$400 million illegal scheme

9/20/2011 7:05:29 PM

that much may very well be true.

[Edited on September 20, 2011 at 7:06 PM. Reason : ]

9/20/2011 7:06:37 PM

I dont understand what you are asking. Before the gov was involved, the operators were paying themselves with money that was supposed to be the players' accounts. This means anyone who cashed out would by definition be paid from the deposits of other people which is what a ponzi scheme is.

9/20/2011 7:08:52 PM

Wait til moron learns how banks operate.

"SHIT! Our entire fucking financial system is a ponzi scheme!"

9/20/2011 7:10:04 PM

Back in my day, Ponzi schemes ran into the 10s of billions.

9/20/2011 7:12:46 PM

^ and weeeee LIKED IT!

Quote :

"This means anyone who cashed out would by definition be paid from the deposits of other people which is what a ponzi scheme is."

no, it's not. it would be embezzling. there is a difference. it's not like it's all that much better, but the terminology is different. A ponzi scheme intrinsically implies an element of perceived and implied investment. This had literally zero element of investment.

[Edited on September 20, 2011 at 7:16 PM. Reason : ]

9/20/2011 7:14:56 PM

^this

9/20/2011 7:23:22 PM

When all the owners and operators are the ones doing the embezzling, it's a ponzi scheme.

All they had to do was keep the site open and hope that not everyone tried to withdraw their money. It doesn't look lime they ever were able to make their payments.

Banks differ from this ponzi scheme because banks allow anyone to dip into the action (not a ponzi) rather than just a select few to dip in (full tilts owners).

9/20/2011 7:23:33 PM

Quote :

"When all the owners and operators are the ones doing the embezzling, it's a ponzi scheme."

no, it's not. it's still embezzling. you still aren't understanding the basic definition of a ponzi scheme, dude. embezzling means they misappropriated funds. Ponzi is a specific scheme, again, where old investors are paid "returns" on their "investment" with the money "invested" by new investors. Again, it means there MUST be some type of implied investment occurring. That simply wasn't happening. Show me at all where FullTilt is marketed as any kind of investment firm. It's entirely a service-firm. You may be thinking that since there were individual "accounts" that there is an expectation of investment, but that simply isn't the case. The accounts were a convenience part of the service so that you didn't have to directly link your bank account to the betting.

If I create a bank that simply holds people's money in individual accounts and I then spend all their money, I haven't created a ponzi scheme. I've just committed embezzling or some other crime. But I haven't made a ponzi scheme.

It's literally analogous to the bank runs of the early 1900s. For some reason, the banks didn't have the money to cover all of their customers' deposits. Yet no one suggests that the banks were running a Ponzi Scheme. This is no different.

Quote :

"All they had to do was keep the site open and hope that not everyone tried to withdraw their money. "

And what you are essentially describing is a fractional-reserve banking system. Something that is extremely common today that we don't even begin to call a Ponzi Scheme.

[Edited on September 20, 2011 at 7:33 PM. Reason : ]

9/20/2011 7:31:24 PM

^^madoff permitted anyone to cash out... he tried to keep their money obviously... but there were people who gave him money, got outrageous returns, and pulled their money out.

hows that different from a bank?

sure, banks are required to keep cash assets on hand equal to the funds in all checking accounts. so they have backing, but savings accounts, not so much. they loan that money, invest that money, etc. The only difference is they actually invest money and turn profits (theoretically), and share modest interest returns. when everyone tries to pull all their money out at once, financial institutions can collapse if they're owed more than they can pay out... hmm...

9/20/2011 7:33:12 PM

^ the way that is different from Madoff is that he made no real attempt to invest the money. banks ostensibly do, whether it's by investing in stocks or loaning out deposits for interest-bearing loans. Madoff just spent the money and when someone requested to cash out, if ever, he just paid them with some new investors' deposits.

9/20/2011 7:35:25 PM

that was the point i was trying to make. moron seemed to think banks werent because they let people take money out.

[Edited on September 20, 2011 at 7:41 PM. Reason : where as the only real difference is true investment backing]

9/20/2011 7:40:07 PM

It's a ponzi scheme because client accounts weren't solvent and there didn't appear to be an intention of solvency despite fraudulent statements otherwise. This was clearly broader than embezzlement. The business was operated with the sole intent of new payments to keep the scheme afloat.

9/20/2011 7:42:45 PM

You're digging your heels in nicely.

