Collective Action Problem:
http://en.wikipedia.org/wiki/The_Log...lective_Action

I dunno how well is this gonna go down for u buddy

I think it's only human to not want to accept sunk costs and always slightly overvalue what you have. The problem in FTP's circumstance was that because of that they essentially ended up being one step behind in a rapidly evolving process.

The other reason for that is what I think is the main reason for the downfall of the company: Dysfunctional governance which bred mistrust, cya and lack of efficient management and co-ordination. If you think about it:

1. Bitar took overly risky action.

2. Bitar hid or at least tried to hide the reality of the situation from the board.

The reason he took the former was because he wanted to maintain the dividends cashflow so as the board would get off his back and the reason he did the latter was because he didn't want to get sacked by the board.

Lots of factual errors but alot of effort put into the post. The part about chris ferguson having 198 million dollars seized of HIS money is laughable though. That seizure was full tilts money not chris'. I doubt very highly howard or chris were dumb enough to not hide alot of their money in swiss bank accounts given the seizures that were taking place.

Sure, but Bitar's value as CEO was his willingness to take risks, when PS stopped accepting echecks any sane person would have viewed that as a sign to follow suit and cut back US advertising expenses to make up the lost US revenue, Bitar saw it as a chance to gain market-share, kept processing echecks and stepped up US advertising.

That willingness to take risks made them all wealthy when Party and 888 pulled out after the UIGEA was passed, and bit them in the ass on BF - live by the sword, die by the sword.

The problem with your post is that you shared your conclusions/opinions along with the history. It's not wrong to share your opinion but if you want your opinion to have more weight it becomes important to cite your sources. It would have also made that portion of your post more valuable in general.

You don't have first hand accounts by your own admission so it's important to know where the info you used to form your opinion came from. Some of us may not give the same weight to their accounts that you do or other sources may have conflicting accounts. The way you portray everything is as if it is factual.

For example, in your "Procedures for approving distributions and dividends" section where did that come from? Did that come from the actual Operating Agreement for FTP or did you just randomly pull it off the web somewhere and it has no connection to FTP? There's no way of knowing but when I first read it I thought "wow, how did he get to see Tiltware's Operating Agreement?"

It's also just the right thing to do to give credit to the people that did the work in gathering and publishing the information.

<<< OP this guy confessed yesterday haven't you seen the video ??

Let's not forget another factor which probably played a role in the excessive risk Bitar took: A rumored bill to legalize poker during the 2010 lame duck session. Had this bill been passed, it would probably be tougher for the DOJ to succeed and moreover, retrieving old debt could get easier.

And really, what happened to FTP was the perfect storm. FTP could probably had survived improper distributions on its own. It could have survived phantom deposits if that was the only issue. It could survive an event like Black Friday on its own. The problem that all of those events occured within a span of a few months with Black Friday being the event what truly did them in. Without Black Friday, I think they still limp along to this day with people complaining about bad customer service and delayed withdrawals.

Last but not least, let's not forget that a perfect storm is what destroyed the financial sector in 2008. I read the other day that what killed those banks is their models never expected a real estate bubble bursting at the same time in all the real estate markets. That just hadn't happened historically because different local conditions prevailed across markets. However, thinking that what had never happen would never happen, they built lending models which precipitated a simultaneous burst.

Which once again shows value of not ASSuming and the prudence of solid bankroll management!

What i want more than anything is to be as accurate as possible. It was incredibly difficult to do that with such limited credible information available.

Chris Ferguson $190 million statement was incorrect and the 5% profit sharing statement was incorrect.

Since I am not a reporter, i don't have the time, resources, or sources to do a professional quality job. I did however poor over whatever was available online through various articles, blogs/posts from insiders, the Lederer Fils, lawsuits, and released documents, etc. I had to, because i had no alternative, trust the information that was presented through these various sources.

If anyone is still even following this thread I will be editing my post. I will delete incorrect information and giving as many sources as I can, and limiting my opinion. I'll characterize my op as a draft.

I am going to create a wiki page that anyone can edit if this wish. I did learn a great deal writing this post and, even though I have been criticized a great deal for the post itself and the way i went in presenting it, I had a lot of fun researching and writing about the scandal.

Well, personally, I will wait till 'Diamondflush' give us her version since she has been following, and reporting on this, this since 'black friday'.

I really wonder if the ftp owners wouldnt have made more money by not stealing player funds,operating in a legit way, keeping the company s image intact and selling the company for a higher price....

