The Government Blames Full Tilt Poker for the Disruption the Government Deliberately Created

It is not clear to me whether Full Tilt Poker actually defrauded its customers, as Preet Bharara, the U.S. attorney for the Southern District of New York, claims. Although he says the company failed to properly segregate poker players' funds and did not have enough cash on hand to pay them all off at once, he does not cite any specific victims who lost money as a result of these alleged failures. But at least what he is now claiming sounds like it could be a real crime, in contrast to the offenses listed in his April 15 indictment of 11 people associated with Full Tilt and its two leading competitors, which boil down to helping Americans play poker. "Full Tilt was not a legitimate poker company," Bharara says in the press release (PDF) he issued yesterday. Don't be fooled: In Bharara's eyes, there is no such thing as "a legitimate poker company," at least not in the Internet context. According to him, any company that serves online poker players in the U.S., no matter how scrupulously honest it is with its customers, is a criminal enterprise.

The anti-poker crusader's disingenuousness is further illustrated by his comparison of the consumer fraud he is now claiming, which could actually have ripped someone off, to the bank fraud alleged in his April indictment, which consisted of tricking financial institutions into handling poker transactions in exchange for their customary fees—a "fraud" that did not deprive anyone of a single penny. And consider the puzzling lacunae in this passage from the press release (emphasis added):

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 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. 

It was the U.S. government, of course, that deliberately disrupted Full Tilt Poker's payment processing network in the United States in the name of preventing Americans from playing online poker, which explains the company's "inability to collect funds from U.S. players." The government created the very situation it is now blaming on Full Tilt Poker. Furthermore, if it turns out that Full Tilt did something that fits the common-sense understanding of fraud (as opposed to the government's arbitrary, victimless definition), that only reinforces the point that prohibiting online poker exposes players to hazards they would not face in a legal, open market. As with drugs and prostitution, legalization is the antidote to black-market ripoffs.

Nick Gillespie discusses the new Full Tilt allegations here and here. For more on the crackdown that disrupted the system for transferring money between players and poker sites, see my 2008 Reason story "Some Bets Are Off."

Comments

[Barely Suppressed Rage]

Alright, that does it! I'm reporting you to AttackWatch.

[wef]

Thugs act like thugs. Surprise!

[Raston bot]

customers must learn you get what you vote for instead of shielding them from their own apathy.

[grrizzly]

I stand by my claim that it is Barack Obama who stole my poker money. All the sixty dollars that I had with Full Tilt Poker when Obama's administration cracked down on it.

[John Hall]

I've seen a lot of people complaining on poker sites about not being able to get any money out of FTP (though that has been more since the April bust).

[Res Publica Americana]

The fact that there are "anti-poker crusaders" in the first place is a clear demonstration of just how morally bankrupt society is.

[state lotteries]

what?

[In Time of War]

Eh, whatever. This is one of the reasons I refuse to support the lottery. If gambling is bad, it's bad, and the state needs to shut up and shut down their cash cow.

[State Governments]

Don't you understand? It's different when we're the ones taking stupid people's money!

[All Governments]

Don't you understand? It's different when we're the ones _____________!

[Lost_In_Translation]

Government may have precipitated the fraud, but Full Tilt Poker should never have continued to operate acting as if money was coming in to players accounts.

[Mike M.]

What gets me is, how did their American customers not catch on to the funny business early on? Didn't they notice that their FTP accounts were getting credited even though their bank accounts weren't showing any transactions at all?

[Sidd Finch]

Some people did catch on. But the average player doesn't have much incentive to tell the world he's freerolling on FTP .

There's also a larger issue here with FTP not keeping two separate accounts. I haven't followed this closely, but I wouldn't be surprised if the ridiculous salaries and dividends were more of a problem than the lost deposits.

[eMarkM]

I was a semi-pro at both FTP and Stars. Indeed, warning signs were apparent with FTP as they were having a lot of issues with withdrawals. Some took a month or more to clear, which I can attest to personally. There's a whole, pages long thread about delayed withdrawals on 2+2 long before Black Friday.

I started to lose confidence in the site and slowly starting withdrawing what I could. There were rumblings on forums like twoplustwo.com that ppl weren't having money taken out of their bank accounts. Despite the warnings, I still had a good five figure amount there when Black Friday hit.

Every player that has money on that site can basically kiss it goodbye due to either outright fraud at the worst or appallingly bad management at best. They compounded a bad situation with the processors by not having the player's accounts separate, as they repeatedly claimed and then continued to take dividends directly out of player cash.

Contrast this to PokerStars. This whole DoJ thing impacts them just as much as FTP. They kept player money separate and cash flow reasonable. You could withdraw everything you had the day after the DoJ released player funds. They continue to dominate the industry, sans U.S. players.

[Headshots Los Angeles]

I alway thought Full Tilt Poker was one of the more honest online poker sites. Now it looks like a Ponzi scheme. Plus Ultimate Bet Poker had cheating issues. It just proves that online poker is not safe. How much cheating is there that never gets caught? Online poker in it's current unregulated state is unsafe.

