Most recent update: 9/20 at 4:37 PM EDT.
The US Department of Justice has amended its Black Friday civil complaint to include discussion of alleged “Full Tilt Poker’s and the FTP insider defendants’ theft of player funds.” The new complaint adds three new defendants, Howard Lederer, Chris Ferguson, and Rafe Furst. It also alleges that these new defendents together with Ray Bitar committed money laundering, and asks for penalties ranging from $12M for Furst to $42M for Lederer.
A memorandum summarizing the amendment says,
The Amended Complaint alleges that one of the Poker Companies, Full Tilt Poker, not only engaged in the operation of an unlawful gambling business, bank fraud, wire fraud, and money laundering as alleged in the Complaint, but also 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. Full Tilt Poker 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.
The new complaint also contains detailed information about Full Tilt’s debt to players, stating that it was approximately $390 million on March 31, 2011, and is still over $300 million today. It states that approximately $150 million is owed to US players.
It goes on to say that Full Tilt’s Board of Directors, allegedly Ray Bitar, Howard Lederer, Chris Ferguson, and Rafe Furst, paid to themselves and other owners “approximately $443,860,529.89″ from April of 2007 to April of 2011 and that payments to owners only stopped after April 15, 2011.1 It continues, “As of the date of this Amended Complaint, neither Full Tilt Poker nor the individual owners who received over $443 million in distributions have repaid any of the more than approximately $300 million the company owes to players around the world.”
The new complaint also includes internal Full Tilt e-mails discussing the dire financial situation of Full Tilt after April 15th and attempts to hide the situation from players:
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.”
It also alleges that the new defendants committed money laundering and asks for new penalties:
The FTP Insider Defendants are liable to the Government for a sum of money representing the amount of property, funds, or monetary instruments involved in the money laundering offenses described above, in an amount that is no less than $40,954,781.53 for Bitar; $41,856,010.92 million for Lederer; $25 million for Ferguson; and $11,706,323.96 million for Furst.
Subject: Poker brought you this story as quickly as possible, and as such, we have not had time to fully review this new information. We will continue to study this and update this article with what we learn.
Update 9/20/2011 1:19 PM EDT:
SDNY has released a press statement calling Full Tilt Poker “a massive Ponzi scheme.”
The statement says that the amounts listed (approximately $41 million for Bitar, $42 million for Lederer, $25 million for Ferguson, and $12 million for Furst) are the amounts that they received respectively in dividends. It goes on to say that Ferguson is owed an addition $62 million from Full Tilt in dividend payments.
Update 9/20/2011 1:39 PM EDT:
According to the complaint,
In total, approximately 23 individuals owned shares in Full Tilt Poker. The FTP Insider Defendants specifically owned the following approximate percentages of Tiltware LLC: Bitar (7.8%), Lederer (8.6%), Ferguson (19.2%), and Furst (2.6%).”
These share percents are the same numbers that Subject: Poker has heard from other sources. However, the statement that only twenty-three individuals owned shares in Full Tilt Poker contradicts the story that we’ve been told by many sources, including shareholders in FTP, who say that a much larger number of people own small shares in Full Tilt Poker, including many current and former employees. We will continue to look into this.
Update 9/20/2011 2:00 PM EDT:
The amended complaint refers to another professional poker player and owner who has not been sued as “Player Owner 1″ who has received $40,078,646.6 in dividends and millions in loans, at least $4.4 million of which have not been repaid. This is almost certainly Phil Ivey.
Update 9/20/2011 2:11 PM EDT:
Despite the fact that, by early 2011, Full Tilt Poker was severely insolvent, it continued making payments of approximately $10 million per month to its owners up to and including April 1, 2011. Full Tilt Poker also continued making “loans” to its professional poker players who also owned an interest in the company, including loan payments totaling more than $2,000,000 to Player Owner 1 between August 2010 and January 2011.
This confirms that FTP was insolvent before Black Friday, a theory that Subject: Poker has been working to prove definitively for months. It also confirms that owners continued to pay themselves large amounts of money ($10 million per month) long after the company had become insolvent.
With this additional information, we can also confirm beyond reasonable doubt that “Player Owner 1″ is Phil Ivey.
Update 9/20/2011 2:23 PM EDT:
Subject: Poker would like to clarify that we are so far unaware of any criminal charges filed against Howard Lederer, Chris Ferguson, or Rafe Furst. Though some of the allegations included in the civil complaint (and certainly the statement from Preet Bharara that Full Tilt Poker was a Ponzi scheme, which is not justified by or mentioned in the official court filings) would justify criminal charges if true, it seems that no such charges have yet been filed.2
Update 9/20/2011 3:18 PM EDT:
As of March 31, 2011, Full Tilt Poker owed approximately $390 million to players around the world, including approximately $150 million owed to players in the United States. At that time Full Tilt Poker had only approximately $60 million on deposit in its bank accounts.
Update 9/20/2011 4:37 PM EDT:
In early June 2011, Lederer reported to others at Full Tilt Poker that there was only approximately $6 million in left.
Edited on 9/20/2011 12:14 PM EDT: Added last sentence to opening paragraph.
Edited on 9/20/2011 1:09 PM EDT: Fixed a minor typo.
- Subject: Poker believes that the total amount paid to owners in dividends throughout the existence of Full Tilt Poker is roughly $500 million. ↩
- It is possible that criminal charges could have been filed under seal pending the arrest of the accused, but it seems very unlikely that the Department of Justice would unseal the amended civil complaint if they were attempting to hide pending criminal charges. ↩