Full Tilt Poker has lashed out at the U.S. Justice Department for calling it a Ponzi scheme.
"While the government has obviously taken issue with the underlying activities of FTP, under any reasonable interpretation, the world-wide operations of the online cardroom are not a so-called Ponzi scheme," Full Tilt Poker attorney Ian Imrich told The Wall Street Journal in an interview published today.
Earlier this week, the Justice Department amended an earlier civil complaint against the site's executives, including celebrity poker players Howard Lederer and Christopher Ferguson, charging them siphoning off hundreds of millions of dollars collected from the site's players, while at the same time, rendering the service nearly incapable of paying players the money they were due.
"Full Tilt was not a legitimate poker company, but a global Ponzi scheme," Preet Bharara, U.S. attorney for the Southern District of New York,.
Ponzi schemes take investor money to pay subsequent investors, rather than using any money made on profitable investments to dole out cash. The technique was named after Charles Ponzi, a man who popularized the technique in the early 1900s. More recently, investor Bernie Madoff was sentenced in 2009 to 150 years in prison for operating the biggest Ponzi scheme in U.S. history.
Given how Ponzi schemes work, another Full Tilt Poker attorney, Jeff Ifrah, who also spoke to the Journal in an interview published today, said that the poker site simply cannot be called a Ponzi scheme for one simple reason: there needs to be an element of investment.
"A Ponzi scheme requires an investment vehicle in order to receive a certain rate of high return," Ifrah said. "None of these things happened here."
Ifrah argues that Full Tilt is much more like a "mismanaged" bank, the Journal says.
Either way, it's clear the U.S. isn't playing around: Full Tilt's site has been seized by the Federal Bureau of Investigation.