An Internet poker company that was blocked from operating in the United States in the spring as part of an online gambling crackdown was "not a legitimate poker company, but a global Ponzi scheme," federal prosecutors said Tuesday.
The popular Full Tilt Poker website illegally raided player accounts to fund operations and make lavish payments to its owners, Justice Department lawyers said in a revised civil lawsuit filed in New York.
Over four years, the company used $444 million in player money to pay board members, including well-known professional poker players Christopher Ferguson and Howard Lederer, investigators said.
The poker site had promised players that their accounts were protected and wouldn't be touched. But authorities say that, as of March, the company had only $60 million left in its bank accounts to cover the $390 million it owed to players. It routinely mingled player money with its own finances and took cash from some customers to pay winnings due to others, prosecutors said.
"Full Tilt was not a legitimate poker company but a global Ponzi scheme," U.S. Attorney Preet Bharara said in a statement. "Not only did the firm orchestrate a massive fraud against the U.S. banking system, as previously alleged, Full Tilt also cheated and abused its own players to the tune of hundreds of millions of dollars."
A lawyer for the site, Barry Boss, was traveling Tuesday and not immediately available for comment.
Federal authorities sued Full Tilt Poker in April as part of a broad crackdown on the most popular online poker sites. They also filed criminal charges against the company's two top executives, Nelson Burtnick and Raymond Bitar.
Those charges are pending and authorities are seeking the men. Previously, they have issued statements condemning the charges as unfounded.
Executives at two other sites, PokerStars and Absolute Poker, also face charges and civil suits seeking millions of dollars in gambling proceeds.
U.S. lawmakers made it a crime to accept money in connection with unlawful gambling in 2006, but some big card-playing sites continued to operate anyway, saying their off-shore status or methods of processing payments put them outside the law's reach.
Many of the companies had gamblers deposit money in special online accounts that were used to pay losses and receive winnings.
In its revised lawsuit against Full Tilt, Justice Department lawyers said that even though the company had assured players that those accounts "are segregated and held separately from our operating accounts," they were drained regularly for other purposes, including paying the company's owners and board members.
Bitar got $41 million and Lederer got $42 million, the lawsuit said. Ferguson was supposed to get $87.5 million, federal prosecutors claimed.
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