Feds Want to Sue Poker|Site as a Ponzi Scheme


     MANHATTAN (CN) – Full Tilt Poker operated as a massive Ponzi scheme, using players’ funds to pay $440 million to its board of directors for the last four years, according to an amended complaint submitted by federal prosecutors Tuesday.



     The motion to amend comes five months after the government shut down Full Tilt and other leading offshore-based Internet gambling sites with the filing of a civil racketeering and money-laundering lawsuit. Prosecutors also unsealed a criminal indictment against 11 defendants.
     “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,” Manhattan U.S. Attorney Preet Bharara said in a statement. “As described, 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 with the company.”
     Though the company claimed that it kept players’ money segregated and secure, Full Tilt did not actually have enough funds to match players’ account balances.
     By March 31, 2011, Full Tilt Poker owed approximately $390 million to players around the world, including approximately $150 million to United States players,” according to the government. “However, the company had only approximately $60 million in its bank accounts.
     Board members Raymond Bitar and Howard Lederer each received $41 million and $42 million, respectively, since 2007. Board member Rafael Furst received $11.7 million. “[Board member Christopher] Ferguson was allocated approximately $87,486,182.87 in distributions, and received at least $25 million, with the remaining balance characterized as ‘owed’ to him,” prosecutors say. “Much of the money that was distributed was transferred by the Board members and owners to accounts in Switzerland and other overseas locations.”
     The new complaint also alleges that Full Tilt was having trouble collecting funds from players in the United States, but never disclosed these issues.
     “Beginning in August 2010, Full Tilt Pokers payment processing network in the United States was so disrupted that the company often could not withdraw money from U.S. playersbank accounts in order to fund credits to their online gambling accounts,” the government said in a statement. “In order to maintain its false image of financial security, Full Tilt continued to credit player accounts without disclosing its inability to fund those credits. Ultimately, the company credited approximately $130 million to playersonline gambling accounts that it never actually withdrew from their bank accounts. When players gambled with these phantom funds and lost to other players, a massive shortfall developed.”
     And even though Full Tilt owed over $300 million to players around the world in April 2011, when the lawsuit was first filed, the company continued to accept foreign players’ funds.
     Lederer, the board member, allegedly announced in June that there was only $6 million left. Bitar allegedly worried what would happen if customers had a “run on the bank,” because Full Tilt could not even handle a $5 million run.
     The new complaint seeks forfeiture of the board members’ dividends, as well as forfeiture and penalties laid out in the original complaint.

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