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.
Photo from chrischappelear via flickr.