The Nuclear Bomb
Oh boy, has the last week been one drama-filled spew fest for poker. Between Epic Poker and Full Tilt, its no wonder Congress doesn’t just go the opposite direction and make poker illegal in the United States. You think they don’t have a case for it? After this week I’m not so sure. I’ll leave speaking about Epic Poker for my previous post on the subject, but needless to say it will tie in nicely to what just happened this morning.
Full Tilt has been given another slap to the face today by the Department of Justice’s SDNY, with an amended federal civic complaint that alleges that Full Tilt’s board took millions of dollars in player funds and defrauded players in what was, in essence, “a global ponzi scheme.” In the complaint, the DOJ alleges that Full Tilt not only engaged in all of the Black Friday charges, but additionally intentionally misled its player base in order to pay out hundreds of millions of dollars to owners of the company. There are four players in this that are named in the complaint, and here is the exact amended text in the complaint regarding the actors involved:
E. That a money judgment be entered against Raymond Bitar in an amount not less than $40,954,781.53;
F. That a money judgment be entered against Howard Lederer in an amount not less than $41,856,010.92;
G. That a money judgment be entered against Christopher Ferguson in an amount not less than $25 million;
H. That a money judgment be entered against Rafael Furst in an amount not less than $11,706,323.96;
Ouch…(though I will notice there are exact amounts for everyone EXCEPT Chris Ferguson…whom I will be amused if he did get exactly $25 million from the company.) This isn’t the only people the DOJ describe either. In an earlier explanation, there is a paragraph that sounds eerily similar to Phil Ivey:
The other approximately 19 owners of Tiltware LLC received the remainder of the approximately $443,860,530 distributed. For example, a professional poker player and Full Tilt Poker owner (“Player Owner 1”) received at least approximately $40,078,646.64 in distributions, as well millions of dollars characterized as loans from Full Tilt Poker. At least approximately $4.4 million of these loans have not been repaid.
The fact that Ivey(?) has not been directly charged even though they have fairly exact amounts on him suggests that either the DOJ does not believe he was directly involved in the Ponzi Scheme aspect of the business, or they just have more rock solid evidence against the other players.
And as if this is a huge surprise…not only did the company take the money, but they knew how dire their financial situation was when people started withdrawing. The following paragraphs (first found by Subject: Poker) highlights this issue:
Following the execution of the Arrest Warrant In Rem and the unsealing of the Indictment, Complaint, and Restraining Order on April 15, 2011, Full Tilt Poker terminated its United States operations. Full Tilt Poker continued, however, to operate its online gambling business outside of the United States and continued to collect deposits from non-U.S. players. Full Tilt Poker continued accepting player funds despite the fact that it had liabilities to players around the world for over $300 million, yet held only a small fraction of that amount in its bank accounts. Indeed, in early June 2011, Lederer reported to others at Full Tilt Poker that there was only approximately $6 million in left.
Full Tilt Poker’s CEO, Bitar, was well aware of the need for new deposits after April 15, 2011, and knew that even a few million dollars’ of unexpected withdrawals could reveal Full Tilt Poker’s true financial situation. For example, in an internal Full Tilt Poker e-mail dated June 12, 2011, Bitar expressed concern that a company announcement regarding lay offs and the Board (including himself) being replaced would be seen as bad news, which would cause a “new run on the bank,” adding that “it could be a huge run” and that “at this point we can’t even take a five million run.”
(Source for all legal material: Department of Justice Civil Complaint via Pokerstrategy.com, emphasis mine)
I did a little additional digging to see when it was first announced that Ray Bitar may be heading out, and it doesn’t exactly coincide with the internal email, but at the same time by then (July 6) the site had already been shut down by the AGCC so its not like they could lose any (more) money.
The Fallout: Your Full Tilt Money
So what does all of this mean? Well, if true, that money you have on Full Tilt is now 99.9% gone. On top of that, I find it highly unlikely that even if the DOJ managed to take some money from the individual defendants that they would turn and give it back to the players, its likely going to stay in government coffers (lets face it, they need the money too these days…) If you treated your Full Tilt poker account as a bank account, let this be a lesson to you for the next time, even in a regulated environment…don’t do it.
The Fallout: Congress
Which brings me to the title of this post “This is why we can’t have nice things.” The fallout from this is going to be long lasting and painful. Players that up to now were clinging to hope that eventually they were going to get paid are now incensed. People that bought Full Tilt funds are now going to realize how bad of an investment they have made. And Congress, who is being implored by the PPA to look at Online Poker as a way to reduce the deficit, are certainly going to be turned off when news like this breaks, regardless of this being evidence of regulation. It makes it not worth the political risk in a politically polarized environment to take up something that should be a simple freedom issue.
The Fallout: Community Reputation
Let’s face it, the poker community (both players and companies), have been acting like a bunch of petulant children for the last few years. Full Tilt and UB have gotten caught stealing red-handed and pretend that we didn’t see them do it. Players insta-rage over the smallest things and blow them up into mega-controversies that continue to punch at poker’s already black eye. For the poker industry, its basically anarchy on the streets right now. We certainly aren’t acting like we deserve regulated poker here in the US, and when news comes out of Full Tilt, or Epic Poker, or even individual players, it makes the entire industry look bad. Now I’m not saying that the community is wrong to be outraged, but seeing as we are getting outraged almost every day, I’d almost say we are more angry mob than industry these days. Given the news cycle, not sure there is anything the players can do about it though.
The Fallout: Epic Poker
As Epic Poker’s conduct committee is proving, nothing is black and white, and the shades of grey get interpreted differently by different people. I’ve already seen calls for Epic to remove Full Tilt owners (specifically, and possibly intentionally, Howard Lederer’s) tour card as a result of this. Its a double-edged sword. While the evidence certainly suggests guilt here, no actual court (save for the public opinion one) has convicted anyone of anything, even Full Tilt. Once again the committee finds itself in a no-win situation. The community will scream for blood, and very likely could get it in this case. But if they do, then we’d have to reopen Mike Matusow’s and Dutch Boyd’s cases, because they are “current” league members with “past” issues. (You could argue that since June 29th Full Tilt has not had the ability to pay out its owners OR customers and thus hasn’t committed current wrongdoing since the league started). Or you could do nothing, which will cause players to scream to the rooftops, and call both DiVita and Chino Rheem’s cases to the forefront (after all, at least they didn’t allegedly steal $100s of millions from players.
Anyone Got Radiation Meds?
The Full Tilt news is just the latest in a long list of bad press for poker, easily overshadowing the fact that the WSOP just had another record breaking year for attendance and still one of the most-attended Main Events in history. It overshadows the fact that in the immediate aftermath of Black Friday American poker players actually got up and started doing something about the fact their government considered online poker illegal. And it overshadows the fact that this is (or I guess was…) a way of life for many people who now have to choose between moving away from the US or having to find (*gasp*) real jobs.
Then again, maybe this airing out of our dirty laundry is a good thing. Perhaps this will allow us to get over the growing pains that the industry was due to have as a result of its meteoric rise. We now know what can happen when people with less than ideal intentions run companies, and what can happen when we have murky legal situations to deal with. Maybe we can emerge from this in a safer environment for poker, if we just let all the dumb shit people have done the last 10 or so years come out.
Either way, poker is a mess right now, and I’m not entirely sure anyone has the answer for how to fix it. At least not at the moment.
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