....any thoughts?

That depends on what your definition of 'legit' is, a 'legit' unlawful internet gambling business is by my definition an oxymoron- what Scheinberg managed to operate is a wonder of the world.

If they had pulled out of the US market when the UIGEA was passed they probably never turn a profit at all, their player base and entire promotional strategy up to that point was targeted at the US market.

Once they made the decision to violate a Federal law to keep taking US deposits, they were on a slippery slope headed downhill, then at some point they get hit with a large seizure and decide that it's okay not to fully fund RoW accounts and use the business as collateral.

Once you decide that 80% coverage is okay, it's only a matter of time before you rationalize yourself down to 10%, nobody woke up one day and said 'let's steal the players money'.

People want to think it happened because Howard and Chris are greedy degenerates, but seriously, have you not seen these two guys play poker?

In the end the company failed because there was no oversight of Ray when it came to US deposit processing, but the reason there was no oversight wasn't because the rest of the board was greedy or even lazy, there was no oversight because they are nits.

As long as they could say they never knew anything about the payment processing, they thought they were not in jeopardy of doing any jail time, so it's not that they trusted Ray too much to ask him questions, they didn't want to know about that area of the business.

In the end, being involved with payment processing might have saved the company, but would likely have them under criminal indictment right now - in the same boat as the new owner of the company.

everyone involved except ray would've definitely made more (and its possible ray wouldve also). this is why so many ppl just assumed that ftp had the players $$- because why would they messup the 'golden goose'

http://dockets.justia.com/docket/cir.../ca9/09-16291/

while the absolute structure and the people included as owners of ftp has always had some mystery to it note the defendants listed here. (including antonius)

its a link i got from 2+2 back when clonie was doing her ftp lawsuit.

Why would they tho?!

It just seems like Ray made so many bad decisions and the shareholders didnt know, and board either knew and didnt care or didn't really know

Ray should of been sacked as soon as black Friday hit

Distributed 95% of profits ? Hell they distributed 195% of the profits for years

LOL

OP the first bit was ok, gave a decent over view of the whole FTP saga (even if not every thing was 100% correct). Would have been much better if you left your opinions out of the original post though. Especially as you came to the opinion that Lederer was innocent\oblivious, not sure what reaction you expected from others with that view, should have known it wouldn't be good.

Revised Version

2004 Full Tilt goes live.

2001 Cardroom International Lawsuit
CI claims that Full Tilt was established through the company BH Development around October 15, 2001. At the time, BH Development allegedly recruited Chris Ferguson as an investor, who in turn introduced other investors to the company, two of which are named in the claim as Howard Lederer and Ray Bitar.

According to CI, Ferguson circumvented the investment process by allying his investors with an employee of the company named as Perry Friedman and forming what was then dubbed "The Jesus Coalition".

Subsequently BH Development initiated a lawsuit based on the actions of the coalition in 2003 with a settlement outcome that included that: "The Jesus Coalition" relinquish all interests in BH Development without the return of their investment; "The Jesus Coalition" would take full control of the Full Tilt Poker trade name and URLs; but reached agreement on a joint copyright interest in the BH Development software where neither party could transfer the assets without the others consent.

BH Development went on to develop the software for the now defunct Jet Set Poker, while Ferguson et al developed Full Tilt's software.

The main players involved are :
Chris Ferguson Howard Lederer Ray Bitar Andy Bloch Phil Ivey
Perry Freidmen Phil Gordon Eric Seidel Rafe Furst John Juanda Gus Hansen

And possibly :
Erick Lindgren Jennifer Harmen Mike Matusow Allen Cunningham

Even more remotely
Nelson Burtnick

I didn’t include Patrik Antonius because he has stated recently that he has no stake in what happens to the company. Clonie Gowen was there in the beginning but was not a shareholder hence her lawsuit claiming she was promised 1%.

It is unclear who the actual 23 shareholders are, when they bought in, or what amount of shares they hold. It is known that

Chris Ferguson holds 19.2%,
Howard Lederer owns 8.6%,
Ray Bitar owns 7.8%, and
Rafe Furst owns 2.6%.
Phil Ivey 5% (reportedly)
Phil Gordon & John Juanda are being classified as “major” shareholders
It is reported that 4 other owners own more shares than Howard Lederer.
Initial shareholders received 10% but that number dropped when they added new members.

