Thursday, September 22, 2011

"Poker Stars" Gambling Site Defrauds Customers Say Feds

Player Deposits Used To Pay $440 Million To Board Members And Other Owners
The United States Attorney for the Southern District of New York, Preet Bharran, announced this week the filing of a motion to amend the forfeiture and civil money laundering complaint originally filed in April 2011, in the matter of United States v. PokerStars, et. al.

The proposed Amended Complaint alleges that Full Tilt Poker and its Board of Directors, including Raymond Bitar, Howard Lederer, Christopher Ferguson and Rafael Furst, defrauded players by misrepresenting that their funds on deposit in online gambling accounts were safe, secure, and available for withdrawal at any time. 

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. 

On April 15, 2011, the U.S. Attorney's Office for the Southern District of New York filed the original complaint against Full Tilt and two other Internet poker companies and unsealed a criminal Indictment charging eleven defendants, including Bitar, with bank fraud, illegal gambling
and money laundering offenses.

Prosecutors say Full Tilt was not a legitimate poker company, but a global Ponzi scheme. They say Full Tilt also cheated and abused its own players to the tune of hundreds of millions of dollars. Saying, Full Tilt insiders "lined their own pockets with funds picked from the
pockets of their most loyal customers while blithely lying to both players and the public alike about the safety and security of the money deposited with the company."

As alleged in the proposed Amended Complaint, on several occasions in 2008 and 2009 through emails to players and postings on online poker message boards, Full Tilt Poker and its representatives assured players that their money was segregated, safe, and secure. 

For example, in response to inquiries, Full Tilt Poker sent emails to players in May 2008 assuring them that their funds were secure. 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."

Despite these repeated assurances to players, the company did not have enough funds to repay players. By March 31, 2011, Full Tilt
Poker owed approximately $390 million to players around the world, including approximately $150 million to United States players. 

However, the company had only approximately $60 million in its bank accounts.

Furthermore, as alleged in the proposed AmendedComplaint, the company used player funds to pay its Board of Directors and other owners. Between April 2007 and April 2011, Full Tilt Poker and its Board distributed approximately $443,860,529.89 to Board members and owners. Bitar received approximately $41 million, Lederer received approximately $42 million, and Furst received approximately $11.7 million.

Ferguson was allocated approximately $87,486,182.87 in distributions, and received at least $25 million, with the remaining balance characterized as "owed" to him. Much of the money that was distributed was transferred by the Board members and owners to accounts in Switzerland and other overseas locations.

In June 2011, after the ability to collect funds from U.S. online gamblers, Lederer reported to others at Full Tilt Poker that there was only approximately $6 million left on deposit, and therefore no realistic ability to repay its new depositors. Similarly, in an internal email dated June 12, 2011, Bitar worried about a "run on the bank" by Full Tilt Poker customers. 

In addition to the forfeiture and civil money laundering penalties sought in the original complaint, the proposed Amended Complaint seeks the forfeiture of the dividends received by Bitar, Lederer, Ferguson, and Furst, as well as money laundering penalties against these individuals in the same amount. 

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