9/20/2011 7:47:13 PM

Ha

I think that's just reality backing me up actually.

Not surprised you don't know what that feels like.

9/20/2011 7:57:15 PM

I love aaron,


The feds say its a ponzi scheme
The majority of us say it's a ponzi scheme

but aaron INSISTS it's embezzling... but not a ponzi

9/20/2011 9:52:25 PM

ultimately it's just fraud, the mechanism is irrelevant.

i have to side with aaron for just this one time.

[Edited on September 20, 2011 at 9:55 PM. Reason : it does pain me though.]

9/20/2011 9:55:42 PM

^

9/20/2011 9:57:57 PM

Okay... fred, puck, and aaron are saying full tilt is not a doing ponzi scheme?


Am I getting this right?

9/20/2011 10:03:28 PM

Quote :

"Ponzi is a specific scheme, again, where old investors are paid "returns" on their "investment" with the money "invested" by new investors. Again, it means there MUST be some type of implied investment occurring. That simply wasn't happening. Show me at all where FullTilt is marketed as any kind of investment firm."

I actually think it is more a combination of the two in a way. I mean there isn't an "investment" portion, but isn't gambling just extremely high risk investment in a way? By that I mean they are putting in money, taking a chance at getting some rate of return or they could lose it all. Not much different than high risk investing. I'd even go so far as to say the systematic gambling methods used by these pros on online poker sites aren't really much different than a day trader playing the market. They know they'll lose some but hopefully make a higher percentage over time sticking with some sort of formula.

So if you think of it in that type of way, they are paying off people's winnings with the subsequent money that comes in. In this ponzi scheme the "investor" is just the poker players and they were promised returns from FullTilt it just was their job to earn it.

It clearly isn't a ponzi scheme in the most pure form of the definition, but I don't think it is exactly embezzling either. It is a nice hybrid of the two...

But, hell fuck if I know anything burro is clearly a smart man.

9/20/2011 10:20:39 PM

There was no investment portion to it. It was here is my money, I understand you are going to rake a portion to fund the site, but i'm going to let you hold it for me instead of cashing out every hand... but they siphoned funds they were permitted to hold. Nobody is expecting any returns on that money, unless they did something to go and win more.

They siphoned corporate assets that were earmarked as being player funds.

[Edited on September 20, 2011 at 10:33 PM. Reason : .]

9/20/2011 10:29:38 PM

Quote :

"It's literally analogous to the bank runs of the early 1900s. For some reason, the banks didn't have the money to cover all of their customers' deposits."

It is not literally analogous. At all.

Quote :

"sure, banks are required to keep cash assets on hand equal to the funds in all checking accounts. so they have backing, but savings accounts, not so much."

FYI checking accounts are demand accounts, please see below - or maybe you should be sleeping with your money stuffed in your mattress.

And how are you unaware that current banking regulations required reserve ratio is 10% of demand accounts (and a whopping 0% of time deposits). This means every bank in 2011 does not have the money to cover all their customer deposits.

I expect a cascading failure of offshore gambling sites as account holders seek to liquidate.

[Edited on September 20, 2011 at 10:50 PM. Reason : .]

9/20/2011 10:44:38 PM

Quote :

"It's a ponzi scheme because client accounts weren't solvent and there didn't appear to be an intention of solvency despite fraudulent statements otherwise."

that still does not make it a ponzi scheme. that just makes it fraudulent, assuming that's what was actually going on. ponzi requires a facade of investment. no investment, no ponzi.

Quote :

"The business was operated with the sole intent of new payments to keep the scheme afloat."

that describes almost every single business known to man.

Quote :

"The feds say its a ponzi scheme The majority of us say it's a ponzi scheme"

appeal to authority and appeal to popularity. I, instead, am appealing to the actual god damned definition and actual facts. what, oh genius, makes it a ponzi scheme in your eyes? That the feds say so?

Quote :

"I mean there isn't an "investment" portion, but isn't gambling just extremely high risk investment in a way? "

Yes, but they are controlling the gambling. If I put money into some group who would play poker for me and give me some of the winnings, then that would be an investment. The fact that I am directly controlling the money and my own actions specifically determine how much I win or lose, and my actions alone (excluding other players), makes it not an investment. When I invest in stocks, I give my money to someone else and effectively say "go make this more valuable". That simply isn't happening when I buy chips at a casino or buy credits on FullTilt.