They initially came up with $700,000 for development and then $2 million for the actual day to day expenses. There are reports that they raised as much as $5 million in total for the site.
The original elected board:

Ray Bitar (Ceo)
Chris Ferguson (Chairman of the Board)
Perry Friedman (stepped down before 2006)
Phil Ivey (stepped down immediately)
Howard Lederer (president of Tiltware)
Rafe Furst (later addition after initial board was elected)

It is unclear what specific roles any of the shareholders had. It is known who the board was and who the CEO was but it remains unknown who ultimately made the decisions. It has been reported that Chris Ferguson appointed Ray Bitar as CEO and has had more money fed to his accounts than anyone. That could indicate that Chris, being the largest shareholder, had the ability to make decisions on his own without company approval.

It was confirmed by Howard Lederer that back in 2005/2006 Perry Friedman told the board that the business was getting too big and complex for this group to run. Howard also stated “my greatest regret in all of this, is that we were operating as a California LLC, we’re a Dublin company, but that the ultimate ownership of the LLC, and we’re using an operating agreement in 2003, that was our inexperience, our laziness I guess.”

Finances

In April of 2007 Full Tilt has a surplus of around $20-$30 Million. They agreed to start paying distributions, approximately $5 million a month. Noted by Howard Lederer that Chris Ferguson was against any distributions because he thought it would weaken the company.

The company was making approximately $40-200 million dollars profit a year of the $500 million-1 Billion total revenue from 2007-2011. This means that they had an overhead of $300-600 million a year? Seems incredibly high.

They increased their distributions to $10 million a month leaving less than 10% profit in the company. They would never reduce the distributions. From 2007 to 2011 the total reported distributions total $440,000,000.
These distributions are separate from owner salaries, but do include profit sharing. The owners were paid a salary by Full Tilt to manage, promote, etc. If the overhead was $300-600 Million a year, maintained that level for years, the overhead could be into the Billions, you could conclude that the money they received from salary could total $100+million.

What they received in distributions:

$42.5 million Howard Lederer

$42 million Chris Ferguson

Ferguson was allocated approximately $85,161,305.88 in distributions. Tiltware records reflect that approximately $25 million of this sum was actually transferred to Ferguson’s personal accounts, with the remaining balance characterized as “owed” to Ferguson.

$40.8 million Ray Bitar

$11.7 million Rafe Furst

These four alone have received $137,000,000 in distributions. The total is $443 million. Who else received these enormous distributions and are these numbers accurate?

4 to 5 years of $40-200 million dollar profits could total around $600 million.

Approximately $184 Million owed to American players and $210 million owed to foreign players for around $390 million total.

Reports are that Howard Lederer stated that FTP only had $6million by June 12th.

FTP was upside down $330-384 million.

Below is Andy Bloch’s explanation of the money FTP had around April of 2011.

AB: I think the total amount was* ~ $ 60m, some of which was unfrozen pretty quickly and some of which took months to be freed. So there was that money and there were discussions, maybe an email, about not having money, they were not*including that money. In other words, ” we don’t have any money but there is $ 20 million here, if we get that unfrozen we can have that..

DF: Yes, I understand.* You are talking about the accounts in Ireland, Switzerland and Luxembourg, that were frozen by the banks themselves in case the*DOJ wanted those funds, too, right? But some of those were unfrozen right away.*The DOJ did cooperate with those banks to agree to release those funds, right?

AB: Yes in some cases the DOJ got involved,*in others, we had to handle it ourselves.

DF: But more than half* of that money was released early, probably in May, correct?

AB: Yes

DF:*And correct me if I am wrong, that money was used for expenses that needed to be paid to keep the company functioning, whether it was salaries, or operational costs, like the servers and that kind of expense? Was that money sent out to players for withdrawals?

AB: I think it was a combination. I think if the entire $ 60 million had been immediately available, that more of it would have been*used to pay players. I think if more of that money had been*available, I think FTP would have used it to start paying*back U.S. players, at least in part, in some small structured fashion.

DF: Was this a discussion for the members at the time? Were there talks about paying people a little at a time?

AB: Yes, there were always discussions about how and when we could begin to pay the U.S. players. Before Phil Ivey’s lawsuit, there was some plan apparently of how to start paying out players. I found this out later. At least a proposal that was on the table, but when he*filed that lawsuit, there was a big spike in the withdrawals from “rest of world”, and that spike really ate up what was*available to be paying people out.So there was a plan to start paying, to take whatever cash was available to to start paying people out. I don’t know exactly the procedure that would have been followed,*but maybe starting with the smaller balances first, but once that lawsuit hit, and they saw the response to that, which was a huge spike of more than $ 10 million in withdrawals, that plan was*abandoned.* So if all that money had been available and Phil Ivey had not filed that lawsuit, there probably would have been*$ 10-20 million that could have gone right away to the U.S. players, maybe to pay up to $ 500 balances. It’s not really*clear the exact procedure because we never got that far but from the beginning they had been talking about paying out to players and how to do that.

