20 Sep 11

The United States DOJ's Civil Complaint vs. Full Tilt Poker Amended [Updated]

The complaint alleges that Full Tilt defrauded its players by misrepresenting the security of their funds. Howard Lederer, Chris Ferguson, and Rafe Furst have been added to the civil suit, and each are facing significant penalties.

The United States Department of Justice has amended its civil complaint against Full Tilt Poker and several individuals related to it. As Subject: Poker reports, Howard Lederer, Chris Ferguson, and Rafe Furst have been added as new defendants.

See the official memorandum summarizing the changes.

The vast majority of the complaint is identical to what it was when it was first issued on Black Friday, but now there is information related to the amount of money owners paid themselves.

The complaint states that Full Tilt's owners paid themselves "approximately $443,860,529.89" and includes specific penalties that each of the 3 new defendants are facing: ~$42 million for Lederer, ~$25 million for Ferguson, and ~$12 million for Furst.

Furthermore, it restates that Full Tilt Poker and its owners have not repaid any of the roughly $300 million collectively owed to players.

The following statement on the liquidity of the company is directly from the complaint:

Full Tilt Poker’s CEO, Bitar, was well aware of the need for new deposits after April 15, 2011, and knew that even a few million dollars’ of unexpected withdrawals could reveal Full Tilt Poker’s true financial situation.

For example, in an internal Full Tilt Poker e-mail dated June 12, 2011, Bitar expressed concern that a company announcement regarding lay offs and the Board (including himself) being replaced would be seen as bad news, which would cause a “new run on the bank,” adding that “it could be a huge run” and that “at this point we can’t even take a five million run."

The Amendment also reveals information on the ownership of Tiltware LLC:

At all times relevant to the Amended Complaint, Bitar, Lederer, Ferguson, and Furst were among the founders of Full Tilt Poker, as well as part-owners of Tiltware, LLC, a California Limited Liability Company that was the beneficial owner of all other Full Tilt Poker entities.

In total, approximately 23 individuals owned shares in Full Tilt Poker. The FTP Insider Defendants specifically owned the following approximate percentages of Tiltware LLC: Bitar (7.8%), Lederer (8.6%), Ferguson (19.2%), and Furst (2.6%). The FTP Insider Defendants were also, at all relevant times, members of the Board of Directors of Tiltware LLC, and Ferguson was Chairman of the Board of Directors.

Additional Facts as taken from the Amended Complaint:

• As of March 31, 2011, Full Tilt Poker owed players from around the world over approximately $390,695,788 but had only approximately $59,579,413 in its bank accounts.

• Ray Bitar personally received at least $41 million, including at least $34,454,781.53 in ownership distributions and at least an additional $6.5 million in“profit sharing” payments.

• Howard Lederer personally received at least approximately $42 million, including approximately $37,856,010.92 in ownership distributions and at least $4 million in “profit sharing” payments.

• Chris 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.

• Rafe Furst received at least $11,706,323.96 in distributions.

• The other approximately 19 owners of Tiltware LLC received the remainder of the approximately $443,860,530 distributed. For example, a professional poker player and Full Tilt Poker owner received at least approximately $40,078,646.64 in distributions, as well millions of dollars characterized as loans from Full Tilt Poker. At least approximately $4.4 million of these loans have not been repaid.

Preet Bharara's Comments

The Manhattan U.S. Attorney Preet Bharara also publicly claimed that Full Tilt Poker and its board operated the company as "a massive Ponzi scheme against its own players." In his statement he said that "Full Tilt was not a legitimate poker company, but a global Ponzi scheme."

According to Wikipedia, a Ponzi scheme is "a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation."

Bharara's statement continued that the company "cheated and abused its own players to the tune of hundreds of millions of dollars... insiders lined their own pockets with funds picked from the pockets of their most loyal customers while blithely lying to both players and the public alike about the safety and security of the money deposited with the company."

As always, PokerStrategy.com will keep you informed as all developments related to this situation arise.