[Fluffy]

So basically if I had a business selling widgets, and signed contracts to deliver widgets and took customer deposits, this US attorney could come in and seize all my widgets and drive them away, and then indict me for fraud because I took deposits for widgets that I no longer have?

Is this the legal theory here?

[Sidd Finch]

No, that's not really close.

The government never seized the accounts in the sense that they took the money. They allowed players to withdraw, which Pokerstars had no problem covering. Full Tilt, OTOH, continued paying exorbitant salaries and dividends after they had problems with deposits. So players were taking imaginary money to the tables at the same time Full Tilt was taking real money off.

[Clich? Bandit]

If this is true (I'm channeling fearless fosdick here) then it is a not-good thing. BUT, to Fully's point (and mine yesterday) if the gubmint hadnt seized assets in the first place this would not have happened. UNLESS the FTP board were perpetrating this fraud BEFORE the gubmint steped in to seize player assets then I see what some like to call "entrapment". The mere fact that they continued to pay executives is in no way incriminating. I can see a reasonable angle that 1) you need executives to keep working 2) you perceive (wrongly or nto) a quick resolution to the problem.

Again I state: How is this NOT cuased by the government?

[Clich? Bandit]

Fully Fluffy...whats the difference?

[Lost_In_Translation]

Caused by the government, yes, but banks can't use demand deposits (checking accounts) to pay itself and FTP could not use customer accounts to pay itself. It can only take house cuts on the total bets in the pots, but since half those bets were with "imaginary" money, it (and I'm speculating) took real money from players while distributing out the imaginary money. that would have worked accounting wise if they had ever been able to receive the real money from the US accounts, but they weren't so they ended up in a fraudulent situation.

[Sidd Finch]

UNLESS the FTP board were perpetrating this fraud BEFORE the gubmint steped in to seize player assets

The seizing of the player's accounts has absolutely nothing to do with their inability to pay.

The initial problem, the inability to process deposits, was the government's fault. (Although Pokerstars was able to do it.) Everything after is Full Tilt's fault. They could have admitted to the deposit problem and lost business but still have the money to back the chips in play. Or they could have cut operating expenses to the bare bone and hoped the rake would cover the imaginary deposits (no idea if this would work). The latter option is probably illegal and possibly immoral, but it's at least not blatant theft.

[Lost_In_Translation]

Or they could have cut operating expenses to the bare bone and hoped the rake would cover the imaginary deposits (no idea if this would work). The latter option is probably illegal and possibly immoral, but it's at least not blatant theft.

Latter wouldn't have worked any better. They'd still end up with some customers cashing out without incurring the requisite losses. they needed to admit defeat and start closing US accounts, which sucks, but the only legal option.

Fuck the nannybots in congree also.

[R C Dean]

Alright, that does it! I'm reporting you to AttackWatch.

As commenters and Good Americans, I think we owe it to Reason, to ourselves, and (of course) to The Children, to report every Hit 'n' Run post to AttackWatch.

Who's with me?

[Clich? Bandit]

im reporting you.

[Processing Payment]

Eh, whatever. This is one of the reasons I refuse to support the lottery. If gambling is bad, it's bad, and the state needs to shut up and shut down their cash cow.

[Mr. Mark]

When are the G-men going to be taking down Social Security?

I keep checking the news, but all see are stories like "Man's Same Lotto Numbers For 9 Years Pay Off" and "$16.5 Million Lottery Ticket Remains Unclaimed".

Oh, well. At least I've got the federal government out there protecting me against gambling and the capsizing of Guam.

[Robert Fellner]

"Furthermore, if it turns out that Full Tilt did something that fits the common-sense understanding of fraud (as opposed to the government's arbitrary, victimless definition), that only reinforces the point that prohibiting online poker exposes players to hazards they would not face in a legal, open market. As with drugs and prostitution, legalization is the antidote to black-market ripoffs."

Ting!

[CE]

...the company failed to properly segregate poker players' funds and did not have enough cash on hand to pay them all off at once...

Or as my bank (and yours) calls it, "business as usual".

[ronbout]

Wow. I am so disappointed to read the comments on this site. Yes, we all agree that a government that goes after a fair game of poker is overstepping its bounds.

But, a site called reason should be able to separate our distaste for the Big Brother actions and judge Full Tilt on its own merits.

Full Tilt Poker was not in any way, shape or form, a bank. So, the analogies are nice, but also useless. Banks take deposits and turn them around in the form of loans back into the community. The analogy dies there.

Any investment FTP wanted to make should have come from their profits, like any other business.

Most importantly, the money that people sent to FTP was merely a way to play poker. This should always have been the players money. They were NOT investing in FTP, but merely buying chips like at any casino. Using that money for any other purposes was both ethically and legally wrong!

Again, I'm as pissed as anyone about having my poker shut down. But, the actions of FTP is separate issue. Live up to the billing of a site called "reason" and understand that.

have a good day.