The operators of online gambling site Full Tilt Poker, charged with running a $440 million Ponzi scheme by federal authorities, say what happened to them was simply mismanagement, not a scam.
"Banks fail for not having sufficient revenue to cover customer deposits all the time. No one refers to such failures as Ponzi schemes. And there was no Ponzi scheme here," said Jeff Ifrah, an attorney for Full Tilt Poker.
"Players were not investing in any company-run investment vehicle. Players were never promised any type of high rate return. Players just wanted to play poker and the company offered that service," he said. Ifrah explained that in late 2010, the company suddenly found itself unable to meet the player withdrawal demand.
Full Tilt was shut down in April by federal authorities. "Full Tilt was not a legitimate poker company, but a global Ponzi scheme," Preet Bharara, the U.S. Attorney for the Southern District of New York, said in a statement Wednesday.
The site told players their gambling accounts were secure and available for withdrawal at any time when in fact, "Full Tilt Poker did not maintain funds sufficient to repay all players," Bharara said. The operation allegedly used player funds to pay board members and other owners more than $440 million since April 2007.
The complaint named board members Raymond Bitar, Howard Lederer, Christopher Ferguson and Rafael Furst as defendants.
"Full Tilt 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," according to the DOJ statement.
Ifrah said the individuals added to the civil complaint will "certainly have comments on the allegations against them." If they received distributions at a time when the company was underwater, the individuals will need to defend whether the distributions are subject to seizure as the amended complaint alleges.
On April 15, 2011, the Justice Department filed a complaint for money laundering, fraud, and violating the 2006 Unlawful Internet Gambling Enforcement Act against 11 individuals who ran PokerStars, Full Tilt Poker and Absolute Poker.
"But even if the government can prove that case and forfeit such distributions, such a case simply does not amount to a 'global Ponzi scheme' as the US Attorney stated in his press release," Ifrah told ABC News. "The inflammatory description by NY's lead federal prosecutor has nothing to do with the allegations in the amended complaint and the timing of these comments is most unfortunate."
Ifrah conceded that Full Tilt may have been mismanaged, and the company "may have made poor decisions." The Justice Department's shutdown of online poker sites has affected millions of poker players and the poker industry.
In June, Phil Ivey, one of the world's best poker players, announced he was suing his sponsor, Full Tilt, in June for $150 million and boycotted this year's World Series of Poker (WSOP).