Thursday, September 22, 2011

More Full Tilt Disgust

Man I could ruminate on this full tilt business forever. This morning I have two quick thoughts I've been focusing on.

For starters, take a spin around the poker blogs you read these days, and you will still see a ton of people defending full tilt against the allegations that they were a ponzi scheme. I mean, I've seen or heard like five or six well known voices in the poker blogiverse saying that exact thing over the past 36 hours or so. Never mind the fact that, during the last year of its existence, full tilt operated at a massive shortfall in actual cash of some $130 million below the amount of funds in player accounts on their site, because the site was unable to find payment processors willing and able to transfer them the cash from depositors' accounts. They never told anyone this -- went out of their way to hide it in fact -- and spent the better part of their last year as an online poker site with again a 9-figure amount of "phantom funds" that were in play on full tilt's site, but which full tilt was never able to actually collect from its players' bank accounts. As a result, the last year consisted of full tilt funding player withdrawal requests out of other players' deposits (actually, out of what was left out of other players' deposits after the 19 owners and board members took their $5-10 million a month in distributions, that is), while only maintaining a small fraction of the total player poker funds available on the site in actual cash, resulting in the figures announced from Black Friday when full tilt had $390 million of player fund obligations, but only $60 million on hand with which to pay them. The whole thing was not designed as a ponzi scheme, no -- and the system has nothing to do with the traditional pyramid-style scheme that often many ponzi schemes take the form of -- but over the past year when funding player deposits became a huge challenge for tilt, the owners and those in control simply let those funding discrepancies linger, unnoticed and unannounced, and kept their business running in the hopes that no more than 15% or so of their players would make cashout requests at once which is all it would have taken for tilt not to be able to cover the withdrawals given the Black Friday figures. By June 2011 it would have taken just 2% of players to request withdrawals of their funds on full tilt for the company not to have had the money -- anywhere -- to pay their players out. This, my friends, is basically the textbook definition of a ponzi scheme, as asserted by US district attorney Preet Bharara in the amended complain filed earlier this week. And yet, I've read in several places in the poker media this week how it was wrong to use the term "ponzi scheme" to describe the site, that full tilt was just poorly-managed but not at all a ponzi scheme, that the district attorney is just trying to use the well-known and sensationalistic term in the media to gain the upper hand against the poor site being depicted falsely, etc.

Face it guys. Full tilt quickly became a way for the owners and founders to loot their players of our cash and live their extravagant lifestyles basically for free. But when things got out of control, the powers that be knowingly and willingly turned the site into a ginormous ponzi scheme scam, and when the events of April 15, 2011 caused massive withdrawal requests from U.S. players, the proverbial shit hit the fan and the jig was up, just like when Bernie Madoff could no longer meet his own fund's withdrawal requests and was forced to turn himself in. Pay withdrawals out of other people's deposits, and never actually have close to enough money to return everyone's investment near the end -- this is how ponzi schemes almost always end, and it's the essential nature of what makes them a ponzi scheme in the first place. But my question is: Is it seriously not time yet to stop defending these pieces of shit thieves just because you like to think of some of them as your friends? Stop posting that they're being mischaracterized (they aren't), stop posting that the district attorney is lying to get the media and the public on his side (he isn't), and stop saying that this was all just an innocent business enterprise gone wrong (it wasn't).

The other thing I just can't help thinking about these past several hours is the BBT. To be honest -- and frankly I wrote about this here a few times so this is no surprise to anybody -- but after those first couple of BBT series, I never really could understand how full tilt could willingly continue forking over 30 or 40 grand a pop for these BBT series, only to see the winners repeatedly pocketing the cash and not even playing in the WSOP with the winnings, or better yet, people taking the money and going out and playing, but then never blogging one whit about the experience in the first place. Several people commented on this over time on their blogs actually -- it just seemed odd that tilt would keep coming back and offering up more and more free prizes to us, when the BBT participants as a rule pretty much consistently fucked tilt off when tilt looked to get the benefit of their bargain by someone posting publicly about the experience that full tilt enabled them to win.

Well now we know how Full Tilt "had" the money to keep "spending" on "free" stuff for us in the various BBT tournament series, don't we? Full tilt "gave" us all this "free" stuff for the BBT series, over and over again, because in the end it was our money all along that they were just giving us back a small fraction of! I mean, when you're paying yourselves $443 million over a few years out of accounts into which players have deposited $390 million but which have only $60 million left as of Black Friday, what's $150,000 spread over four BBT series to help get a bunch of poker writers to write posts that are sure to bring at least some new players to the site, thereby generating more funds which the founders could pilfer for themselves? Why not give us the money and see how much we can generate in deposits? Since it was the deposits themselves that the full tilt owners were stealing -- and just not the rake from all the participants as we had all believed when the BBT series were going on -- what on earth would possibly make these people hesitate for a second in spending $150,000 of our money -- not theirs in any sense of the word -- on prizes for us, to try to generate more deposits to allow the company to keep its fraud going for just a little while longer. That $150,000 sure seemed like a huge amount of "free" "prizes" to be giving to little old us back in the day....Doesn't seem quite so large an amount anymore these days, does it?

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Blogger Goondingy said...

