U.S. Department Of Justice Accuses Full Tilt Poker Of Ponzi Scheme

This story was published more than 12 years ago.

The United States Justice Department dropped a bombshell in regards to troubled poker site Full Tilt Poker by saying the company was operating as a ponzi scheme.

One particular accusation made by the Justice Department states that Full Tilt told players that their funds were being separated from the company's operating accounts, while actually draining the player funds to pay board members and company owners millions of dollars.

The new release of information by the Justice Department says that poker professional and Full Tilt co-founder Howard Lederer got $42 million in the scam, with Ray Bitar getting $41 million. Poker pro Chris Ferguson was allegedly supposed to get $87.5 million from the company but only got around $25 million. Reportedly the rest of the money was listed as being owed to Ferguson.

A new defendant was also named to the case as Rafe Furst was accused with the other defendants of money laundering. The Justice Department claims that Furst received $11.7 million in the scam. Currently, the government is asking that the defendants be forced to pay penalties ranging from $12 million for Furst to $42 million for Howard Lederer.

Federal Prosecutor Preet Bharara issued a comment Wednesday saying, “Full Tilt was not a legitimate poker company, but a global Ponzi scheme. 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."

A release by the Justice Department said, "At all times relevant to the Amended Complaint, Bitar, Lederer, Ferguson, and Furst were among the founders of Full Tilt Poker, as well as part-owners of Tiltware, LLC, a California Limited Liability Company that was the beneficial owner of all other Full Tilt Poker entities."

"In total, approximately 23 individuals owned shares in Full Tilt Poker. The FTP Insider Defendants specifically owned the following approximate percentages of Tiltware LLC: Bitar (7.8%), Lederer (8.6%), Ferguson (19.2%), and Furst (2.6%)."

“The FTP Insider Defendants were also, at all relevant times, members of the Board of Directors of Tiltware LLC, and Ferguson was Chairman of the Board of Directors."

The new amendment document released by the Justice Department shows just how bad things were for Full Tilt before the seizure of its domains. On March 21st, Full Tilt allegedly owed $390 million to its players around the world, with $150 million being owed to U.S. players. Despite this large amount of monies owed, the Justice Department said that Full Tilt only had around $60 million in its coffers, meaning that more than $300 million in outstanding debt to players is still owed.

The amendment also speaks to the trouble it believes Full Tilt was finding itself in, saying "“The company faced increasing difficulty attempting to collect funds from players in the United States. Rather than disclose this fact, Full Tilt Poker simply credited players’ online gambling accounts with money that had never actually been collected from the players’ bank accounts. Full Tilt Poker allowed players to gamble with - and lose to other players - this phantom money that Full Tilt Poker never actually collected or possessed.”

The amendment also gives specific information as to how it believes Full Tilt explained to players that its funds were safe. The amendment contains quotes from various emails and forum posts by Full Tilt staff. A specific post by FTPDoug in July of 2008 explained:

“Players' funds at Full Tilt Poker are kept in several deposit accounts throughout the world, all of which are separate and distinct from our operating accounts. Funds are transferred from the players' deposit accounts to Full Tilt Poker's operating accounts only after we have earned them. This is not done each time we earn rake or even daily, but as our earnings accumulate, we make periodic transfers of those earnings from the deposit accounts to our operating accounts."

Full Tilt Poker has yet to make comment on the new allegations, however many industry leaders have spoken out in regard to the issue. Poker Players Alliance John Pappas said, "This is a sad and disappointing day for American poker players. If true, these allegations detail a massive betrayal of player trust which will cause financial hardship for thousands, if not millions, of individual poker players, none of whom are accused of doing anything wrong.

“We call on the Department of Justice to certify that the proceeds of any settlement or seizure that may result from this action will first be dedicated to reimbursing players. We further call on Full Tilt Poker, its management, directors and owners to take all available steps to ensure the prompt payment of players as their first priority."