EDITORIAL: An Intriguing Question Raised By The Full Tilt Poker Allegations: What Is Real Online — And What Is Not?

In Manhattan yesterday, U.S. Attorney Preet Bharara accused the online company Full Tilt Poker of operating a massive Ponzi scheme on a global scale. The prosecution of Full Tilt began in April. The case includes multiple online poker companies as defendants.  As the investigation evolved, the Full Tilt Ponzi scheme was detected, prosecutors said. It is the only poker firm accused of a Ponzi offense.

Lost in the Full Tilt Ponzi headlines yesterday was an intriguing series of allegations that raises serious questions about what is real online and what is not. The import of the allegations is that, if true, it shows that certain tentacles of the Internet have evolved in incredibly deceptive and dangerous ways. Could all the king’s horses and all the king’s men working 24/7/365 realistically hope to contain the menace of web-based money-laundering?

The allegations also beg another question: Can the form-shifting Internet even be policed — or do the virtuoso maestros of  virtual criminality have a permanent advantage that aids them in the full-scale fleecing of tens of thousands of people of tens of millions of dollars at a time?

There are no easy answers. But it is almost certain that the criminals have the upper hand right now, which makes it even more important for businesses and consumers to stay informed and work proactively with law enforcement. Can there be any doubt that both economic security and national security are at risk in an era in which the largest sports stadiums cannot accommodate all of the victims of online fraud flowing from a single case and fraud proceeds disappear down ratholes in the blink of an eye?

Although the general allegations of fraud beyond the Ponzi variety drew little media attention yesterday, those allegations may be the most important in the evolving poker cases. In one way or another, they touch on each of the defendants — and the story is the stuff of nightmares because it suggests that the nightmares could become permanently entrenched if this extremely murky corner of the Internet continues to expand.

Among the prosecution’s claims (bolding added by PP Blog) is that certain “[C]oconspirators . . . created dozens of phony e-commerce websites purporting to sell everything from clothing to jewelry to golf clubs to bicycles” in bids to route money to the poker companies.

Not one or two, but dozens. Virtual companies and phony corporations/websites, it seems, are doing the work of the fabled brick-and-mortar car washes of yesteryear in disguising fraud proceeds.

And why not project political awareness and a social conscience when funneling cash and laundering money?

There is a specific claim that a phony firm known as “Green2YourGreen” was  used to disguise payments to poker firms. A bogus website for Green2YourGreen allegedly was set up, and the purported business was described as a “direct sales” firm.

Its offerings allegedly consisted of purported “environmentally friendly household products” pitched by affiliates on a commissions basis.

In reality, prosecutors charged, the phony “green” operation was created “to disguise the gambling transactions” and “listed numerous products that were purportedly for sale and contained ‘testimonials’ about the benefits of green living.”

All of the phony firms and websites were designed to trick banks into processing payments for illegal gambling, according to the complaint.

There were so many of them that PokerStars, a non-Ponzi defendant, was experiencing “increasing” chargebacks because its customers could not figure out why charges for “BICYCLEBIGSHOP.COM, GOLFSHOPCENTER.COM [and] VENTURESHOPPING.COM” were appearing on their bank statements,  according to the complaint.

In any event, the lies and laundering of truth and money worked so well that billions of dollars flowed to the schemes, according to the complaint.

It was hard to read the complaint yesterday without coming away with these questions: How many more bogus websites and bogus companies are doing the same thing — for beneficiaries who have no ties to poker? How many more criminal operations outside of the poker sphere — narcotics traffickers and terrorists, for instance — have cloaked themselves in this fashion and parked themselves at the end of the money-laundering conduit?

The PP Blog has covered various “programs” that seem to make no sense at all — and we’re not just referring to the obvious fraud schemes such as the ones that exist on the Ponzi and criminals’ forums.

No, for the purposes of this post, we’re talking about the less-obvious ones — purported MLM or direct-sales “programs” that do not appear even to have a product and yet have a virtual presence on the Internet, for instance

And we’re wondering how many of the purported “programs” are just fronts for the Steroidal Puppeteers at the end of the criminally gushing money spigot and how many of  the hucksters who become the public faces of the schemes are really just people who carry out the orders of the hidden master criminals.

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8 Responses to “EDITORIAL: An Intriguing Question Raised By The Full Tilt Poker Allegations: What Is Real Online — And What Is Not?”

  1. One of the primary problems with the internet is with perceived anonymity. Someone can become anyone they want to be, make up fake profiles,and fake businesses. Add to that the average person does no Due Diligence or even rudimentary verifications, the net is ripe with crooks like Andy Bowdoin, 2 time convicted Felon!

  2. I fear I must echo Okosh’s concern about the validity of the “ponzi” charge.Necessarily gambling pays out money from the money it takes in, that’s the nature of the beast, even at casinos, since there is not really a product. Wire fraud, theft,fraud and deception designed to skirt gambling prohibitions certainly appear to be present, though.

  3. admin: In aftermath of the Full Tilt Poker Ponzi allegations, U.S. Congressman says he’ll give up campaign contributions that may have come from tainted poker proceeds:

    Maybe he could send some of it to Phil Ivey who has filed a claim of $150million against full tilt. He also boycotted the 2011 WSP(world series of poker) in protest…

  4. An explanation of the ponzi aspect of the charges from the International Business Times:

    “The Forbes article explains that Fill Tilt Poker’s cash flow problems began in 2010 because of a federal government crackdown on online poker sites that disrupted the payment processing account, preventing Full Tilt from withdrawing money from U.S. players’ accounts. U.S. GOVERNMENT LAWYERS CLAIMS THAT FULT TILT CONTINUED TO CREDIT PLAYERS ACCOUNTS WITH WHAT AMOUNTED TO $130 MILLION OF ‘PHANTOM FUNDS,’ a practice that backfired (much like Bernie Madoff’s ponzi scheme did) when players won the fake money and could not cash out”

  5. laidback: I fear I must echo Okosh’s concern about the validity of the “ponzi” charge.Necessarily gambling pays out money from the money it takes in, that’s the nature of the beast, even at casinos, since there is not really a product. Wire fraud, theft,fraud and deception designed to skirt gambling prohibitions certainly appear to be present, though.

    I’m thinking that the Feds can argue that Full Tilt was collecting money from non-U.S. players after the April complaint was brought — and while this occurred the firm was insolvent ($60 million in the till at the end of March, $390 million in payments owed).

    Any payouts the firm did make to non-U.S. players after the April complaint was brought came in whole or in part from “new money” — i.e., a Ponzi scheme.

    This is no ordinary case, to be sure.


  6. From the amended complaint:

    “Following the execution of the Arrest Warrant In Rem and the unsealing of the Indictment, Complaint, and Restraining Order on April 15, 2011, Full Tilt Poker terminated its United States operations. Full Tilt Poker continued, however, to operate its online gambling business outside of the United States and continued to collect deposits from non-U.S. players.

    “Full Tilt Poker continued accepting player funds despite the fact that it had liabilities to players around the world for over $300 million, yet held only a small fraction of that amount in its bank accounts. Indeed, in early June 2011, Lederer reported to others at Full Tilt Poker that there was only approximately $6 million in left.

    “Full Tilt Poker’s CEO, Bitar, was well aware of the need for new deposits after April 15, 2011, and knew that even a few million dollars’ of unexpected withdrawals could reveal Full Tilt Poker’s true financial situation. For example, in an internal Full Tilt Poker e-mail dated June 12, 2011, 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.'”