DOJ: Full Tilt Poker is a Ponzi Scheme
The final nail in Full Tilt Poker's coffin may have been driven today as the US Department of Justice filed a motion to amend its civil suit filed on Black Friday against three major oniine poker sites, calling Full Tilt a "global Ponzi scheme."
In the amendment Howard Lederer, Chris "Jesus" Ferguson and Rafe Furst have all been added as defendants and reported to be the recipients of part of $443 million in payouts to owners made from money that included player deposits.
The new charges, according to US Attorney Preet Bhahara, reveal Full Tilt to be more of a "Ponzi scheme" than an online poker site.
Lederer, Ferguson, and Furst Named New Defendants
Many have wondered since the original April 15th indictments why Howard Lederer and Chris Ferguson were not included in the filing.
That has been amended with the new filing.
According to the amended complaint, the two of them, along with Ray Bitar and Furst, were part of Full Tilt's Board of Directors and distributed $443.8 million to themselves and other owners at Full Tilt Poker between April 2007 and April 2011.
It appears that there are 23 individual shareholders in the company with Chris Ferguson holding the largest share of the company at 19.2%, followed by Lederer with 8.6%, Bitar at 7.8% and Furst with 2.6%
Ferguson was allocated around $87 million in payouts, the amendement claims, but received only $25 million with the remaining balance being owed to him.
Lederer reportedly received $42 million, Bitar $41 million and Furst $11.7 million.
Full Tilt Had $330 Million Shortfall in March - Nearly Broke Now
The biggest reveal in the amended complaint showed that Full Tilt Poker was operating as an apparent "Ponzi Scheme" as opposed to a legitimate online poker company.
While the company claimed that they had players funds segregated and safe, the reality appears to be that the company used player deposits to pay owners and run the company.
According to the complaint, a balance sheet prepared by the company on March 31, 2011 revealed that the company owed players around $390.6 million and had only around $59.7 million in its accounts.
Part of this shortfall was due to Full Tilt's inability to withdraw funds from player's accounts.
From August 2010 until the time of the indictment, around $130 million in funds were "phantom" posted to player accounts due to a lack of payment processing options.
The news regarding its financial situation gets even worse post-Black Friday.
According to the complaint, early in June 2011 Bitar reported to others at Full Tilt that the company only had about $6 million in funds left.
The complaint quoted an internal email that an announcement regarding lay offs with the company could cause a "new run on the bank."
He also stated that "at this point we can't even take a five million run."
Request for Judgments Entered
The complaint requests that judgments be entered against Bitar, Lederer, Ferguson and Furst for the amounts that they received in owner distributions.
If approved, Bitar would face repayment of $40.95 million, Lederer $41.85 million, Furst $11.7 million and Ferguson would face repayment of no less than $25 million.
Manhattan US Attorney Preet Bharara stated the following, "As the proposed Amended Complaint describes in detail, Full Tilt was not a legitimate poker company, but a global Ponzi scheme.
"As a result of our enforcement actions this alleged self-dealing scheme came to light. 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.
"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."
Representatives for either Full Tilt Poker or any of the defendants have yet to make a statement adressing the charges.