Full Tilt Poker – a huge blow to poker [Editorial]
Monday, 26 September 2011
It appears that Full Tilt Poker currently owes players around the world $390,000,000. This debt allegedly goes back as far as mid-2010, almost a year before Black Friday, when Department of Justice seizures and a lack of payment processors meant that they were unable to debit US players’ accounts.
Not worrying about this, Full Tilt allegedly credited the accounts with money crafted out of thin air and decided to continue as normal. This shortfall grew to almost four hundred million dollars.
Most disturbing, if true, is that the owners of Full Tilt Poker continued to pay themselves to the tune of $10m per month even while the company was insolvent. That, plus the lack of player/operational fund segregation, means that they were using our money to line the pockets of their stable of pros while owing nine figures to the poker world at large and running a company with less than one per cent of that in cash.
Of course, it isn’t a Ponzi scheme. We, as players, were not investors. We were poker players, who trusted a website that was the second-largest in the world and represented by all the best and most famous poker players including Phil Ivey, Tom Dwan, Patrik Antonius and of course, Lederer and Ferguson. However, the words “Ponzi scheme” resonate with the public. They may not know what exactly it is, but it’s bad, right? Like Bernie Madoff? So Full Tilt Poker was like Bernie Madoff? So online poker is bad?
CNN, The New York Times, The Wall Street Journal, ESPN and ABC all dedicated front pages to covering the allegations against Full Tilt Poker. There’s no excuse for it, of course – allegedly paying yourself and your friends close to HALF A BILLION DOLLARS while you allegedly owe thousands of players almost that amount; apparently continuing to pay out eight figures monthly while you’re insolvent; it appears to be negligent mismanagement of a company, but it’s not a Ponzi scheme.
Of course, that doesn’t matter. It’s out there now and the average US citizen equates online poker with a Ponzi scheme. It doesn’t matter that PokerStars paid all US players within a week and continued to operate globally; it doesn’t matter that this wouldn’t have happened without an exceptionally catastrophic run-on-the-bank event. But, when and if regulation in the US comes, do you think a US recreational player is going to want to deposit online? “No way, all online poker sites are Ponzi schemes to take your money. And it’s rigged. I read it in the New York Times.”
It is, to paraphrase Tom Dwan, simply unbelievable that they could continue to accept deposits that they could not credit. This went from a small hole to a big hole to almost four hundred million dollars. This is a site that Dwan claims was, at its peak, making in excess of $500m per month. Any sensible owner would have ceased US player deposits as soon as the hole grew to a piddling amount like, I don’t know, just a hundred million.
What can we learn from this? Don’t put all your eggs in one basket, obviously. I completely trust PokerStars, for example, but I would no longer feel comfortable having my entire bankroll online. If you’re well-bankrolled you only need 25-30% on a site at any one time anyway, unless you swing like Tom Dwan mixed with Max Mosley.