Update 20/09/2011: Tom Dwan TwoPlusTwo Thread

Tom 'Durrrr' Dwan has created a thread answering questions on the TwoPlusTwo forums.
He spent six hours in total answering questions, during which he confirmed:

• He knew about the extent of the issues for several months, but signed a Non Disclosure Agreement. A friend of his went to Ireland with a view to investing in Full Tilt, and signed the NDA in relation to that, he wasn't asked separately to sign one.
• Confirmed that Full Tilt never turned down an investment offer that would have covered player fund and legal liabilities.
• Has confirmed he will honor the $1 million he pledged to pay back players by Hanukkah 2012, probably much sooner. He will give the money to a liquidator, no preferential treatment will be given to certain players, and the process will be transparent.
• He was paid just over $1 million by Full Tilt, and currently owes them a figure less than that.
• Never had a profit share/equity deal in the company.
• Thinks that Full Tilt Pros should give some of their profits back to the players.
• Still considers Phil Ivey a friend, and agreed with his actions.
• Has not spoke to Rafe Furst, Chris Ferguson, or Ray Bitar since April 18. Has spoke to Howard Lederer, he doesn't trust him but as yet hasn't been outright lied to by him (To the best of his knowledge).
• Was asked several times to post his contract on the forum, but refused to.
• Will be doing several interviews in the coming days.


Update 21/09/2011: Rafe Furst's Attorney

David Angeli, attorney for Rafe Furst has stated “Mr. Furst hasn’t done anything wrong. He always acted in what he believed was the best interest of players and anyone associated with Full Tilt." So far, he is the only legal representative of the four men involved in yesterday's revelations to make any comment.

Update 21/09/2011: AGCC Statement Within 24 Hours?

According to CalvinAyre.com, a statement is expected to appear on the AGCC website in the next 24 hours, as their hearing in London is drawing to a close. This was apparantly confirmed in a phone call with the AGCC today.

Update 21/09/2011: Tom Dwan Interviews

PokerNews.com conducted an interview with Tom Dwan yesterday which they published today. It doesn't really divulge any new information that wasn't in his twoplustwo thread listed earlier. However he does elaborate on a few of the earlier points made.

He referred to some of the owners of Full Tilt as scumbags, and vindicated his own position by reminding us that he did not attempt to bribe Simon Watt in their 2010 WSOP heads-up match (which Dwan lost) to win his extremely lucrative bracelet bet.

And just this moment, Dwan has appeared on Fox News, rejecting claims that Full Tilt is a Ponzi scheme:


Update 21/09/2011: Rafe Furst Blogs

Rafe Furst, a Full Tilt pro and minority owner who was added to the US DOJ's complaint yesterday, has released an open letter on his blog in which he states he has nothing to hide and feels he has done nothing wrong.

Here is the complete statement:

By now you’ve no doubt heard about the allegations against me in a Federal civil suit regarding Full Tilt Poker. Because of the seriousness of the allegations I’m not able to comment at all about the pending case, much as I would like to. From a moral, personal and interpersonal perspective I feel I’ve got nothing to hide. And since I trust in our system of justice and have the utmost respect for my legal counsel, I will refrain from talking about the case until it’s resolved.

What I would like to express here is concern for my family, friends, colleagues and supporters who believe in me and who feel my pain as if it were their own. It sucks to have to endure the character assassination and potshots being taken at me in the media and social networks without being able to defend myself. Privately though I have received incredible support from many of you, and I can’t tell you how much it means to me. May you never have to endure something like this, but if you do, I hope you have friends as good as mine.

To the skeptics, please consider that not everything you read is true, and our society is built on a presumption of innocence until proven otherwise. It’s difficult to take back hurtful things that you might later regret, when the damage has already been done.

To those of you who have asked what you can do to show your support, I am grateful for the offer. My only request at this time would be to not let the naysayers and haters be the only voices out there expressing their opinion of me. My twitter is @rafefurst, and I’d love to hear from you publicly.

With Respect and Love,

Rafe

by Matt Kaufman and Barry Carter