Article in Forbes claims DoJ may repay FTP players based on deposits rather than balances

[Skallagrim]

Originally Posted by DoTheMath

I don't think this conclusion follows logically at all. The DoJ doesn't care about what is "fair" as much as what is legal. The DoJ recognizes that there was no legal impediment to FTP providing play to ROW players. Therefore it believes that the results of play are what legally drives payouts to ROW players. However, it alleges that it was illegal for FTP to provide play in the US. This could lead them to believe that it would not make legal sense to recognize the outcome of this illegal activity as a basis for remission to US players.

Your conclusion here is not mandated, and IMHO, rather unlikely. There was no FRAUD in the FTP games. The way money moved around in those games is not the cause of players becoming victims. Thus the way the money moved around should have little bearing on determining what is the loss amount due to fraud - that loss amount is the money we were unable to withdraw.

Given the alleged fraud, poker players at FTP are analgous to investors in a Ponzi scheme.

For the reasons I have stated above, I very much disagree. Of course this depends on your definition of ponzi scheme, but no traditional ponzi scheme I am aware of has included, at least as the basis of the business*, the moving around of the "invested" money directly from one "investor" to another, and certainly none have existed where that movement of money form one "investor" to another was due to the playing of a game.

It is a stretch to call a poker playing depositor an "investor" and clearly not a natural use of that term.

Indeed the DoJ seems to have regarded them as such in some of their public comments. Investors who appear to be winners in a Ponzi scheme do not necessarily get to keep their winnings. They may be subject to clawback. This is because their payouts were not based on actual investment gains. The DoJ may be reluctant to recognize the results of illegally offered poker games as actual wins and losses.

Not everyone uses the words "ponzi scheme" in as strict a sense as others. And as you well know, at law it is the facts alleged in the charging documents that define the matter, not the description words used in public statements.

The DoJ will not be motivated by what (winning) poker players see as a fair outcome. They will make a choice which they believe is most consistent with the law.

I expect that to be true. I also expect that if there are different options roughly equal under the law, the DOJ will choose the one fair to players.

....

You're even more long winded than me. I think most of the rest of your post depends on the conclusions that this is a ponzi scheme situation and the DOJ will take ponzi scheme precedent and make this situation fit that precedent rather than approach this situation as one that should follow different prior precedent (like netteller, for example) or create new precedent. I think I have adequately addressed those conclusions and remain in respectful disagreement.

Skallagrim

* I am sure there are examples of ponzi scheme members/victims transferring money to each other. But those transactions were ancillary to what the scheme was supposedly about, not the supposed purpose of the scheme. Transferring money among its players is why FTP existed, and there was no fraud in that part of the operation.

[lawdude]

Originally Posted by repulse

I can think of plenty of arbitrary redistributions of wealth that would make more people happy than pissed off, but I don't see how that'd be a relevant measure of the justice of it.

I would want the PPA to advocate for fairness and for the integrity of the game of poker overall. In this case, since the poker itself was neither illegal nor fraudulent, the fair outcome is to pay balances, which is also consistent with precedent (in poker cases, at least) and expectations. The PPA would lobby against this because it they would fervently defend any implication that the poker itself was illegal or fraudulent.

I agree they should pay out balances but the claim is not based on the legality of the poker.

Many of the players may very well been violating laws including state gaming laws as well as underage play and tax laws.

If it is based on legality per se we are screwed. The real point is the theory of federal jurisdiction is based on laws that do not apply to players.

[TheEngineer]

Originally Posted by t_roy

It depends on how you look at it. You say, everyone had money on deposit. I say everyone had their money stolen and were playing with numbers on a screen. I could have easily lost that money without any hope of ever winning any money or even seeing my original deposit back. It didn't end up like that, but does that change it?

Let's say you and I played cards heads-up at a card room and you won all my chips. Further, let's say the club was closed by authorities before you could cash out. The game was fair, but there were questions on the financial state of the card room.

