Poker Ponzi Scheme – MANHATTAN U.S. ATTORNEY MOVES TO AMEND CIVIL COMPLAINT ALLEGING THAT FULL TILT POKER AND ITS BOARD OF DIRECTORS OPERATED COMPANY AS A MASSIVE PONZI SCHEME AGAINST ITS OWN PLAYERS

United States Attorney
Southern District of New York

SEPTEMBER 20, 2011 ELLEN DAVIS, CARLY SULLIVAN,

Company Allegedly Used Poker Player Money To Pay Distributions
Totaling More Than $440 Million To Its Board Members And Other
Owners

PREET BHARARA, the United States Attorney for the
Southern District of New York, announced today the filing of a
motion to amend the forfeiture and civil money laundering
complaint in the matter of United States v. PokerStars, et. al.
The proposed Amended Complaint alleges that Full Tilt Poker and
its Board of Directors, including Raymond Bitar, Howard Lederer,
Christopher Ferguson and Rafael Furst, defrauded players by
misrepresenting that their funds on deposit in online gambling
accounts were safe, secure, and available for withdrawal at any
time. 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. On April 15, 2011, the U.S.
Attorney’s Office for the Southern District of New York filed the
original complaint against Full Tilt and two other Internet poker
companies and unsealed a criminal Indictment charging eleven
defendants, including Bitar, with bank fraud, illegal gambling
and money laundering offenses.
Manhattan U.S. Attorney PREET BHARARA said: “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.”
As alleged in the proposed Amended Complaint, on
several occasions in 2008 and 2009 through emails to players and
postings on online poker message boards, Full Tilt Poker and its
representatives assured players that their money was segregated,
safe, and secure. For example, in response to inquiries, Full
Tilt Poker sent emails to players in May 2008 assuring them that
their funds were secure. One of those emails read, in part:
“To protect both our players and business
from financial problems, all player account
funds are segregated and held separately from
our operating accounts. Unlike some companies
in our industry, we completely understand and
accept that your account money belongs to
you, not Full Tilt Poker.”
As alleged in the proposed Amended Complaint, despite
these repeated assurances to players, the company did not have
enough funds to repay players. By March 31, 2011, Full Tilt
Poker owed approximately $390 million to players around the
world, including approximately $150 million to United States
players. However, the company had only approximately $60 million
in its bank accounts.
Furthermore, as alleged in the proposed Amended
Complaint, the company used player funds to pay its Board of
Directors and other owners. Between April 2007 and April 2011,
Full Tilt Poker and its Board distributed approximately
$443,860,529.89 to Board members and owners. Bitar received
approximately $41 million, Lederer received approximately $42
million, and Furst received approximately $11.7 million.
Ferguson was allocated approximately $87,486,182.87 in
distributions, and received at least $25 million, with the
remaining balance characterized as “owed” to him. Much of the
money that was distributed was transferred by the Board members
and owners to accounts in Switzerland and other overseas
locations.
In addition to its failure to segregate funds and its
constant stream of distributions to owners, the proposed Amended
Complaint alleges that the company faced a growing shortfall in
2010 related to its inability to collect funds from U.S. players,
a fact which it did not disclose to players. Beginning in August
2010, Full Tilt Poker’s payment processing network in the United
States was so disrupted that the company often could not withdraw
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money from U.S. players’ bank accounts in order to fund credits
to their online gambling accounts. In order to maintain its
false image of financial security, Full Tilt continued to credit
player accounts without disclosing its inability to fund those
credits. Ultimately, the company credited approximately $130
million to players’ online gambling accounts that it never
actually withdrew from their bank accounts. When players gambled
with these phantom funds and lost to other players, a massive
shortfall developed.
The proposed Amended Complaint alleges that this scheme
continued even after the original Complaint was filed and the
criminal Indictment unsealed in April 2011. Full Tilt Poker
continued to accept foreign player funds, despite the fact that
it had liabilities to players around the world for over $300
million and held only a small fraction of that amount in its bank
accounts. As alleged in the proposed Amended Complaint, in early
June 2011, Lederer reported to others at Full Tilt Poker that
there was only approximately $6 million left, and therefore no
realistic ability to repay its new depositors. Similarly, in an
internal email dated June 12, 2011, Bitar worried about a “run on
the bank” by Full Tilt Poker customers, and admitted that “at
this point we can’t even take a five million run.”
In addition to the forfeiture and civil money
laundering penalties sought in the original complaint, the
proposed Amended Complaint seeks the forfeiture of the dividends
received by Bitar, Lederer, Ferguson, and Furst, as well as money
laundering penalties against these individuals in the same
amount.
Mr. BHARARA praised the FBI for its outstanding
leadership in the investigation, which he noted is ongoing.
The matters announced today are being handled by the
Office’s Asset Forfeiture and Complex Frauds units. Assistant
U.S. Attorneys SHARON COHEN LEVIN, MICHAEL D. LOCKARD, and JASON
H. COWLEY are in charge of the civil money laundering and
forfeiture action, and Assistant U.S. Attorneys ARLO DEVLINBROWN,
NICOLE FRIEDLANDER, and NIKETH VELAMOOR are in charge of
the criminal case.
The allegations contained in the proposed Amended
Complaint are merely accusations.
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