Zynga's poker games may be fixed, but it could be worse:
Poker Web Site Cheated Users, U.S. Suit Says
By MATT RICHTEL
New York Times
September 20, 2011
The millions of people who signed up for a Web site called Full Tilt Poker knew they were there to gamble. But it turns out they were taking on far more risk than they realized, even when they had no chips on the virtual table.
That is the essence of a civil complaint that federal prosecutors filed on Tuesday. It asserts that players around the world entrusted Full Tilt with $390 million in gambling money, and that the company promised to keep those funds in secure accounts. In reality, prosecutors found, the money wasn’t there; instead, much of it had been transferred to the owners and management of Full Tilt, some of whom were themselves among the most prominent and popular poker players in the world.
“Full Tilt was not a legitimate poker company but a global Ponzi scheme,” said Preet S. Bharara, the United States attorney for the Southern District of New York in Manhattan, whose office filed the complaint on Tuesday.
Barry Boss, a lawyer for Full Tilt, which had its headquarters in Ireland, was on a flight and unavailable to comment, a person at his office said.
Prosecutors said they first exposed the scheme this spring while investigating other problems at Full Tilt Poker and two other poker sites, Poker Stars and Absolute Poker, all of which were based outside the United States. In April, the government shut down access to the sites for American players, arguing that they were violating fraud and money-laundering laws.
Before that, American players had wagered hundreds of millions of dollars on the sites. From their home computers, players would put money into accounts with the virtual poker clubs and then bet against one another.
Full Tilt, like the others, told players that it kept their money — including their winnings — in accounts that they could tap into or close out at any time. And the company had a reputation for paying back players in a timely fashion.
When the sites were shut down, prosecutors worked out agreements with them to help them repay players what they were owed.
But reimbursements to Full Tilt players slowed or stopped altogether. The money available turned out to be insufficient, according to prosecutors, because the owners and board members of Full Tilt had themselves tapped those accounts for $440 million since April 2007.
The management’s luck, it would seem, ran out.
Among those profiting, the complaint claims, were some of the biggest names in poker: Howard Lederer, nicknamed the Professor, is said to have received payouts of $42 million. Chris Ferguson, nicknamed Jesus in the poker-playing community for his long hair, received at least $25 million and was “owed” $60 million more, prosecutors said. The two men could not be reached for comment.
Greg Brooks, an accomplished poker player who was once a regular player at Full Tilt, said the federal complaint was a painful eye-opener about what was happening behind the scenes at Full Tilt. In the past, he said, he regularly received sums in excess of $100,000 from Full Tilt, paid within a week of his request, suggesting that he could get access to his money whenever he wanted.
“My impression was that things were working well for years. I had no inkling, not even the slightest guess it wasn’t like that,” he said.
Mr. Brooks, who lives in New York, said he was owed a sum in the “low- to mid-six figures” by Full Tilt that he doubts that he will get back. (He said he was reimbursed a substantial but lesser amount by Poker Stars.) And he added that he was particularly upset with some of the fixtures in the poker community who, he said, paraded around as “brand ambassadors” for Full Tilt. Their behavior, he said, represented a major breach of trust and honor among players. “There’s an inherent level of trust and handshaking in the poker community that is unique to it,” he said.
In its complaint, which is meant to amend the original criminal complaint unsealed in April, the government asks that the members of Full Tilt management forfeit illicitly gained funds. Under federal rules, Full Tilt players could have the opportunity to petition for their money once the lawsuit is resolved.
Some advocates for legalizing online poker pointed to the complaint as another reason that the activity should be federally licensed and regulated.
“This is a system that has been forced into place by the failure of the U.S. to regulate online gambling,” said Lawrence Walters, a Florida lawyer who specializes in gambling and First Amendment law, arguing that players had to send money to risky overseas accounts. “The prohibitionists have gotten their way so far.”
He also quibbled with the government’s characterization of Full Tilt as a Ponzi scheme. He said that the government was using a “focus-group” tested term to get attention, when the allegations suggest that the management of Full Tilt may simply have been lying to players and possibly embezzling funds.
He also said he didn’t think that what prosecutors said happened at Full Tilt was happening in the rest of the industry.
“This is not endemic to the industry,” Mr. Walters said. “Sites live and die on their reputation. To the extent sites get a reputation for slow pay or no pay, that will quickly circulate.”
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