US Government Accuses Full Tilt Poker of Being a Ponzi Scheme
The US government has made new allegations against online poker site Full Tilt Poker, calling it a "massive" Ponzi scheme that defrauded players out of more than $400 million.
In a motion filed in federal court in New York to amend an earlier civil complaint filed in April, prosecutors on September 20 accused Full Tilt Poker of running a Ponzi scheme.
Howard Lederer, Chris "Jesus" Ferguson, Rafe Furst, and director Ray Bitar were all specifically named in the charges, with sums included that each received from Full Tilt even as the company acknowledged internally that far more obligations were owed than money currently in corporate accounts.
As of March 2011 the company had outstanding debt and obligations of almost $400 million but only about $60 million in cash on hand. Despite that shortfall, Lederer, Ferguson, and Furst had all received substantial payments, including the following:
Lederer: $41 million in corporate distributions and profit sharing
Ferguson: $25 million in distributions
Furst: $12 million in distributions
Prosecutors also allege that Full Tilt knowingly continued to accept player deposits that they weren't able to collect from the player's bank, leading to a shortfall of $130 million that the company had credited to players but never collected.
While various information had leaked out since April pointing to gross mismanagement at Full Tilt, the new motion provides much more information as to just how shaky the situation truly was -- and just how profitable the business was for Lederer, Ferguson, Furst, and other principals with the company.
Allegations Much Worse than Originally Claimed
The new claims from prosecutors go far beyond mismanagement, and specifically mention intent to defraud on behalf of Full Tilt.
"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. Full Tilt was not a legitimate poker company, but a global Ponzi scheme," the office of Manhattan US Attorney Preet Bharara said in a statement.
Full Tilt's situation was already dire as a company, as it has been unable to find any investor willing to buy the company, but the latest filing could mean serious trouble for Lederer and others, raising the possibility of the seizure of personal assets including homes in the US.