Online gambling site busted in ‘Ponzi scheme’

By Agence France-Presse
Tuesday, September 20, 2011 18:00 EDT
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NEW YORK — International online gambling site Full Tilt Poker stole $440 million from players around the world in a Ponzi scheme used to pay lavish fees to board members, US prosecutors said Tuesday.

Full Tilt “defrauded players by misrepresenting that their funds on deposit in online gambling accounts were safe, secure, and available for withdrawal at any time,” the US Attorney’s office for Southern Manhattan said.

“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.”

The senior prosecutor, US Attorney Preet Bharara, said the site’s top figures, including famed poker champions Howard Lederer and Christopher Ferguson, “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.”

In a classic pyramid scheme, gamblers were given the impression that they still had money deposited and were allowed to keep gambling, even when all that remained were “phantom” funds, prosecutors said. The company ended up owing $390 million worldwide, including $150 million to US customers.

“Full Tilt was not a legitimate poker company, but a global Ponzi scheme,” Bharara said.

Full Tilt Poker was first sued by federal authorities in April as part of a broader crackdown on online gambling, which the Justice Department says is illegal. The suit was revised and refiled Tuesday in the still developing investigation.

In the original suit, Full Tilt Poker and two other online poker companies — PokerStars and Absolute Poker — were charged with bank fraud, money laundering, illegal gambling and other offenses.

Bharara said the Justice Department had filed an amended complaint against Full Tilt Poker to reflect the accusation that the company was running a Ponzi scheme.

Ferguson, the poker world’s equivalent of a rock star and known to aficionados as “Jesus,” and Lederer were not mentioned in the original complaint against Full Tilt Poker. They are alleged to have been paid $25 million and $42 million respectively by the site.

The amended complaint seeks the forfeiture of dividends received by Ferguson, Lederer, and other directors, and money laundering penalties.

While Internet gambling has been illegal in the United States since 2006, online poker remains a multi-billion-dollar industry with companies using a variety of ways to flout the law, including locating their operations offshore.

The US ban on Internet gambling has been challenged as an unfair trade restriction at the World Trade Organization and some US lawmakers are seeking to have online gambling legalized.

Agence France-Presse
Agence France-Presse
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