Devastating news for the Illegal online Poker Industry

FullTiltPoker.com

NEW YORK (Reuters) – U.S. prosecutors made new allegations on Tuesday in a probe of the Full Tilt Poker website, accusing self-styled “Poker Professor” Howard Lederer and professional poker champion Christopher Ferguson and others of paying themselves more than $440 million while defrauding other players.

In a motion filed in federal court in New York to amend an earlier civil complaint, the prosecutors accused Full Tilt Poker of running a Ponzi scheme that continued even after the original charges were filed.

Prosecutors unsealed the earlier charges on April 15, accusing three Internet poker companies — Full Tilt Poker, Absolute Poker and PokerStars — and 11 people, including Full Tilt director Raymond Bitar, of bank fraud, illegal gambling and money laundering offenses.

Lederer is described on his website as “The Poker Professor” and Ferguson has won five World Series of Poker events. The men are directors and owners of Full Tilt Poker.

“In reality, Full Tilt Poker did not maintain funds sufficient to repay all players, and in addition, the company used player funds to pay board members and other owners more than $440 million since April 2007,” the office of Manhattan U.S. Attorney Preet Bharara said in a statement.

“Full Tilt was not a legitimate poker company, but a global Ponzi scheme.”

A Ponzi scheme is usually one in which early investors are paid with the money of new clients and it collapses when funds run out.

The U.S. Attorney’s previous civil complaint did not contain allegations of the company defrauding players or owners taking payments improperly.

Representatives of Full Tilt Poker could not immediately be reached to comment on the amended complaint, which has yet to be approved by a U.S. District Court judge. This type of filing is usually approved as a formality.

The prosecutors said Full Tilt Poker’s board of directors, including Bitar, Lederer, Ferguson and Rafael Furst, defrauded players by misrepresenting that their funds in accounts were safe, secure and available for withdrawal.

In the new complaint, they cited emails and poker message board postings in 2008 and 2009 in which Full Tilt Poker and its representatives assured players their money was safe.

One of those emails read, in part: “To protect both our players and business from financial problems, all player account funds are segregated and held separately from our operating accounts. Unlike some companies in our industry, we completely understand and accept that your account money belongs to you, not Full Tilt Poker.”

The government challenges the assurances, saying the company did not have money to repay the players.

The case is USA v Pokerstars, et al, U.S. District Court for the Southern District of New York, No. 11-02564.

Breeders’ Cup to Partner with Poker Pro | Poker Industry Upset

Poker Pro Vanessa Russo

Poker Pro Vanessa Russo

I couldn’t find anything about this on the NTRA or Breeders’ Cup websites, but the Thoroughbred Times is reporting that the Breeders’ Cup has established a sponsorship with poker superstar Michael “The Grinder” Mizrachi, who is the youngest player on poker’s top 10 career money list with more than $11-million in career tournament earnings. Last year, “The Grinder” made the final table of the World Series of Poker Main Event, finishing fifth to pocket over $2.3-million.

Breeders’ Cup believes the partnership will help introduce wagering and liquidity of the two-day Breeders’ Cup World Championships to the poker world.

“We believe that there is a strong cross-over between poker and horse racing, which has not yet been realized”, said Peter Rotondo, vice president of media and entertainment for Breeders’ Cup.

I commend the Breeders’ Cup and Rotondo for trying this approach. It may not work as well as they hope since the crossover between poker players and handicappers is surprisingly low. I know this from having conducted surveys during my time at Brisnet.com.  Regardless, it is a worthwhile attempt by the industry.

Follow-up: A poker site just came out bashing The Grinder for his alignment with the racing industry. Read about the pushback here.