If someone else bought out the card room and honored the old chips, would you give me back my loss? After all, the chips really weren't worth anything the day we played.

If I put in a request with authorities that they deduct my loss from your refund, would you think I was honorable for doing so, or would you think I was trying to weasel out of a bet and reneging? That's all I was saying.

[TheEngineer]

Originally Posted by t_roy

It depends on how you look at it. You say, everyone had money on deposit. I say everyone had their money stolen and were playing with numbers on a screen. I could have easily lost that money without any hope of ever winning any money or even seeing my original deposit back. It didn't end up like that, but does that change it?

Everyone with money on the site was owed that money by FTP. I've not found a single player with money on FTP who felt he/she was no longer owed that money just because FTP apparently didn't have it. They may not have had the cash, but the debt did not disappear. For example, PPA continually asserted publicly that the debt was owed.

i see no case here where winners should be forced to forfeit their wins.

[lawdude]

Originally Posted by PokerXanadu

Madoff was a ponzi scheme. FTP was not a ponzi scheme; it was theft of player account balances (as evidenced by the DOJ indictment), despite the use of the words "ponzi scheme" for sensationalism in the DOJ press releases.

'Nough said.

I think FTP was probably a Ponzi Scheme, though we'd need a bit more information than is present in the public record to complete the circle.

Here's the basic model: if FTP was accepting player deposits, using those player deposits to pay its name players and shareholders, and then engaging in a form of "fractional reserve banking" where they relied on the fact that only a small percentage of their players requested cashouts at any particular time, and therefore relied on whatever new player deposits they were receiving to fund the cashout requests, as far as I'm concerned that's close enough to a Ponzi scheme to merit the term.

I'm not certain that's what FTP was doing, but it looks like a reasonable inference to make.

EDIT: to be clear, where I think Skalla is wrong is in thinking the central and defining feature of a Ponzi scheme is that there be investors. I think the defining feature of a Ponzi scheme is the use of current inflows, rather than banked funds, to pay withdrawals.

Now as I hinted, fractional reserve banking is a form of Ponzi scheme too. (As is Social Security.) But the difference is these schemes are insured. I represented some regulated businesses in the past that were required to maintain deposits that were made by their clients. And they were given a choice under the law-- they could either just maintain an explicit trust account under California law, and not touch the money at all, or they could commingle but they had to purchase an insurance policy for the amount of the deposit. Banks commingle, but they insure their deposits.

FTP appears to be an uninsured Ponzi scheme.

[PokerXanadu]

Originally Posted by lawdude

I think FTP was probably a Ponzi Scheme, though we'd need a bit more information than is present in the public record to complete the circle.

Here's the basic model: if FTP was accepting player deposits, using those player deposits to pay its name players and shareholders, and then engaging in a form of "fractional reserve banking" where they relied on the fact that only a small percentage of their players requested cashouts at any particular time, and therefore relied on whatever new player deposits they were receiving to fund the cashout requests, as far as I'm concerned that's close enough to a Ponzi scheme to merit the term.

I'm not certain that's what FTP was doing, but it looks like a reasonable inference to make.

EDIT: to be clear, where I think Skalla is wrong is in thinking the central and defining feature of a Ponzi scheme is that there be investors. I think the defining feature of a Ponzi scheme is the use of current inflows, rather than banked funds, to pay withdrawals.

Now as I hinted, fractional reserve banking is a form of Ponzi scheme too. (As is Social Security.) But the difference is these schemes are insured. I represented some regulated businesses in the past that were required to maintain deposits that were made by their clients. And they were given a choice under the law-- they could either just maintain an explicit trust account under California law, and not touch the money at all, or they could commingle but they had to purchase an insurance policy for the amount of the deposit. Banks commingle, but they insure their deposits.

FTP appears to be an uninsured Ponzi scheme.

I disagree. An essential element of a Ponzi scheme is the apparency that client funds are being used for an investment vehicle to generate profit. That's where the fraud comes in - the persons running the scheme are actually stealing the funds instead.

