Is Full Tilt Poker Really a "Ponzi Scheme"? If So, Is it Still a Better Bet Than Social Security?

Yesterday, I blogged a federal legal action against Full Tilt Poker, an online poker site. The U.S. Department of Justice is alleging that Full Tilt, including poker stars Chris "Jesus" Ferguson and Howard Lederer, defrauded customers of $300 million. ""Full Tilt was not a legitimate poker company, but a global Ponzi scheme," said Preet Bharara, U.S. Attorney for the Southern District, in a statement…." reported the Wall Street Journal.

Via his FiveThirtyEight Twitter feed, New York Times stats blogger Nate Silver asks some follow-up questions, specifically about the Ponzi scheme allegations:

Not saying FullTIltPoker ran a sound business but calling it a "Ponzi scheme", as DOJ does, is not really accurate.

Full Tilt Poker (apparently) had less cash than deposits. But banks do the same thing. That's not, intrinsically, a problem. (1/2)

Problems: (i) FTP may have misled players about this (ii) risk of "run on the bank" was high. But calling it a Ponzi scheme is spin. (2/2)

Based on news accounts so far, Silver's comments ring true. It's also not clear yet exactly what sorts of problems bettors ran into in terms of getting payouts. This much is certain: Ferguson and others associated with Full Tilt are outspoken advocates of legalizing online poker, which is a touchy subject among law enforcement.

Within an hour or so of my original post, I was contacted by a flack for a group called Fair Play USA, who sent along this press bit from former FBI head Louis Freeh:

"While I have no knowledge of the facts of the case currently being reported on, I do know that ambiguity in current online gambling law and a lack of firm and transparent regulation and licensing is putting American poker players at risk. The current 'Wild West' atmosphere of online gambling, especially online poker, is dominated by shady offshore operators.

"Current laws that attempt to prohibit Internet gambling have failed to stop the illegal Internet gambling market from growing to $6 billion in the United States, exposing minors to Internet gambling sites of all kinds and leaving consumers at risk.

"Changes in the law can better protect consumers and still allow Americans to safely – and legally – play online poker."

Despite common Jersey and Rutgers roots, I'm not fan of Freeh, who presided over all manner of snafus at the FBI. And I don't know anything about Fair Play USA other than what I gleaned during a 30 second glance at its website, which prominently names another less-than-stellar celebrity, former Pennsylvania governor and Department of Homeland Security Secretary Tom Ridge, as its public face. In classic advocacy group mush-mouthedness, the site doesn't simply come out in favor of legalizing online gaming but instead goes through a blah-blah-blah exercise about keeping teh kidz safe and establishing this or that. But to the extent that they are talking about increasing our god-given right to lose our own hard-earned money in the manner of our choosing, more power to Fair Play USA, the least-inspirational name for a firm since George Costanza infiltrated Play Now on Seinfeld.

It is hard to understate how crazy gambling drives cops. Back in 2007, Drew Carey and Reason.tv looked at just how far police are willing to go to shut down unauthorized card games. Even going so far as to raid folks playing for charity at a VFW hall in Texas: