By now, you have probably already heard this poker news; but it is something that I have to cover anyways.
I never had actually played on Full Tilt poker, mainly because I liked PokerStars better. But I did have a feeling that Full Tilt was up to no good well before this ESPN article dropped a week ago. You may very well have a similar story to the one I’m about to tell.
I play weekly in a poker league at a local bar. Obviously, some of the people in my league played on Full Tilt. I knew that something was wrong around January this year because 3 of them deposited money into their account and did not have it taken from their bank account. They didn’t ask or didn’t care but used the money to play poker. Then, they all were about to cash out the money that had never been taken from them in the first place.
They only did it one time and it wasn’t a willful attempt to defraud Full Tilt. They had made the deposit; what if they never looked to see if the transaction went through. If these guys who have a limited knowledge were able to do this, that means that there had to have been thousands of people doing this intentionally once they knew that they could.
Full Tilt’s Ponzi Scheme
A Ponzi scheme is traditionally an investment fraud that is purported by a money manager. This money manager will claim that they are making a large profit with the investors’ money and pay dividends on time. In reality, the profit isn’t there and the money manager pays the old clients with new client money. Eventually the system breaks because there aren’t enough new investors to keep the scheme going.
Full Tilt isn’t a classic Ponzi scheme in that sense. I don’t believe that they went in a gave Howard Lederer or Chris Ferguson money from the players’ accounts. They made the money off the rake and tournament fees. I just so happened that they wanted to go on “business as usual” when they couldn’t actually get the money from players’ bank accounts.
The banks were told to stop gambling related transactions from going through. Full Tilt got around that initially by setting up 3rd party companies who would say the transaction is for something like golf balls. They would make the transaction an odd number like $99.87 if you made a $100 deposit. Once the government shut down these services, Full Tilt couldn’t get money from the players.
However, they were still giving chips to the players who made deposits and that money that couldn’t be accounted for. Well, that money ended up accounting for about $150 million in players’ funds that didn’t exist in the first place. Full Tilt thought that there would never be a run on the bank, so they would eventually get the money back from the players who tried to deposit it before anything went wrong.
Too bad for them that the US government took their legs out from under them when they seized Full Tilt’s website and told them to stop accepting American poker players and to pay them back their money. PokerStars had no problem being able to do this (and I got my $500+ back from them) because they never tried to pull a scheme like that off. Full Tilt went into bankruptcy.
I used to think that once the dust settled Full Tilt would be bought by another company and come back under its own name. With the Ponzi label attached, I don’t think that can be the case anymore. That would almost be like another company taking the name of Enron. However, it is completely likely that the rights will be bought and the name will be re-branded. Those servers still have contact info for the many thousands of people from the US that played poker at Full Tilt.