A lawyer for Chris Ferguson, the Full Tilt Poker pro and board member of the troubled poker site, strongly dismissed government allegations that the poker site was running as a gigantic Ponzi scheme.
“While the government has obviously taken issue with the underlying activities of FTP, under any reasonable interpretation, the worldwide operations of the online cardroom are not a so-called Ponzi scheme,” said Ian Imrich, an attorny for Chris Ferguson. Using the inflammatory term is beyond careless and possibly breaks rules of professional conduct among lawyers, Imrich added.
Ferguson, along with fellow Full Tilt board members and poker pros Howard Lederer and Rafael Furst, were named as defendants in an amended civil complaint alleging that Full Tilt Poker misused funds of its own players to pay its board of directors. Preet Bharara, the U.S. Attorney in Manhattan who amended the complaint, said that “Full Tilt was not a legitimate poker company, but a global Ponzi scheme.”
Imrich said a Ponzi scheme, as defined by the U.S. Securities and Exchange Commission, consists of investment fraud involving paying returns to current investors with funds obtained from new investors. The allegations in the amended complaint against Full Tilt’s board of directors do not claim investment fraud. Full Tilt is accused of improperly using deposited funds of its poker players in order to pay substantial dividends to its board members.
According to Bharara, Full Tilt was not able, for several months, to collect deposited funds from U.S. poker players because of the government’s attempts to disrupt the third-party payment processors who were responsible for deposits and withdrawals in the internet poker industry. Full Tilt tried to avoid this problem by allowing deposits made by its players to be credited to their accounts without actually having the ability to fund the money into said accounts. This allowed players to have an account balance with the funds they wanted to deposit, even though Full Tilt had no means to obtain the funds from the payment processors because of the government’s disruptive efforts of the payment processors. The result was that online poker players were sitting at tables and placing bets with money that was credited to their accounts, but was not actually credited to Full Tilt by the payment processors.
Full Tilt had hoped that any withdrawal requests made by its players would be covered by regular deposits that would be larger than the cash out requests, until a time that they would be able to straighten out the problems with the third-party processors, prosecutors claim. But Full Tilt was apparently having cash flow problems due to the theft of $42 million by one of its payment processors, as well as $115 million seized by the government over a span of many years.
“Until April 15th, Full Tilt Poker had always covered these losses so that no player was ever affected,” Full Tilt said in a recent statement, also adding that “unprecedented issues with some of its third-party processors greatly contributed to its financial problems.”
Whether or not it was a Ponzi scheme will be decided in a court of law.