All Bets Are Off (Online Gambling 7 of 8)

In previous blogs, I discussed the passage of the Unlawful Internet Gambling Enforcement Act (UIGEA). This act made transferring money in connection with online gambling illegal. It took the United States governments some time, but they eventually went after the three biggest online poker providers in America, Full Tilt Poker, PokerStars, and Absolute Poker, for money laundering. But the charges did not end there. Specifically, Full Tilt Poker has more recently been charged by the Department of Justice as operating as a large scale Ponzi scheme. This blog will look into the history of Full Tilt Poker, this new charge, and Full Tilt Poker’s response in hopes of coming to a conclusion of whether poker gaming servers could prove to a great risk to players and their money.

Full Tilt Poker is an online poker provider based in Ireland.[1] Created by professional poker player Chris “Jesus” Ferguson, Full Tilt poker hoped to cash in on the explosion of online poker playing following the 2003 World Series of Poker.[2] Ferguson convinced other notable professional poker players, most notably Howard Lederer, to join the Full Tilt crew in return for 10% stock in the up and coming corporation.[3] Ferguson himself took a 20% interest in the corporation. Since then, Full Tilt has paid Lederer $38 million in fees and Ferguson $24 million. Full Tilt then tried to lure amateur players to its poker provider by promising them the chance to play with some of the world’s best players. The strategy worked as Full Tilt became extremely popular, once hosting a single tournament of 54,000 players.[4] Full Tilt operates by providing an online location for people to play poker against one another. Full Tilt then takes a rake, or a fee, from each player for using the provider to play. Players play with credits that Full Tilt gives them in return for money. To simplify this explanation, a player would transfer $50 from his or her bank account into their Full Tilt account for 50 credits. Full Tilt then deducts player’s credits as they plain in poker games or tournaments. In these games, if a player wins the poker game or tournament, he or she can win vast amounts of credits depending on how many credits it cost to enter the game and how many players were involved. A player can then cash out by exchanging the credits back into money and transferring it back into his or her bank account.

Things got bad for Full Tilt Poker on September 20, 2011. Already charged with money laundering and violating the UIGEA, the U.S. attorney’s office amended their civil suit against Full Tilt Poker to allege it is a “massive Ponzi scheme”.[5] The amended complaint alleges that Full Tilt Poker never had the actual cash-on-hand needed to cover the deposits made by its players.[6] The complaint claims that Full Tilt Poker was $130 million short of what they claimed to have for U.S. players and as of March 31, 2011 owed players worldwide $390 million but only had $59 million on hand.[7] An indictment specifically named all 23 directors of Full Tilt claiming they took millions of players’ funds despite knowing the online poker provider was not financial stable.[8] U.S. attorney Preet Bhara stated, “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.”[9]

Of course, Full Tilt Poker has responded to this charge. Full Tilt claimed the disparity in money was not due to theft but due to problems with money collection from players’ bank accounts.[10] Essentially, Full Tilt credited players with money, but then failed to actually collect that money from the players’ bank account.[11] The problem centers around Arizona based Vensure Federal Credit Union and Utah’s Sun Bank, financially troubled institutions that Full Tilt was using to get around the UIGEA money transferring laws (i.e. money launder).[12] As the government began to look into these financial institutions, they stopped processing Full Tilt money transfers from 17 states thus creating the money discrepancy. Full Tilt then says they simply mismanaged the situation and never stopped crediting the players’ accounts for their intended transactions nor did Full Tilt ever go back and delete the poker credit given to the players for the non-deals.[13] The government does not believe this is simple answer to the issue and points to the fact the owners of Full Tilt were still taking $10 million from players’ accounts a month.[14]

A change is on the horizon for Full Tilt Poker. Just two weeks ago on November 17, Groupe Bernard Tapai (GBT) acquired Full Tilt Poker.[15] The United States Department of Justice brokered the deal where Full Tilt surrendered their assets to the U.S. government, which then sold the corporation for $80 million.[16] The U.S government will then pay back the money to American Full Tilt players that had their money frozen and GBT will be responsible for paying back foreign players their money.[17] Players will need to apply with the Department of Justice to get their compensation.[18] Although there is some fear that players will not file claims due to tax concerns and the legality issue with online gambling. In return for the deal, the U.S. government will drop their civil charges against Full Tilt Poker but the charges against those named in the indictment (like Ferguson and Lederer) will remain.[19] The exact specifics of the deal are still being worked out and Full Tilt Poker shareholders still have to approve the deal, but this is certainly interesting and breaking news. What will happen to Full Tilt in the future will be interesting to see. Will players trust the new ownership? Will other poker providers be affected by the scandal? Will this criminal activity hurt proponents of making online gambling legal again in the United States? Does this prove that governments are necessary to regulate any online gambling? A lot remains to be seen, but Full Tilt’s actions certainly did not help the case for legalizing online gambling.

And with that, blog number seven comes to a close. My next blog will be my final one of the semester. To wrap up my series on online gambling, I am writing up a questionnaire that I hope to get some anonymous online gamblers to fill out. The questionnaire will share the information I have learned and detailed throughout this semester and see if in being notified of this information changes the thoughts, habits, or practices of online gamblers. If I am unable to convince some online gamblers to complete my questionnaire, I will instead focus the last bog on the future of online gambling and what if anything has changed on the playing field during these past few months.

[1] Alexandra Berzon, U.S. Alleges Poker Site Stacked Deck, The Wall Street Journal, September 21, 2011Access at:

[2] Id.

[3] Id.

[4] Id.

[6] Id.

[7] Id.

[8] Alexandra Berzon, U.S. Alleges Poker Site Stacked Deck, The Wall Street Journal, September 21, 2011, Access at:

[9] Id.

[10] Alexandra Berzon, Full Tilt’s Collection Woes Bred Alleged Ponzi Scheme, The Wall Street Journal, Access at:

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Chad Holloway, Groupe Bernard Tapai Signs Deal with DOJ to Acquire Full Tilt Poker, November 17, Access at:

[16] Id.

[17] Id.

[18] Id.

[19] Id.


~ by jramsey5213 on November 27, 2011.

One Response to “All Bets Are Off (Online Gambling 7 of 8)”

  1. In high school, I played online poker, but never for real money. My concerns were never about money laundering, tax implications, or anything of that nature, but were always centered on whether I would make or lose money. Being risk averse, I never anted up any actual currency.

    I was always skeptical that I would join a table full of friends who sat together, chatting on instant messaging programs about what cards they held, who should bet, and how to drain anyone at the table that wasn’t in their group. To me, it just wasn’t worth it.

    Of course, the government has a much different perspective than most players, as it is their job to ensure the safety and security of companies like Full Tilt, making sure they abide by all applicable laws and regulations. The risk of fraudulent transactions, tax-dodging, and other crimes seems too great to continue to let these companies function, although I would say that most users just want to play poker. I’m not sure where the balance lies between letting commerce take place and running the risk that crimes are also taking place. Erring on the side of caution, the government has made their decision for now, but is still sorting out their ultimate decision.

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