In the case of FTP, the fraud was a deception by the company principles that player funds were held in trust. Instead, the funds were being distributed to the owners. This is much different in that the use of the funds was real - players actually got to play poker on the site with other players using their account balances.

If instead FTP took investor money, promising to use it to run an online poker site that would generate profits through rake, but instead paid new investors with old investor money and in the meantime siphoned off money without actually running a poker site, that would be a Ponzi scheme.

As you explain, in the case of banking, client funds do not have to be held in trust. Similarly, client (player) funds at a poker site do not have to be held in trust either. But, FTP publicly claimed that they did - hence fraud. But not a Ponzi scheme.

The insurance aspect that you point out is important for the future of online poker sites. NV regulations, for instance, allow licensed sites to either keep cash reserves or insurance in the amount of total player balances:

1. An operator shall maintain a reserve in the form of cash, cash equivalents, an irrevocable letter of credit, a bond, or a combination thereof for the benefit and protection of authorized players’ funds held in interactive gaming accounts.

2. The amount of the reserve shall be equal to the sum of all authorized players’ funds held in the interactive gaming accounts. Amounts available to authorized players for play that are not redeemable for cash may be excluded from the reserve requirement.

3. If a reserve is maintained in the form of cash, cash equivalent, or an irrevocable letter of credit, it must be held or issued, as applicable, by a federally-insured financial institution. If the reserve is maintained in the form of a bond, it must be written by a bona fide insurance carrier. The reserve must be established pursuant to a written agreement between the operator and the financial institution or insurance carrier, but the operator may engage an intermediary company or agent acceptable to the chairman to deal with the financial institution or insurance carrier, in which event the reserve may be established pursuant to written agreements between the operator and the intermediary and between the intermediary and the financial institution or insurance carrier.

I would sure prefer to deposit funds to a site that is bonded and insured than one that claims they have my money segregated in case I want it. At least I'd know that there is an insurance company assuming the risk who will want to keep a close eye on the financial health and practices of that site. Certainly better than depending on the regulators to keep the site in line.

[PokerXanadu]

Originally Posted by DoTheMath

That's an inaccurate characterization of the charges. If the wrongdoing was restricted to this, it is likely a different offence would have been alleged. In fact, it is a material part of the allegation that false statements were made and broadcast by wire for the purpose of inducing players to deposit or refrain from withdrawing. It is in part because of these false statements that the offences charged are defrauding players and wire fraud.

...

While I am sure you would like the offence to be limited to these post-deposit misappropriations, because it is necessary to support your position that the only thing people were unlawfully deprived of was their post-play balance, it is a necessary part of a fraud charge that the fraudster made a false statement which could be relied upon to induce the victim to hand over the money. It is a fact that the allegations involved are defrauding players and wire fraud. That means the offence started with the false statements, and the amount of the fraud is the amount obtained through the false statements, which is the deposits.

...

The AFMLS does not pay remission to people because they are unsecured creditors; they pay remission to people who are victims of crime. The amount they pay is based on the amount lost due to the crime, not the amount a person is owed in unsecured debt. So the question the AFMLS must address is how much did each player lose to the cirme, not how much was each player owed. The crime was a false inducement to deposit. The most obvious amount of the crime was the amount deposited.

...

You make very solid points. However, you also gloss over the inducement to "refrain from withdrawing". When Bitar claimed, and thereafter customer representatives repeated, that player funds were safely segregated, it was certainly an inducement for players to keep their money on account just as much as it was an inducement for players to make new deposits.

This is the bigger portion of the fraud committed imo as the player account balances exceeded arriving player deposits at any given time. This was the larger "amount of the crime". FTP could not cover (and did not) all player balances despite their promises otherwise.

[Digitalpimp]

Not fair at all. I'm one of the people who NEVER deposited on FTP. Acquired my roll solely from freerolls and countless hours at the $1 dailys & micro-stakes.

