DoJ adds Lederer, Ferguson, Furst to Full Tilt complaint; calls FTP “ponzi scheme”

full-tilt-poker-ponzi-schemeThe US Attorney for the Southern District of New York (SDNY), which brought the original Black Friday indictments against online poker companies, has filed an amended civil complaint against Full Tilt Poker (FTP) that adds “FTP Insider Defendants” Howard Lederer, Chris ‘Jesus’ Ferguson and Rafael ‘Rafe’ Furst. In announcing the amended complaint, the SDNY’s Preet Bharara described FTP as “a global Ponzi scheme” that relied on fresh player deposits to keep the ship afloat. The complaint alleges that FTP currently owes its players over $300m, half of which belongs to US players.

In addition to the bank/wire fraud and money laundering charges in the original filing, the amended complaint alleges that FTP “defrauded its poker players by misrepresenting to players that funds deposited into their online player accounts were secure and segregated from operating funds, while at the same time using player funds to pay out hundreds of millions of dollars to Full Tilt Poker owners.”

To illustrate this charge, the amended complaint cites form emails created by FTP in 2008 that stated “our players’ funds are kept in several deposit accounts throughout the world, all of which are separate and distinct from our operating accounts.” Another email went as far to suggest “unlike some companies in our industry, we completely understand and accept that your account money belongs to you, not Full Tilt Poker.” The complaint even cites 2009 internet poker forum posts made by much-maligned FTP player liaison ‘FTPDoug’, which stated “I can say with authority, though, that we do not mix deposits with operational expenses…”

The amended complaint alleges that, according to FTP’s own internal balance sheet, the total sum owed by FTP to its worldwide player base on March 31, 2011 (before the April 15th indictments allegedly tied up FTP’s funds) was approximately $390,695,788, yet at the same time FTP’s bank accounts contained only $59,579,413. Some of this discrepancy has previously been blamed on FTP’s willingness to credit US players’ deposits despite being unable to physically ‘pull’ the money from their bank accounts due to ongoing DoJ enforcement action against payment processors. Despite this gap, the complaint alleges that FTP continued to distribute $10m/month to its owners as late as April 1.

The credit crunch grew even more acute following Black Friday. In early June 2011, Lederer reportedly told his cohorts that there was only $6m left in FTP’s bank accounts. The amended complaint cites an internal FTP e-mail dated June 12 in which FTP CEO Ray Bitar “expressed concern that a company announcement regarding lay offs and the Board (including himself) being replaced would be seen as bad news, which would cause a “new run on the bank,” adding that “it could be a huge run” and that “at this point we can’t even take a five million run.””

The amended complaint identifies 23 individuals with an ownership stake in FTP. It also breaks down the stakes held by Bitar and the three new defendants in Tiltware LLC (described as the “beneficial owner of all other FTP entities”) as follows: Bitar (7.8%), Lederer (8.6%), Ferguson (19.2%), and Furst (2.6%). The 23 stakeholders received a total disbursement of over $443m between April 2007 and April 2011. Of this, Bitar received $41m in ownership distributions and “profit sharing” payments, while Lederer similarly garnered $42m. Ferguson’s ownership distributions came to a staggering $85m, but only $25m of this was actually transferred to his accounts (with the balance listed as “owed” to Ferguson). Furst received almost $12m in ownership distributions. The remainder of the $443m disbursed was divvied up between the other 19 stakeholders. The SDNY’s amended complaint includes financial penalties matching the sums actually received by Lederer, Ferguson and Furst, and five bank accounts “associated” with these individuals have since been “restrained.”

The amended complaint also makes note of a “professional poker player and FTP owner” identified only as “Player Owner 1” who received over $40m in distributions, plus millions “characterized as loans from FTP”, of which “at least” $4.4m have not been repaid. This appears to be a reference to Phil Ivey, who was alleged to have ‘borrowed’ almost $11m from FTP between June 2009 and April 2011.

(As the DoJ displays its willingness to revise complaints to ensnare the money men who may have thought they’d gotten away with it, one wonders how long it will be before the US Attorneys office in Maryland amends the court papers filed against BetED to include not just the front men/fall guys, but the two men suspected to be BetED’s beneficial owners – principals Paul Lavers and Joe MacDonald. Especially as the pair appear to be preparing to lower their bucket back down the well for yet another scoop of players’ cash via Covers are widely suspected of having passed all the BetED player deposits through to themselves via a huge (up to 80%) revenue share agreement that is believed to have been directly applied to player deposits real-time every month. This is identical to the accusations levelled against Full Tilt ownership in this amended complaint.)

We had to chuckle at a comment made by Preet Bharara in announcing the amended complaint, specifically the bit about how FTP “was able to accomplish this massive fraud, in part, because it illegally conducted business in the United States but maintained its personnel, operations, assets and accounts principally overseas.” After all, if FTP’s operations had been stateside, like, say, Bernie Madoff’s make-believe investment business (the largest Ponzi scheme in US history, with real-money losses of $18b), the authorities would have seen right through the scam in a heartbeat. Of course, they would.

No doubt this development has made the goings-on behind closed doors in London between FTP and the Alderney Gambling Control Commission all the more uncomfortable. Which begs the question — was the timing of the SDNY’s announcement deliberate? What about the fact that the announcement was made on the same day the American Gaming Association released its ‘code of conduct,’ as well as the following video, which goes to rather comical lengths to stress the Snidely Whiplash types currently operating US-facing online poker sites? (The cowboy with the beard even resembles Chris Ferguson.) The AGA has begun spam-tweeting: “Full Tilt news is perfect example of why we need to regulate online poker to protect players.” Remember, you’re not being paranoid when they really are all out to get you…