$42 million was stolen by Daniel Tzvetkoff’s Intabill a processor from Australia.

*Side not about Daniel Tzvetkoff- FTP found out he was stealing and sued Intabill. When Daniel came to Vegas in April 2010 FTP apparently tipped off the feds that he was there and they picked him up. According to some reports he immediately turned and gave the feds all the information they needed to start their case against online poker. Exactly a year later the DOJ filed charges. FTP ended up causing their own demise.

The seizures totaled $128million of which only $10 million was recoverable & $42 million was stolen. It is unknown if the 2009 $30 million seize was included in this total amount or if the 2009 seizures were only $30 million. There are reports that the seizures in 2009 could have been as high as $100million. They were upside down $330 million, $160 million of that is now accounted for. $14 million unrecovered player loans.

Question Did the US government seize $128 million in “real dollars?” if so why didn’t this money get routed back to the players along with the other seizures starting in 2009?

Culpability

June 2009 The feds seize $30million of FTP money which is held by a processor

November 9th 2010 FTP had $145 million on hand and $344 million in account balances

November 2010 Make the decision to credit accounts with seized moneys

February 1st 2011 Ray Bitar gets report that FTP will soon run out of money

April 7th 2011 Ray Bitar informs Chris and Howard of a backlog of about $100 million

April 15th 2011 the DOJ charges FTP and denies access to American market.

April 21st 2011 Howard is informed that they are $250 million short of covering player balances.

April 27th 2011 Players still depositing $8-9 million a week but FTP couldn’t afford a $5million run on the bank.

April 2011 FTP decides to remain open to foreign players even though they are short $250million of player funds.

June 1st Phil Ivey sues FTP which essentially ends FTP’s ability to start paying back American players, due in part to the $10 Million spike in foreign players withdrawals directly attributed to Phil’s lawsuit.

June 12th 2011 Howard stated that the company only had $6million on hand at this point.

June 29th 2011 Full Tilt Poker’s license is revoked by AGCC and shuts down.

Distributions of $10million a month were continuing happen. Management was also paid after April 15th. Total monthly operational costs were $1.5 million.

Who are the FTP members and/or management staff that committed these crimes?

Ray Bitar- Board Member, CEO, and Shareholder

Ray was the CEO and has been charged for many crimes in relation to this. He was the person in charge and when the company moved to Dublin and there was a great deal of backlash against him within the company. It is unknown if he is just incredibly bad at management on an epic scale or he maliciously sought to defraud.
He did receive $40+million in distributions.
He was aware of all of the financial problems and did not communicate those to any shareholders.
He decided to credit player accounts without receiving the money.
He continued to distribute “profit” to shareholders
He continued to take a $200k monthly salary after Black Friday
He worked with and conspired with Nelson Burtnick(who has pleaded guilty) a processor to defraud the government.
He never used the money he received from the company to repay the players.

Howard Lederer -Board Member, Management, and Shareholder

Howard’s responsibilities while working at FTP were marketing and software. Howard left the day to day operations in September 2008. Nothing notable happened prior to 2009. He did however stay on the board but has stated he would have liked to have been released from the board.
He never met or even spoke to any regulators or processors.
He received distributions in the amount relative to his shares as did everyone else.
He was never made aware that the company had any financial troubles prior to April 7th 2011.
The CFO and CEO would present the financials and he along with everyone else, he trusted that the information is accurate. He did not contest the internal report. AGCC is continues to license FTP.
Howard states that not one shareholder would have taken distributions if it were known that they couldn’t cover player balances.
Howard did not distance himself from the company after BF. He worked with the some of the shareholders to try to remedy the financial scandal.

Why continue to let foreign players deposit when the company is insolvent?
Howard states that it was best for FTP to stay open to look more appealing to potential investors.

Why not come out right after Black Friday and give an apology and to comment on the process of the players getting their money back?
Howard states that the DOJ communicated to FTP to no make any comments. He also stated that he had nothing to concretely say in regards to the player getting their money back.