[lawdude]

Originally Posted by PokerXanadu

I disagree. An essential element of a Ponzi scheme is the apparency that client funds are being used for an investment vehicle to generate profit. That's where the fraud comes in - the persons running the scheme are actually stealing the funds instead.

I understand that's the classic definition of a Ponzi scheme, but that doesn't mean that element is essential.

The key point about a Ponzi scheme is not that people are investing, but rather that it relies on a steady stream of new clients to fund the promises already made and without the new clients, the thing goes kaput.

THAT's what the DOJ is claiming Tilt did. And that's at the very least closely analogous to a Ponzi scheme.

Your argument is like getting mad over labeling John Edwards a fornicator because he was technically an adulterer instead.

In the case of FTP, the fraud was a deception by the company principles that player funds were held in trust. Instead, the funds were being distributed to the owners. This is much different in that the use of the funds was real - players actually got to play poker on the site with other players using their account balances.

Actually, that makes it worse. Players did get to play poker on the site. But rather than playing poker with real money in their accounts, they were playing poker with imaginary money created by Full Tilt Poker while the real money had been given to somebody else.

Full Tilt Poker games were exactly like the investment statements sent by Madoff to his clients. They were fake, in the sense that the money that was supposedly being splashed around the table had already been spent.

As you explain, in the case of banking, client funds do not have to be held in trust. Similarly, client (player) funds at a poker site do not have to be held in trust either.

I vehemently, 100 percent, absolutely disagree with this, and frankly, it scares me to see a 2+2 moderator say this.

Any money that is deposited into a poker site is your money. It should not be TOUCHED for any purpose other than to pay out to other players you lose to, to pay rake, or to pay out the player who deposited them. That's a trust.

Now if, instead of holding the funds in a trust account, a site wants to insure them, that's fine too. But one way or the other, those funds are absolutely 100 percent sacrosanct and no poker site has any right to that money.

The insurance aspect that you point out is important for the future of online poker sites. NV regulations, for instance, allow licensed sites to either keep cash reserves or insurance in the amount of total player balances:

This is exactly what I said in my prior posts. The world of non-bank businesses holding money for customers did not start with poker sties, and state regulators have a lot of experience with this issue. You hold in trust or you insure. If you use entrusted funds to fund current operations and rely on future income streams to pay back current clients, that's a Ponzi scheme or its functional equivalent.

I would sure prefer to deposit funds to a site that is bonded and insured than one that claims they have my money segregated in case I want it. At least I'd know that there is an insurance company assuming the risk who will want to keep a close eye on the financial health and practices of that site. Certainly better than depending on the regulators to keep the site in line.

Actually, those regulators are the ONLY thing that stops lots of businesses (not just poker sites) from stealing your money. Government regulation is not only useful for this situation-- it's essential. In places without functional government (Somalia) or with corrupt government (Bangladesh), people have a very hard time entrusting their money to anyone.

[DoTheMath]

Skallagrim,

In this post I am quoting from, and partially responding to, your post #136 ITT, which itself was a reply to my post #119. I say "partially" because I believe I have already addressed much of your argument in my posts #121, #127, #130 and #133, which all were available to you before you posted #136. I wish you had addressed them as well, instead of #119 in isolation. I value your insight, but it is even more valuable when it addresses the entire issue.

I'm going to re-order some of your post for convenience of structuring this partial reply. It is not my intention in doing so to change context.

Originally Posted by Skallagrim

You're even more long winded than me.

Yeah, well, I'm always up for a challenge.

Originally Posted by Skallagrim

Your conclusion here is not mandated, and IMHO, rather unlikely. There was no FRAUD in the FTP games. The way money moved around in those games is not the cause of players becoming victims. Thus the way the money moved around should have little bearing on determining what is the loss amount due to fraud - that loss amount is the money we were unable to withdraw.

