Greed is dangerous. But combine it with stupidity and arrogance, and it can be lethal.
Some of the insiders of Full Tilt Poker appear to have taken one of the most profitable businesses ever created and needlessly run it into the ground. Along the way, they got themselves indicted and sued in gigantic civil lawsuits. And they deprived hundreds of thousands of online poker players of hundreds of millions of dollars.
All of it was unnecessary.
For anyone who has been living in a cave without an Internet connection for the last decade, Full Tilt was one of the leading online poker operators. It made far more than the largest card club in the world, without having to spend money on buildings and dealers. It did not even have the risk of losing streaks, since it never played a hand, just raked every pot.
Full Tilt’s main license was issued by the Gambling Control Commission of Alderney, one of the British Channel Islands. According to Andre Wilsenach, the Commission’s executive director, the company’s problems started four years ago, when the U.S. federal Department of Justice began covertly freezing funds. Full Tilt found that it could not access millions of dollars deposited by American players.
The obvious solution was to tell those players, “Sorry,” and stop accepting deposits from the U.S. If it wanted to make those players whole, for public relations and other reasons, it certainly had the funds to send to those American players the amounts they had deposited that had been seized.
But, apparently it decided that this would scare off other players around the world. So, someone came up with the idea of using funds from other players, principally those in Europe, to pay off Americans who won or wanted their deposits back.
This might have worked; if they had only told their regulators first.
Full Tilt was under a legal duty to keep the Commission informed of significant events. In fact, its failure to disclose these seizures was the main ground for its regulators revoking its license.
If Full Tilt had said to Wilsenach, “The U.S. is freezing some of our American players’ deposits,” the Alderney Gambling Control Commission would have worked with it. They might even have approved the idea of using European players’ funds, since Full Tilt had more than enough cash to make all players’ whole.
Anyone who has been on the operating side of the tables, even virtual ones, knows you always have to keep your regulators fully informed. Instead, Full Tilt officials continued to tell the Alderney authorities that they had hundreds of millions of dollars in cash, including funds that had been tied up by the U.S. federal government.
Worse, insiders, including those who knew the money was running out, continued to pay themselves hundreds of millions of dollars, for years.
Arrogance and greed killed any chance of resolving the mess. According to the federal government, Full Tilt owes players $390 million. It should have $503 million in cash. And it would, if insiders like poker-pro Howard “The Professor” Lederer hadn’t taken out $443 million over the last 4 years.
Lederer alone allegedly took $42 million. If he had been satisfied with only $10 million, and the other insiders did, as well, there would have been more than enough to pay back everyone.
It wasn’t that hard a decision. After all, the players’ deposits were always the players’ money, not the operators’.
© 2012, I. Nelson Rose. Prof. Rose is recognized as one of the world’s leading experts on gambling law, and is a consultant and expert witness for governments, industry and players. His latest books, Internet Gaming Law (1st and 2nd editions), Blackjack and the Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.