The U.S. Attorney's Office for the
Southern District of New York on Tuesday filed charges against
executives of online poker powerhouses Full Tilt
Poker, Absolute Poker, and PokerStars -- as well poker celebrities Howard
Lederer and Christopher Ferguson -- on money laundering and other charges
related to Ponzi schemes that defrauded players of $444M USD. Board
members and owners of the businesses were paid in the scheme were also charged.
The criminal complaint against Full Tilt Poker alleges [press release; PDF]:
Poker] defrauded players by misrepresenting that their funds on deposit in
online gambling accounts were safe, secure, and available for withdrawal at any
time. In reality, Full Tilt Poker did not maintain funds sufficient to
repay all players, and in addition, the company used player funds to pay board
members and other owners more than $440 million since April 2007.
U.S. Attorney Preet Bharara, who's serving as prosecutor for the case stated in
the press release, "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 with the company."
Full Tilt Poker, AbsolutePoker, and PokerStars -- all top 10 world poker sites
-- are each accused of operating similar Ponzi schemes.
The sites all operated within a legal gray area -- the world of online
gambling. The Unlawful Internet Gambling Enforcement Act, a last
minute amendment to the SAFE
Port Act of 2006, outlawed financial institutions from transferring funds to online gambling
sites. Many confuse this with a prohibition on online gambling, but many
sites -- including the three charges ones -- found ways to continue money
games within the U.S.
While that was permissible under current laws, federal prosecutors say these
sites broke the law by funneling money from player accounts to the company's
owners, executives, board, and celebrity sponsors. Full Tilt Poker
allegedly only had $60M USD in the bank, but owed players $390M USD after
paying $443 to owners, including $42M USD to Lederer. Mr. Ferguson was
paid $25M USD, transferred to overseas Swiss bank accounts. The company
said it owed Mr. Ferguson another $65M USD.
In order to hide its gaping money hole, the gambling site began issuing
In April the sites were shut down after a federal order was unsealed as a
precursor to the criminal charges. The sites currently have placeholder
pages embossed with the seal of the U.S. Department of Justice.
The prosecutor complains, "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. When players gambled with these
phantom funds and lost to other players, a massive shortfall developed... this
scheme continued even after the original complaint was filed and the criminal
indictment unsealed in April."
Chris Ferguson is one of the most iconic poker players, known for his
distinctive wide-brimmed hat and sunglasses. Before becoming a professional
poker player he earned a Ph.D in computer science. Howard Lederer does
not have a Ph.D but he is known as "The Professor" for his methodical
approach to the game and learning materials.
Both men are believed to reside in the U.S.
If convicted on the federal charges, the pair may have to pay back a large part
of their earnings and/or spend time in prison. Given that many other
poker celebrities also were paid for endorsements of these top sites, this may
just be the tip of the iceberg when it comes to charges.
Apparently this is one gamble that didn't pay off for the giants of the poker