Quote :

"Not much different than high risk investing. "

You are correct, there are most certainly some similarities between gambling and investing, but they simply are not synonymous. No one in their right mind would consider FullTilt or any other direct gambling activity to be an "investment" in the same vein as a mutual fund or purchasing stock. Yes, there is an element of risk, but they simply aren't the same.

Quote :

"It is not literally analogous. At all."

actually, it is. The banks in the early 1900s, and any fractional-reserve system, frankly, makes the assumption that only x% of people will want to withdraw their money at any one given time. So they make the decision to have enough liquid assets on hand to be able to meet that. moron said that they operated under the assumption that not everyone would want to cash out at the exact same time. how is that any different than what I described? Yes, the exact regulations today might be different, but it is essentially they same basic principle: bet that not everyone will want to withdraw at the same time, hold enough to meet your expected worst-case demand (or in today's system, the gov't requirement). Now, I'm not saying that this specific scenario is identical to those runs, because it's not, but the basic principle moron was describing most certainly is.

[Edited on September 20, 2011 at 10:54 PM. Reason : ]

9/20/2011 10:50:07 PM

Quote :

" And how are you unaware that current banking regulations required reserve ratio is 10% of demand accounts (and a whopping 0% of time deposits). This means every bank in 2011 does not have the money to cover all their customer deposits."

I was unaware demand accounts were 10%, for some reason I thought they were 100%, but I knew time deposits were 0.

I don't know where the fuck you drew any sort of paranoia out of my post... I was pointing out that banks can cover everything at once... you reinforced it, to a much greater extent...

Btw, move this to tsb, someone.

9/20/2011 11:07:03 PM

Quote :

"appeal to authority and appeal to popularity. I, instead, am appealing to the actual god damned definition and actual facts. what, oh genius, makes it a ponzi scheme in your eyes? That the feds say so?"

Yes, I'd like to think the Feds are more competent than a lame TWWer. The Feds aren't just any department, they are highest division of justice departments. They are seasoned professionals and have to have a lengthy resume in order to be considered to have a job there. If you happen to be right, which is akin to a 3 legged horse winning the kentucky derby, then my hat is off to you.

9/20/2011 11:15:25 PM

feds. competent. does. not. compute.

9/20/2011 11:23:53 PM

competent enough to know what a ponzi scheme is.

9/20/2011 11:26:16 PM

Of course the Feds know what a ponzi scheme is. They are running the biggest ponzi scheme of all time.

9/20/2011 11:28:45 PM

competent enough that they let madoff run one for 20 years or some bullshit like that.

[Edited on September 20, 2011 at 11:29 PM. Reason : ^ok true. I WILL GIVE YOU THAT]

9/20/2011 11:29:08 PM

a lot of mma nobodies/new people will need new sponsors now

9/20/2011 11:37:16 PM

Quote :

" It's literally analogous to the bank runs of the early 1900s. For some reason, the banks didn't have the money to cover all of their customers' deposits. Yet no one suggests that the banks were running a Ponzi Scheme. This is no different."

Did the banks pay their employees with customer's funds or with bank's funds?

Also, Ponzi most likely learned how to ponzi using the knowledge of what happened later with the banks. Remember, Ponzi scheme was named after Ponzi's scheme between 1910-1920... which preceded the great depression in 1929


[Edited on September 21, 2011 at 12:02 AM. Reason : .]

9/20/2011 11:57:23 PM

It was a ponzi scheme.

They depended on new funds to pay cash outs.

Ponzi

Also you are incorrect about their being no investment. They paid interest on player account balances.

Ponzi

[Edited on September 21, 2011 at 8:54 AM. Reason : a]

9/21/2011 8:50:09 AM

I FUCKING TOLD YOU ONLINE POKER WAS RIGGED

9/21/2011 8:56:38 AM

Quote :

"Yes, I'd like to think the Feds are more competent than a lame TWWer. The Feds aren't just any department, they are highest division of justice departments. They are seasoned professionals and have to have a lengthy resume in order to be considered to have a job there. If you happen to be right, which is akin to a 3 legged horse winning the kentucky derby, then my hat is off to you."

so if they declare that 2+2=5, then you are just going to believe them, right? after all, surely they know more about math than a lame TWWer, right?

Quote :

"Did the banks pay their employees with customer's funds or with bank's funds?"

doesn't matter with respect to whether it is a ponzi scheme.