I presume that "Your conclusion here" refers to what I have bolded above. I agree that the aplication of results of poker games is not the casue of players becoming victims and should have little bearing on determining the loss amount due to fraud. But I think I believe that statement more than you do. Since the transfers between players didn't cause the loss to the fraud, it does not enter into the computations of the loss to fraud or the calculaton of remission. While the results of games would affect how much FTP owes players if the whole operation was legit, it doesn't necessarily affect the amount for which FTP defrauded players. Since the internal transfer though game results wasn't the fraud, it does not adjust the amount of the fraud.

Furthermore, I would point out that a result of a poker game didn't cause any transfer of actual money. It caused a transfer of FTP's debt oblgation from one player to another. What money there was remained in exactly the same place: in a bank account to the credit of FTP.

I only partially agree with the notion that there was no fraud in the games. I agree that there is no evidence the RNG was rigged or anybody was cheating. The games were not fraudulent in that sense. However, over time the games became fraudulent in the sense that they were held out as competitions for the money supposedly put up by players as represented by chips at the table. In fact, that money wasn't really there. The players were not winning (or losing) what they thought was at stake. That is one of the reasons I disagree that the loss to fraud was the amount players were unable to withdraw (i.e. their account balances). A player who deposited $100 after FTP began its fraudulent activity, because he relied on the fraudulent assurances of FTP, and who subsequently "lost" $50 at the tables, and never attempted a withdrawl, didn't lose $50 to the fraud. He lost $100 to the fraud. If it hadn't been for FTP's fraudulent statements, he never would have deposited any of that $100, so would have lost none of it at FTP to any cause. Furthermore, the fact that he notionally lost $50 of it to other players is irrelevant when FTP didn't make that lost $50 available to be cashed out by the player who "won" it. FTP kept/spent/distributed the whole $100, or at least far more of it than they were entitled to.

While it may not have been illegal for at least some of the US players to play in the games, the DoJ maintains it was illegal for FTP to offer the games to US players. What I had in mind when I posted #119 was that the DoJ might not be minded to recognize a transfer of debts by FTP between players which was the result of an illegally offered game. Since then I have come to believe that even if there could be a transfer of debt obligations, it is not the unsecured debt that the remission compensates, it is the amount defrauded, which I believe can differ from the amount of debt.

Originally Posted by Skallagrim

For the reasons I have stated above, I very much disagree. Of course this depends on your definition of ponzi scheme, but no traditional ponzi scheme I am aware of has included, at least as the basis of the business*, the moving around of the "invested" money directly from one "investor" to another, and certainly none have existed where that movement of money form one "investor" to another was due to the playing of a game.
...
I am sure there are examples of ponzi scheme members/victims transferring money to each other. But those transactions were ancillary to what the scheme was supposedly about, not the supposed purpose of the scheme. Transferring money among its players is why FTP existed, and there was no fraud in that part of the operation.
...

It is a stretch to call a poker playing depositor an "investor" and clearly not a natural use of that term.

I don't think it is important to discuss whether FTP qualifies as a Ponzi scheme. FTP players became analogous to Ponzi investors when the stakes they were playing for became imaginary, and any returns to players were funded from new player deposits, rather than out of what was represented to them to be the source of their withdrawls.

Originally Posted by Skallagrim

Not everyone uses the words "ponzi scheme" in as strict a sense as others. And as you well know, at law it is the facts alleged in the charging documents that define the matter, not the description words used in public statements.

Totally agree, which is why we shouldn't get caught up in debating whether FTP was actually a Ponzi scheme.

Originally Posted by Skallagrim

I expect that to be true. I also expect that if there are different options roughly equal under the law, the DOJ will choose the one fair to players.

Seems likely to me, too. I don't buy the greedy-DoJ-are-trying-to-get-as-much-as-they-can-for-themselves theory. It is the great amount of discretion available to the AFMLS that lets me retain some hope that players will actually get their balances back.

Originally Posted by Skallagrim

I think most of the rest of your post depends on the conclusions that this is a ponzi scheme situation and the DOJ will take ponzi scheme precedent and make this situation fit that precedent rather than approach this situation as one that should follow different prior precedent (like netteller, for example) or create new precedent. I think I have adequately addressed those conclusions and remain in respectful disagreement.

