Full Tilt Poker, Massive Global Ponzi Scheme

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It’s official. The DOJ has branded Full Tilt Poker as a “massive global Ponzi scheme.”

I had my suspicions of this back in April when the DOJ said that Full Tilt could resume operations outside the US if they returned the US-based players’ money. Full Tilt responded with a series of statements that boiled down to “Players’ money, huh? You mean you want us to just return all of it?”

But I have to admit I didn’t anticipate the scope of the fraud. The DOJ complaint alleges that Full Tilt maintained $390 million in player deposits while having only $60 million cash on hand. Where did the rest of the money go? Directly into the pockets of company principals Howard Lederer, Chris “Jesus” Ferguson, Rafe Furst, and Ray Bitar to the tune of $440 million over the past four years.

Sounds like a massive global Ponzi scheme to me. I have a couple thoughts about this.

Prohibition creates criminality

When you prohibit something, you necessarily create criminal enterprises. This is just as true with online poker as it has been with alcohol in the 20s and drugs today. I’m willing to give Lederer, Ferguson, and company enough benefit of the doubt that when they launched Full Tilt Poker in 2004, they were not intending to preside over a massive criminal conspiracy. Those were the heady days when poker was absolutely exploding and money was raining from the heavens. They likely just saw an opportunity to launch a business and went for it.

Then came the UIGEA in 2006, and Full Tilt made an important decision. They chose to remain in the United States market when other more established sites like Party Poker withdrew. This decision nearly instantly catapulted Full Tilt from being a second-tier site into being one of the top two poker sites in the world. But it also meant that, as time went on, they would be facing more and more enforcement measures in the United States designed to shut off the fire hose of money.

The government squeezed and squeezed, and instead of doing the responsible thing and admitting that they could no longer do legitimate business in the United States, Full Tilt doubled down on their decision and started going further and further outside the lines to keep the money flowing.

It was likely during this period that these four named in the complaint came to the realization that Full Tilt Poker was not a business built for the long term. It would eventually get squeezed to death by the US Government. And that left them with a choice. They had hundreds of millions of player deposits under their control. When the bottom fell out of the business, as it inevitably would, who should get the money? Should they simply return hundreds of millions to players all over the world and say, “Thanks guys, we’re glad we could do the right thing and return your cash”? Or would that money look better stashed away in a web of personal offshore accounts?

The people who ran Full Tilt Poker were criminals. That much is now clear. But I think that they didn’t set out to be criminals. If the US Government hadn’t taken such a myopic stance toward online poker from the UIGEA in 2006 up to Black Friday in April of this year, Full Tilt would have been free to operate as a legitimate business, and the temptation to convert this enterprise into a Ponzi scheme would have been one I think those who ran Full Tilt may have been able to resist.

To me it’s clear that online poker should be legal worldwide. If it had been, Full Tilt players might have their money today. So I blame the crooks at Full Tilt for this, but I also blame shortsightedness in the Federal government.

This does bring up one final cautionary point. Any business—legal or illegal—that accepts deposits and maintains balances one behalf of people can be turned into a Ponzi scheme almost at the flip of a switch. And any stressor that causes ones of these businesses to falter, one as simple as a loss of competitiveness, can create the temptation for the owners to transfer cash reserves to a bank in the Caymans. Then one day you’ll wake up to a message on their website that says, “Thanks for the cash, guys, it’s been fun.”

Play live poker

This is a big black eye for online poker, no doubt about it. But to me as I alluded to above, I think it’s really a big black eye for any business that accepts deposits, and particularly for those that are subject to government scrutiny and pressures. The fact that Full Tilt ran online poker games as opposed to, say, selling online ads is nearly incidental. Poker, the game, really has nothing to do with it.

So how about live poker, guys? No deposits required. Little to no cheating at the small stakes. Plenty of dead money. Free drinks. And a whopping $1/hour in comps. It really ain’t a bad deal.

I’ve always prefered live poker. Yes, online poker was much more lucrative, particularly pre-UIGEA. But it’s never been about the money for me. Sure, I make my living at poker so I’d better win money at it, but I don’t need $440 million in cash distributions to be a happy man. Unless you’re trying to make a mortgage payment on the Empire State Building each month, live poker offers the opportunity to make a nice side income (or even full income) with few of the pitfalls you’ll find online.

And nowadays live poker is spread in most states of the US and many countries worldwide. Chances are you live within a reasonable drive of a cardroom. Give it an honest shot. You might come to like it.

And an update on my upcoming book release

Lastly, a plug for my new book. How To Read Hands At No-Limit Hold’em is the only book anywhere that teaches you that critical no-limit skill, hand reading, step-by-step and in depth. It’s written with all those live small stakes games in mind, so when you do go play live poker, you’ll have a big edge.

How To Read Hands breaks down the thought process used by top no-limit players and shows you how to apply it to example hand after example hand. Read this book, and you’ll be finding new and lucrative bluffs and value bets in no time. It comes out October 18th, and preordering begins here at Noted Poker Authority on October 4th. Just two weeks until you can order your copy. Get psyched.

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