Poker Listings Interviewer: Question
Based on what you know from your own experience with Howard Lederer and Chris Ferguson, do you believe they would always act in a way that was in the business and the customers’ best interests?

Gus Hansen’s Response
I have known Howard Lederer for a long period of time and I’ve known Chris Ferguson for a long period of time and from my point of view I would be shocked if they ever did anything that even remotely reminded me of foul play.
I think they could be guilty of neglect or not being careful enough but I can’t believe they’d be guilty of foul play. Obviously there’s a chance I’m wrong but I honestly don’t believe so.

Doyle Brunson’s response

It is widely perceived that Howard Lederer was still heavily involved in running the company even though he retired two or three years earlier. I’ve been in contact with Lederer the last few months. When someone I’ve known for years, trusted and respected looks me dead in the eye and says he didn’t know about the financial problems, call me a big old Texas sucker because I will believe them. I have not talked to Ferguson but I understand he says what Lederer told me, that they didn’t know. There are at least 4 stockholders that own more of FT than Lederer. Where were they? The guilt should be shared IF its true Lederer and Ferguson didn’t know of the financial mess.
He never used the money he received from the company to repay the players.

Rafe Furst- Board Member, Shareholder owner

Rafe was on the board and a shareholder, that is all that is really known .
He never used the money he received from the company to repay the players.

Chris Ferguson- Chairman of the Board, Management, and Majority Shareholder (cc-1?)

He was using the money he received in part to rapidly buy up other shareholders shares.
He was more involved than Howard, more of a stake in the company, and more power. He really should have known what the financial state was. Hard to believe that he so blindly trusted Ray & Gil.
How he appointed a CEO and with no oversight.
Reports emerge that Chris Ferguson may be holding up the GBT deal over $16m he believes he is owed; that claim is disputed by Ferguson.
He never used the money he received from the company to repay the players.

Gil Coronado-CFO (and possible cc-2?)

His job description is below. If he had done what his job title requires him to do none of this would have happened. Someone had to direct his actions. Who?
CFO Typical Responsibilities (this wasn’t FTP’s CFO’s job description, this was found online)
As CFO, your job is to control the cash flow position throughout the company, understand the sources and uses of cash, *and maintain the integrity of funds, securities and other valuable documents. You receive, have custody of, and disburse the company’s monies and securities.
After cash flow, the CFO must understand all of the company’s liabilities.*
As CFO, you establish and maintain lines of communication with investment bankers, financial analysts, and shareholders in conjunction with the President.
In today’s increasingly challenging and volatile macro world, the role of the CFO has evolved significantly. Traditionally being viewed as a financial gatekeeper, the role of the CFO has expanded and evolved to a strategic partner and advisor to the CEO. In fact, in a report released by McKinsey, 88 percent of 164 CFOs surveyed reported that CEOs expect them to be more active participants in shaping the strategy of their organizations.


Deirdre O’Shaughnessy-Director & Caroline Lynch- Head of HR
Apparently they worked under Gil and under Ray. The speculation is that they participated in some way. It is unknown what if anything they did.



Sources of the material was taken in part from the links below.


http://www.gambling911.com/poker/wha...ds-091212.html
http://www.pokerlistings.com/gus-han...-scandal-51712
http://blogs.reuters.com/felix-salmo...rComplaint.pdf
http://stuff.mit.edu/afs/athena/cont...0Complaint.pdf
http://pokerati.com/wp-content/uploa...v-Tiltware.pdf
http://www.apcw.org/legal-documents/...Indictment.pdf
http://www.revolution2020pdf.info/pa...0s6-pdf_0.html
http://www.clg.org/pdf/Motion%20for%...OKER%20LTD.pdf
http://www.visualanalysis.com/Images...ndictments.pdf
http://documents.jdsupra.com/eb7fef2...ec1ba85187.pdf
http://www.gamblingcontrol.org/userf...e%20290911.pdf
http://www.pokerplayernewspaper.com/...us-truth-10642
http://www.bluffed.net/news/20120917...-of-full-tilt/
http://www.pechanga.net/category/iss...l-tilt-closure
http://onlinepokerreport.com/4276/wh...ar-indictment/
http://www.subjectpoker.com/files/ex...d-Accounts.pdf

August 2012
It is reported that the owners had to return distributions to PS and the DOJ in the form of assets to complete deal.

June 1st
Phil Ivey sues FTP which essentially ends FTP’s ability to start paying back American players, due in part to the $10 Million spike in foreign players withdrawals directly attributed to Phil’s lawsuit.