Skallagrim

I think most of the rest of my post depends on the conclusion that the crime being compensated for by remission is wire fraud against the players, and that the amount defrauded was the amount of net deposits after the fraudulent behaviour began, plus balances in place at the time the fraudulent behaviour began. If FTP tricks a player into depositing money he isn't going to get back, or tricks him into keeping money on the site so he never gets it back, it doesn't matter if FTP provides the illusion that the play of poker is continuing to determine who gets the money. FTP got the money and spent it, "lent" it to friends, and, mostly, distributed it to shareholders/partners. The amount of the fraud was the full amount the player was induced to deposit or leave on. It is not adjusted by the non-rigged non-cheating play of cards that pretended to move money that wasn't there.

The respect remains, as always, mutual.

[DoTheMath]

Originally Posted by PokerXanadu

..., you also gloss over the inducement to "refrain from withdrawing".

You are correct that I didn't provide sufficient description about what I felt to be the proper treatment of funds that FTP induced players to keep on the site rather than withdraw. In this regard, my post was sort of the mirror of the PPA letter, which repeatedly addresses funds players were induced to keep on the site, but glosses over funds players were induced to deposit.

Let me correct that now, because I think both types of funds deserve equal treatment.

I believe the amount of the fraud is best stated as the amount of net deposits after FTP's fraudulent behaviour began, plus the amount of credit in player accounts as of the moment FTP began its fraudulent behaviour.

If FTP's false statements about the safety and availability of player funds induced a player not to withdraw, then all of those funds he didn't withdraw is what FTP defrauded him of. However, that amount does not get adjusted by wins or losses after the date the fraud began. At that point, the games were no longer actually being played for their stated stakes. If a player was tricked into keeping money on the site, any subsequent "loss" in a poker game occurred because of the deception. If he hadn't been deceived, the money wouldn't have been there to be "lost" at poker. Unfortunately for the ~10% of US players who were net winners, that means any wins made after the start of the fraud that they didn't cash out were illusory.

Originally Posted by PokerXanadu

When Bitar claimed, and thereafter customer representatives repeated, that player funds were safely segregated, it was certainly an inducement for players to keep their money on account just as much as it was an inducement for players to make new deposits.

Agreed.

Originally Posted by PokerXanadu

This is the bigger portion of the fraud committed imo as the player account balances exceeded arriving player deposits at any given time. This was the larger "amount of the crime". FTP could not cover (and did not) all player balances despite their promises otherwise.

Whether the induced non-withdrawls were greater than the induced deposits depends on when the fraudulent behaviour began. Bitar faces three counts of Wire Fraud against players. The first count relates to a wire sent July 18, 2008. If this is the date that the fraud began, I think what we know about player balances and deposit rates makes it more likely that the amount of fraudulently induced deposits was greater than the amount of fraudulently induced non-withdrawls.

[PokerXanadu]

Originally Posted by lawdude

I understand that's the classic definition of a Ponzi scheme, but that doesn't mean that element is essential.

The key point about a Ponzi scheme is not that people are investing, but rather that it relies on a steady stream of new clients to fund the promises already made and without the new clients, the thing goes kaput.

THAT's what the DOJ is claiming Tilt did. And that's at the very least closely analogous to a Ponzi scheme.

Your argument is like getting mad over labeling John Edwards a fornicator because he was technically an adulterer instead.

OK - go ahead and change the definition of Ponzi scheme at will. It doesn't really matter since there is no legal definition that applies. No one can be legally indicted for it, no matter how you define it. The BF indictments were for "fraud" (and other things), not "Ponzi scheme".

Actually, that makes it worse. Players did get to play poker on the site. But rather than playing poker with real money in their accounts, they were playing poker with imaginary money created by Full Tilt Poker while the real money had been given to somebody else.

Full Tilt Poker games were exactly like the investment statements sent by Madoff to his clients. They were fake, in the sense that the money that was supposedly being splashed around the table had already been spent.