Quote :

"Also you are incorrect about their being no investment. They paid interest on player account balances."

No one was putting their money into FullTilt on account of the interest. Literally no one. Even such a nominal amount of interest doesn't change the fact that it wasn't an investment. It wasn't marketed as one, nor was it run like one to outsiders, nor did even the dumbest idiot on the planet think it was one. No investment, no ponzi.

Quote :

"It was a ponzi scheme. They depended on new funds to pay cash outs."

That's not the only requirement of a ponzi scheme. Almost every business in America uses incoming funds to pay out whatever they owe to suppliers. Are all businesses in America ponzi schemes now?

9/21/2011 9:29:57 AM

^ that's simply not true. Tons of players left their funds on fulltilt because of the interest. They traded online money back and forth all the time. Someone gives you $20k in cash and you ship them the virtual chips.

9/21/2011 11:19:12 AM

9/21/2011 11:20:32 AM

Furthermore you're not looking at it in the right context.

The 19 owners of tiltware (Phil ivey is one if them) were being paid ownership "profits" every month. They were being paid profits because they were INVESTORS.

It turns out not all of what the owners were receiving was profits. It was actually the deposits of players were being told their funds were maintained in secure accounts , maintained separately from fulltilt operational funds.

That is a Ponzi.

9/21/2011 12:20:12 PM

is there evidence to suggest the owners were conspiring to take these deposits with no intention of having sufficient cash flow to cover those player deposits, or were they merely greedy and were so used to taking in large profit distributions on a regular basis and were also incompetent enough to stop doing so when their cash flow started drying up (allegedly on account of the online poker ban making it difficult/impossible to process transactions in the way that they were previous doing)

if they knew exactly what they were doing, then i would call it a ponzi scheme
if they were just greedy and had poor business practices, then i would just call it fraud or embezzlement
if they were #2 but were also victims of changing regulatory environments, well i would say that in addition to committing fraud, they were also stupid for continuing to operate in a way that would ruin their business and ultimately put themselves in a position that it would appear to be fraud


[Edited on September 21, 2011 at 12:44 PM. Reason : .]

9/21/2011 12:40:13 PM

I don't believe the 19 software owners knew it was a Ponzi so they just kept collecting their profits.

The four in the know were the owners of fulltilt Howard lederer, Rafe furst, Chris Jesus Ferguson, and the CEO.

They contunued taking profits even as it collapsed with lederer remarking in one meeting that a $6 million run on their bank (players cashing out) would ruin them.

They got as much money out and wired to their personal offshore accounts as they could before it went bust.

It's well known that the old school pros like Ferguson and lederer are no longer profitable poker players in today's poker landscape. This was their way of staying rich and relevant in the poker world they were no longer competitive players in. It was also a good way to stick it to the new generation of players who took away their livelihoods.

9/21/2011 12:51:24 PM

In one desperate attempt to keep the deposits flowing, they invested $10 million in a failing regional bank for a secret agreement that the bank would in turn process payments that they knew to be illegal (based on the 2005 Bush law). This was a pretty big scheme.

9/21/2011 12:54:17 PM

Quote :

"It turns out not all of what the owners were receiving was profits. It was actually the deposits of players were being told their funds were maintained in secure accounts , maintained separately from fulltilt operational funds."

For real, though...this is a perfect description of fractional reserve banking, just change the names of the parties.

9/21/2011 12:57:53 PM

Quote :

"that's simply not true. Tons of players left their funds on fulltilt because of the interest. They traded online money back and forth all the time. Someone gives you $20k in cash and you ship them the virtual chips."

this may be true. it would be a reason to keep it there as opposed to consistently shifting money in and out, which is a pain in the ass. but in no way were people showing up to FullTilt to put their money in for the interest. Ergo, not an investment.

Quote :

"The 19 owners of tiltware (Phil ivey is one if them) were being paid ownership "profits" every month. They were being paid profits because they were INVESTORS."

one generally does not include owners as investors, because the owners are making direct decisions with the money. Moreover, that these 19 people are "investors" doesn't change the fact that the other million people involved are NOT investors.

