Embattled online poker giant Full Tilt Poker has struck back at U.S. federal prosecutors, who Wednesday accused the gambling site of being a “global Ponzi scheme.”
“While the government has obviously taken issue with the underlying activities of FTP, under any reasonable interpretation, the world-wide operations of the online cardroom are not a so-called Ponzi scheme,” said Ian Imrich, attorney for Full Tilt owner and star poker player Chris Ferguson, in an interview with the Wall Street Journal.
The statement follows an accusation by Preet Bharara, a federal attorney for the Southern District of New York, who told WSJ earlier this week that, “Full Tilt was not a legitimate poker company, but a global Ponzi scheme.”
Ponzi schemes, named after Charles Ponzi, who invented the fraudulent business structure in the early 1900s, operate by paying new investors with previous investors’ money, rather than paying them in actual profits made by the business. A recent well-known example is that of Wall Street tycoon Bernie Madoff, who was arrested in 2008 for creating what is said to have been the largest Ponzi scheme in history.
Investors in Ponzi schemes are often enticed by guarantees of profit far larger than legitimate investments can deliver. This is true because the payouts to investors have nothing to do with actual business performance, but rather the amounts that can be paid and still keep the scheme afloat.
Another Full Tilt attorney, Jeff Ifrah, told the Journal that Full Tilt’s structure does not match that of a Ponzi scheme. Instead, he says, Full Tilt was simply a “mismanaged” business, as the Journal explains it.
“A Ponzi scheme requires an investment vehicle in order to receive a certain rate of high return,” Ifrah said. “None of these things happened here.”
Regardless of whether or not the Ponzi claims are true, Full Tilt remains in serious trouble with U.S. authorities, who in April seized all of Full Tilt’s assets, and shut down the gambling site’s functionality, save allowing users to withdraw their funds from the Full Tilt system.
Two other major online poker sites, Poker Stars and Absolute Poker, were also seized by the Federal Bureau of Investigation.
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