You never play with real money in an account. You always play with virtual imaginary money. The only question is whether that virtual money is backed, by either real money cash reserves or insurance.

I vehemently, 100 percent, absolutely disagree with this, and frankly, it scares me to see a 2+2 moderator say this.

Any money that is deposited into a poker site is your money. It should not be TOUCHED for any purpose other than to pay out to other players you lose to, to pay rake, or to pay out the player who deposited them. That's a trust.

Now if, instead of holding the funds in a trust account, a site wants to insure them, that's fine too. But one way or the other, those funds are absolutely 100 percent sacrosanct and no poker site has any right to that money.

I never said that I support allowing sites to take player deposits without keeping full cash reserves or insurance. I am simply pointing out that sites can (and do) do whatever they want with the money. There have not been any laws anywhere which require otherwise, except for some poorly enforced offshore regulations.

This is exactly what I said in my prior posts. The world of non-bank businesses holding money for customers did not start with poker sties, and state regulators have a lot of experience with this issue. You hold in trust or you insure. If you use entrusted funds to fund current operations and rely on future income streams to pay back current clients, that's a Ponzi scheme or its functional equivalent.

Nope. That's standard banking and not uncommon business practice. For instance, a contractor doesn't keep all your deposit money in cash reserves until he completes your work; a retailer like Target or Walmart doesn't keep segregated cash reserves to cover all outstanding gift card balances; the credit card companies Visa, MasterCard and Amex don't keep segregated cash reserves to cover all outstanding prepaid card balances; buy-in Retirement Living Facilities don't keep segregated cash reserves to cover all the estate payback promises due at death. These amounts are simply kept as liability entries under standard accounting. But if you steal entrusted funds for personal use, cook the accounting books and rely on future income streams to pay back current clients, that's fraud.

Actually, those regulators are the ONLY thing that stops lots of businesses (not just poker sites) from stealing your money. Government regulation is not only useful for this situation-- it's essential. In places without functional government (Somalia) or with corrupt government (Bangladesh), people have a very hard time entrusting their money to anyone.

We agree. I too support strong regulation. But, as we have seen, regulation doesn't guarantee compliance. Insurance, under regulation, rather than cash reserves would be an additional layer of protection for player funds, imo, as any insurance company to take on such risk will have a very close watch on regulatory compliance.

[lawdude]

FYI , but in fact it is illegal to engage in fractional reserve banking, taking deposits and spending them, without complying with banking laws. The gift cards you describe are not redeemable for cash. They are just scrip.

Actual debit cards are either issued by regulated banks or have a funding / trust requirement behind them.

What Tilt did is a Ponzi scheme because they were basically banking the deposits without any legal right to act as a bank.

[DoTheMath]

Originally Posted by lawdude

Any money that is deposited into a poker site is your money. ... Now if, instead of holding the funds in a trust account, a site wants to insure them, that's fine too. But one way or the other, those funds are absolutely 100 percent sacrosanct and no poker site has any right to that money.

That's not what the DoJ said in one of its memoranda of law in support of its motion to dismiss Webb's cleim. Are you suggesting the DoJ is wrong?

[Skallagrim]

DTM - I am going to keep this short, sorry.

It is an interesting view on things, that the games were fraudulent because the underlying solvency of the company was in jeopardy. It has numerous problems, however, when looking at all pieces of the puzzle.

Your view would have greater merit if there was ZERO money. So would l-dude's view that basically everything is a ponzi scheme unless it is completely funded.

There was not ZERO money, there was plenty of money (60 million dollars in fact) - just not enough money to cover all player balances. So, in fact, when you say people were not really moving money around you are wrong for two reasons: 1) many folks (the lucky ones) made withdrawals and got real money prior to the collapse of FTP, and 2) given that FTP had some money and some assets, at worst people were playing for less than they thought, not nothing. IOW, even using your view, folks who won a dollar actually won about 20 cents (based on a very rough estimate of FTP liabilities to assets).

Skallagrim