Two of the icons of the poker world, Chris "Jesus" Ferguson and Howard Lederer, and two other directors of the Full Tilt Poker website have been accused of defrauding thousands of online poker players out of some $300 million owed to them.
In effect, the federal government is accusing these men of profiting from a Ponzi scheme, run very much like the fractional reserve banking system under which obligations vastly exceed on-hand deposits and couldn't possibly be paid if everybody wanted out at the same time.
The Justice Department alleges that after it filed suit against Full Tilt and two other major online poker sites in 2010, making a large dent in their huge profits, the owners of Full Tilt made up for diminished business by taking deposits from players and paying themselves with the proceeds.
A Wall Street Journal report said, "On March 31, 2011, Full Tilt owed approximately $390 million to players around the world, including $150 million to U.S.-based players, but the company had just $60 million in its bank account, the government said in its filing Tuesday."
As a former Full Tilt player (luckily not a high stakes one), I am angry at being scammed, having lost a little money, but as they say, caveat emptor, let the buyer beware. I am told that some big time players are out millions of dollars.
Meantime, alleges the indictment, Messrs. Ferguson, Lederer and other owners of the company were lining their pockets willy-nilly.
Back in April, the justice department shut down gambling at three of the largest off-shore websites: Full Tilt, Poker Stars and Absolute Poker. The companies were charged with bank fraud, illegal gambling and money laundering.
At the time, I speculated that this was a precursor to the legalization of online poker in the U.S. I wish I could have made a bet on that, since it was announced minutes before the indictment was made public that the American Gaming Association, the biggest casino trade group, has pushed all-in, as they say, to do just that.
The casinos were understandably upset that online poker was raking in huge dollars that they couldn't get their hands on. The president of the AGA, Frank Fahrenkopf, says he's hoping to work with Congress to craft a bill and is calling for a regulatory framework to end the online prohibition mandated by the 2006 Unlawful Gambling Enforcement Act.
With government deeply in debt, who can doubt that this will, in time, happen? We're talking about an estimated $6 billion in revenues in the United States. The idea is that legitimizing online poker will protect consumers and allow stricter controls over kids getting access to poker sites.
The Washington Times reports that some major names in federal law enforcement have weighed in on the side of such legislation. Former FBI Director Louis Freeh and former Homeland Security Secretary Tom Ridge have joined the advisory board of FairPlay USA, a newly formed advocacy group pushing for a regulatory framework for online poker.
Critics say gambling is addictive and that government shouldn't encourage it, but that train left the station long ago. Governments heavily promote their state-run lotteries — which back in the day were called "the numbers racket" — and the odds are hugely stacked against lottery players, who have more chance of being run over by a bus than of winning a big jackpot.
State after state has legalized casino gaming to reap the tax revenues from it, and there really remains no logical reason to draw the line at poker, which is a game of skill, not one of pure chance.
"We're talking about jobs, tax revenue," Mr. Fahrenkopf said. "It's sort of a no-brainer."
Like a pair of aces pre-flop against any lower pair, I'd say it's about 80-20 that this thing gets done.
Ron Smith's column appears on Fridays. His email is rsmith@wbal.com.