Outstanding breakdown and I...agree!

9:27 PM  
Blogger Astin said...

Still not a Ponzi scheme. Banks hold far less in assets than they could afford to pay out. If there was a run on deposits, every bank in the world would be shown to be insolvent.

Was it a scam? Sure. But it wasn't a Ponzi scheme. Ponzi schemes are pretty specifically defined, and as soon as you say "it didn't have this aspect..." then it's NOT a Ponzi scheme, it's something else.

As for the "free" stuff, nobody ever thought it was free, and everybody knew it was a relatively small amount for FT. And guess what? Every dime anybody's made, every piece of swag, every FPP renewal? It was ALL "our" money. That's how the business WORKS. And guess what? The winners GOT PAID. Nobody got ripped off unless they kept the money on the site.

12:13 AM  
Anonymous Anonymous said...

I still can't believe people are still defending the site.

The best con men in the world leave those they conned still not believing that they've been conned. It's a scheme as old as time.

Hey, anybody own a time share? No, I'll sell you one. Oh wait you do own a time share, let me sell you on how to get out of it.

Prey upon the greedy.

12:29 AM  
Blogger Hammer Player a.k.a Hoyazo said...

I do love it when my commenters unwittingly prove my exact point. I mean, that "explanation" up there about the BBT is just priceless, but Astin's not the only one doing it, not by a long shot.

I guess no matter how much I've been yelling about this for months, some people are still going to defend full tilt like that because just like Don said, the best con artists not only con you but leave you feeling like you didn't just get conned.

If they weren't so busy finding ways to keep hiding our money and running from the law, I'm sure the guys named in the amended complaint would be yukking it up at Astin's comment. And then people will wonder what motivates some new set of guys to go and start running a whole new con and take some more guppies to the cleaners all over again.

The reactions to this scandal sure do show the entire world who the real fish were when it comes to full tilt poker, don't they?

12:38 AM  
Blogger Astin said...

Who's defending? I'm saying calling it a Ponzi scheme is the wrong terminology. Definitely a scam, definitely crooks if allegations are true, but using a specific term as a catchall for all scams is lazy.

A Ponzi scheme doesn't have a pool of money sitting there to be used. It distributes what comes in to keep the illusion going. A Ponzi scheme requires new investors to keep the scam going - Tilt was relying on non-existent money because processors didn't exist. A Ponzi scheme pays out not just the insiders, but the early investors as well - the only people paid out by Tilt were the insiders, off client money, not off new investors coming in. A Ponzi scheme guarantees high returns - Tilt guaranteed you could play poker and get your money out if you had any. A Ponzi scheme, when it disappears, has no money to be found because it was paid out to investors as returns, or "re-invested" in the scheme. A small portion is still held by the scammer. In this case, they know where the money went and who got it.

Could it be called a pyramid scheme even? I doubt it. There was no incentive to anyone who brought in other players. Again, it WAS a scam, just not a Ponzi.

As for the other part - I'm saying your argument makes no sense. Anybody who thought Tilt was magically creating $150k out of the goodness of their hearts is a moron. Every penny the company spent, that ANY company spends comes from its clients. And did the winners NOT get paid? Did they not have $10k they didn't have before in their bank accounts? You write it as if we were under the illusion that millions of players' rake didn't pay for the perks. Or that the people who won prizes never saw them. That didn't happen. Even if Tilt was legit and solvent, $150k over 4 tournaments that had dozens of games played and plenty of SEO benefits is worth it or them and just a drop in the bucket. Besides, when was the last BBT? Was it before or after the processing problems kicked in? Do you know they weren't liquid at that time? I don't.

And please, watch where you erroneously cast stones - how often were you playing on UB and singing its praises here after they were CAUGHT stealing players' money? You defended the hell out of proven crooks and used the excuse of soft players and big overlays to justify your support.

2:12 AM  
Blogger Bayne_S said...

"Ponzi scheme" is the go to phrase for scams when intellectually lazy politicians or prosecutors want to raise outrage.

Charles Ponzi was not the 1st to create the fraud he was just the most "successful"

Social Security is not a Ponzi scheme as there are no investors lured in for great returns it is forced investment.

Full Tilt actions would be more embezzling than Ponzi scheme as they were more an Investment Bank where we got to direct how our deposits should be used but violated the cardinal rule of investment banking by not separating investor funds from operating capital.

6:50 AM  
Blogger NBShuffler71 said...

Come on guys. Ridiculous to be arguing the toss over whether or not this is actually a Ponzi Scheme. Whether or not it is technically a Ponzi Scheme is neither here nor there. I'm sure the DOJ just used this term for impact to illustrate the huge and blatant fraud that has taken place.

It may have started as mismanagement and negligence, but for these people to keep paying themselves huge amounts of cash long after they realised what was going on is a total disgrace. Taking money (they didn't need)from people who trusted and respected them whilst lying through their teeth about the position of the business. What i don't understand is how long they thought they could continue to get away with it.

I'm glad this bogger (Hammer player) is telling this situation as it is, as some of the poker media has been incredibly quiet and leniant on this matter. I put it down to vested interests and denial, but i for one hope Lederer, Ferguson & co get everything they deserve.

5:19 AM  

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