Quote :

"It turns out not all of what the owners were receiving was profits. It was actually the deposits of players were being told their funds were maintained in secure accounts , maintained separately from fulltilt operational funds. That is a Ponzi."

no. AGAIN. that's fucking EMBEZZLEMENT. you need to go get a damned dictionary and read the definitions, dude. Embezzlement is not a requirement for a ponzi scheme. I could take a shoe box and stuff a bunch of people's cash into it and never touch it while paying "returns" from that same shoe box. Even if I don't pay myself out of that shoe box, it's still a ponzi scheme. Embezzlement is NOT a requirement, it never has been, it never will be. It usually accompanies the scheme, because why else would you run such a scheme? But it is NOT a requirement.

Quote :

"if they knew exactly what they were doing, then i would call it a ponzi scheme"

even with that I wouldn't call it a ponzi scheme because there is no hint of this being an investment. What makes this "murky" is that you have people putting money in and taking it out, which is unusual with respect to most businesses. Usually you have one set of people who are paying in, customers, and one set of people who are being paid, suppliers. There's really only a few types of businesses where the two overlap: banks, investment firms, and casinos. There may be others, but these are the main ones we think of with this kind of model. Yet no one in their right mind considers a casino customer as an "investor". We call him a "gambler," precisely because there is a difference in how the money is being used and controlled. No, if they knew what they were doing, then it's embezzlement, as they are taking funds that are appropriated for one purpose and using it for another without real authorization. Otherwise, it's just bad business practices. I imagine it was a combination of the two, but it's far from a ponzi sheme.

Quote :

"For real, though...this is a perfect description of fractional reserve banking, just change the names of the parties."

bingo.

[Edited on September 21, 2011 at 1:34 PM. Reason : ]

9/21/2011 1:33:18 PM

I always thought lederer and ferguson were slime balls. I hope they get their shit pushed in.

9/21/2011 1:36:48 PM

The reason you aren't recognizing that this indeed was a Ponzi scheme is that you don't understand the owners of the software are not the same people as the owners of the poker company.

The owners of the software were being paid a return on their software investment.

This was supposed to be coming from the profits their investment was generating for the owners of the website.

Instead the phantom profits were mostly comprised of new player deposits.

Once they can determine how much of the ill gotten "profits" went to these investors, you can bet there will be clawbacks.

9/21/2011 2:06:32 PM

Quote :

"The reason you aren't recognizing that this indeed was a Ponzi scheme is that you don't understand the owners of the software are not the same people as the owners of the poker company."

and the reason you don't understand that it isn't a ponzi scheme is that it requires money be taken from one investor and given to another. The software owners might have had an investment perspective, but the players DID NOT. Ponzi REQUIRES that one investor be paid FROM ANOTHER INVESTOR. The players are NOT investors. And even then, calling the software owners "investors" is still disingenuous. They are business owners, not investors.

9/21/2011 2:46:22 PM

Well you're not correct in this case and I've layed it out for you so we will just leave it at that.

Again, the players were using fulltilt as a bank account and collecting interest as well.

Tiltware was owned by separate ownership and duped by high returns that will now be clawed back because they weren't real.

I'm not interested in arguing the mechanics beyond that, but will note that this is another win for Ron Paul and another loss for government intervention. By trying to protect people from gambling they walked them right into a $400 million scam.

9/21/2011 4:24:43 PM

Aaron, calm the fuck down.

You being angry will not help you win the argument.

You're wrong, accept it.

9/21/2011 4:33:34 PM

According to dictionary.com, only 1 definition says

Quote :

"to put (money) to use, by purchase or expenditure, in something offering potential profitable returns, as interest, income, or appreciation in value"

but you're ignoring the 4 other definitions of investors

Quote :

" 2. to use (money), as in accumulating something: to invest large sums in books. 3. to use, give, or devote (time, talent, etc.), as for a purpose or to achieve something: He invested a lot of time in helping retarded children. 4. to furnish with power, authority, rank, etc.: The Constitution invests the president with the power of veto. 5. to furnish or endow with a power, right, etc.; vest: Feudalism invested the lords with absolute authority over their vassals. "

I mean, if that doesn't just smack the shit out of your only argument, I don't know what will.

9/21/2011 4:40:00 PM

This a semantic argument, guys. It's just not worth having.

I think we're all generally on the same page. Government tries to crack down on behavior it deems unacceptable, owners try to extract as much money as possible from a venture that has been rendered non-viable by said government crack down, everyone ends up getting fucked in the end.

9/21/2011 4:42:47 PM

Well his semantic argument just got owned.


The thread can now end in peace.

9/21/2011 4:44:38 PM