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Popular Poker Website Is Ponzi Scam, Says DOJ

  • by
  • September 21, 2011
  • 11:00 am
Popular Poker Website Is Ponzi Scam, Says DOJ

The US Department of Justice just sued popular poker site Full Tilt Poker for defrauding players out of hundreds of millions of dollars. The website was taking money out of users’ private accounts and funneling it towards the company’s owners and board of directors. The site currently has more than $444 million in outstanding balances, but a mere fraction of that on hand — meaning that customers are out over $300 million.

Several professional poker bigwigs are implicated in the scandal, which also extends to two other poker sites and their methods of reporting taxes. They had all been under investigation for months for the tax issues, during which time Full Tilt Poker insisted to its users that it had not misappropriated their money and they had nothing to worry about.

There are a lot of things that can be learned from a scandal like this. CNET points out that “we’ve become relaxed about trusting Web sites with real money, when we don’t necessarily have huge reason to believe that the people behind it can be virtually trusted.”

Felix Salmon traces the root of the scheme to problematic regulations: “In a weird way, strict anti-gambling regulations in the US are responsible for this fiasco. If poker sites were legal and regulated, we could trust the regulator — an arm of the US government — to protect gamblers’ funds. Casinos are strictly regulated; online poker sites should be as well.” Basically, if online gambling were legal, the federal government could better protect customers from frauds like those perpetrated by Full Tilt Poker.

It’s ironic that with presidential candidate Rick Perry insisting that Social Security is a Ponzi scheme, there was a real one right under everyone’s nose. Maybe this incident will not only remind consumers to beware, but also will serve as a bit of a learning moment for those who are unclear about the difference between large-scale frauds and successful government programs.

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Photo from chrischappelear via flickr.

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10 comments

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11:36AM PDT on Sep 22, 2011

All monetary gambling is a scam

10:38AM PDT on Sep 22, 2011

I was once an online poker player. I played thousands of hands over thousands of hours. I have a poker library that is equal to none and have spent hundreds of hours studying the game. I am a not great, but decent poker player. However, I do understand the odds and the theory behind poker, and I was not amused by online poker. I have heard all of the explanations as to why online poker is honest and the deals were fair. But, on a gut level, I never really did believe that. I wanted to believe it. I quit playing several months ago. I should be a break or better player, but I could never seem to break even. I lost around $800 playing poker over a period of 5 years. I would see hands where AA would be up against KK or AA against AA, or a set of 8's against a set of 9's. Or someone would hit the weird miracle river card with a hand that should never have been played out. People would say that these deals were random. I doubted that. Now that I have read about the owners taking player's money, I can see where they might tweak the "random" shuffle to create hands that would increase the rake and get people to bet much more than they normally would. It becomes even more reasonable to think so.

9:18AM PDT on Sep 22, 2011

Thank You!

8:45AM PDT on Sep 22, 2011

I heard that the reason Full Tilt does not have the funds is because the government seized them. So it may not be their fault. My husband used them for years and had no trouble.

4:33AM PDT on Sep 22, 2011

I never really thought about it, as i am not much of a gambler... but I wonder what the regulations are for online casinos. A real casino has to have the chip value in standard currency for all the chips in play on the floor (or so i learned most likely from a movie). So what would a virtual casino require? ...interesting

1:31PM PDT on Sep 21, 2011

Don't be fooled. Maddof was regulated and still got away with it. Fannie & freddie were regulated and that bill is almost $1,000,000,000,000. Enron, lightsquared, etc. you can find endless lists of "regulated" companies that are scams.

Regulation lures the public in to thinking that since it's regulated it must be safe. Not always. Beaucracy, fraud and corruption, etc. are too prevalent in society and especially in government. People don't think they will get caught, and if they do, they can get away with it.

The loser is always the unsuspecting public... just look at Solyndra... $500,000,000 down the tubes... our money.

My point is regulation is not the cure for corruption. Be wary of any deal that seems too good to be true, or any online site. Use trusted sources as verified by the users, not some rating agency.

The public remains the BEST regulator of industry, not completely, but in almost every case. Scammers get busted by peers and public and go out of business. Yes, some will get suckered in, but some always will. There is never enough protection. Don't disguise a scam with regulation... it just makes it worse.

1:23PM PDT on Sep 21, 2011

Thanks...posted like story last night
surprised to hear about full tilt

12:49PM PDT on Sep 21, 2011

No surprise there, the amount of scams that are thinly veiled pyramid schemes the work from home sites are as a rule little more than pyramid schemes and then there is the job scams. One thing about the internet is that there are people who will con people so it is no surprise about online poker, especially given the amount of spam & mysterious pop ups these companies use.

12:34PM PDT on Sep 21, 2011

noted.

11:59AM PDT on Sep 21, 2011

xx

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