid capital to repay short term withdrawals as they can't demand the loans back instantly. Even in the worst case the depositors ought to get back their cash - its just that they may have to wait for those loans to pay off over a number of years.
This is entirely different from a company spending clients deposits and then hoping that they can create a future revenue line to make up the difference (this being a charitable view of how many such frauds start). Under this model the organisation doesn't have any reasonable expectation of ever being able to honour those debts.
Probably not going to be a popular post - and I don't work for a bank before you ask, but there is a big difference between stupid behaviour and outright fraud
@ Thomas Whipp
Read up on Fractional Reserve Banking to see how banks really operate - it's an illusion that they have enought "assets" to cover their obligations as these "assets" are essestial based on somebody paying them back what they borrowed.
Isn't that the modern definition of a ponzi scheme?
I thought everyone knew...
The biggest ponzi scheme around is the state pension...
Well, it ought to be
but the state sez it isn't a Ponzi scheme, so it isn't legally a Ponzi scheme. Or something like that.
I thought a Ponzi scheme was a fraudulent investment where the funds from new investors are used to pay high returns to existing investors, until it all collapses and the organisers run off with whatever they creamed off the top?
The allegation here seems to be that Full Tilt simply stole the players money. How is that a Ponzi scheme?
The so-called "gamblers" are investing in a scheme that cannot make an overall profit, to the advantage of the site operators. That's "ponzi" (or Tigg, if you have an education).
The operators skimming off the top is just plain stupid, and only gets the authorities involved sooner. As we see in this case.
But either way, the marks get taken; 'tis the nature of the beast. See Amway.
The allegation of ponzi scheme is because they were stealing money and encouraging more deposits to pay the directors further
This was highlighted further after the American market was closed and they then continued to incentivise the RoW to deposit, all this knowing full well that they had taken the money and were not able to cover their liabilities.
No, it's a deal where the original investors make money by convincing people to wear sunglasses, ride a motorcycle, and say "Heeeeeyyyyyyy" and "Sit on it" at regular intervals.
Or maybe that's the Fonzie scheme; I get them confused.
Because they were still inviting in
new players with which they paid off old players to keep the public profile up.
It might have worked to, if it hadn't been for those nosy kids and their dog...
Maybe it is just semantics, but I still don't see what makes this a ponzi scheme.
The gamblers weren't investing in the business, they were placing money in escrow - that is necessary for online poker, otherwise the loser might not pay up. They weren't expecting Full Tilt to make unrealistically huge returns, they just expected them to look after the money and give it back when requested.
The allegation is that Full Tilt took the money, which would be plain old theft.
The fact that the gamblers were hoping to make huge returns off each other is irrelevant.
It is like a Ponzi...
...in that (allegedly), money from new depositors was going to people making withdrawals; what should have happened is that everyone's money should have been segregated and on deposit so there were no issues.
By the way, Full Tilt were regulated by Alderney, which to my knowledge had a good reputation.
Do it again until you get it right.
Poker isn't gambling. It's a game of skill.
Even though there is a large element of chance involved, a good player should, in the long run, make a profit. Players play each other and the house takes a cut of the winnings. It's not like playing against the house where everybody is equally likely to pay for the running costs of the casino.