WWJD … or How Did the Full Tilt Debacle Come to This?

by Lou on October 1, 2011

So how did it all come down to this?  It was no surprise when the Alderney Gambling Control Commission pulled the plug a few days ago on Full Tilt poker, especially when they determined that Full Tilt misled them about their financial operations, never mind the fact that Full Tilt committed numerous acts in violation of their licensing agreement, including filing false reports, unauthorized provision of credit, and failing to report material events.

But where and how did it all start?  And when did Full Tilt’s management cross the line and decide to treat money belonging to players as their own, personal ATM machine?

It didn’t happen at the very beginning—at least I don’t think so.  I just don’t believe that Lederer, Ferguson, Furst—and any of the other Full Tilters who were there at the inception—sat down at a table and decided to run a long con on the entire poker world.  No, I believe they simply had an idea for building a better online poker site, and there’s nothing wrong with that.

And for a while they succeeded.  But costs were high, and mounting.   After all, they had a roster of pros that far exceeded the number of players sponsored by any of their competitors, including the much larger Poker Stars.  And while it seemed like a feather in their cap when they were able to sign up the vast majority of pros around, I don’t think their roster generated enough value for the money they invested.

Let’s take Mike Matusow as an example.  Was he generating income that wouldn’t have been there had he not been a sponsored pro?  I’ve heard Matusow was getting $30,000 per month from Full Tilt, but it’s hard to believe that his presence produced $30,000 per month more than they would have earned in rake if Matusow wasn’t associated with the site.  This is not to put down Mike Matusow.  It’s just a case of paying someone more money than he generates, and that’s a money-losing proposition.

And then there are the huge sums the founders were taking for themselves.  Five million last year, ten million this year, multiplied by the number of Full Tilt founding fathers, and after a few years you’re talking about real money.

But resisting temptation is tough, and you never know how you’re going to respond until you’re staring temptation in the face. Poker Stars never had to deal with that kind of temptation because the Isle of Man’s gaming laws required that player funds be segregated, and not comingled with the company’s operating funds.  Whatever Poker Stars spent had to come out of what they earned in rake.

But when player funds are sitting in the same bank accounts, accessible in the same manner that operating funds are, it’s not hard to start viewing that money as company money instead of funds held under a fiduciary relationship in trust for the players.

And when times got tough, it became all too easy for the Tilters to reach into that one, big pocket and take a little for themselves.  And when things got really tough … when they couldn’t find enough middlemen to process player deposits, and couldn’t create enough bank accounts for enough sham businesses to make these transactions look legit, they simply credited players for deposits they made, even though they hadn’t yet received money from these players because they simply were not able to find ways to process those payments.

“Not to worry,” they thought, “unless there’s a run on the bank, we’ll never face a situation where all our players will be asking for their money back at the same time.  We can live on the float.”

Well, when the Feds brought down the hammer, the unimaginable happened. Every player wanted his or her money back and Full Tilt couldn’t pay them. But they did continue to process payments to themselves, and continued doing so until the cookie jar was nearly empty.

I don’t have any special access into the minds of the principals at Full Tilt.  But this is what I believe happened.  They eased across that Rubicon so seamlessly that they weren’t even aware they were on the road from mismanagement to fraud, from bad judgment to a Ponzi scheme, from a business failure to criminal culpability.

And in doing so, they let down the entire poker community.  After all, most of us trusted Howard “the Professor” Lederer and Chris “Jesus” Ferguson.  They didn’t look like scam artists.  Lederer was impassive, analytical, and never rattled.  He really looked like his nickname.  And Ferguson, with his low-key personality, PhD from UCLA, uber-analytical personality, and avocation as a ballroom dancer, is just not your typical poker hustler.

But hustle us they did.  And while they were a disappointment to all of us, they were also robbing those who had money on deposit on Full Tilt poker.

I’m not one of those someones.  I had no money at Full Tilt. But I love poker and don’t like having rug pulled out from under me by some of poker’s former luminaries.  It stinks!  I only wish I could have been inside their heads as their moral compasses turned away from true north and began spinning in circles—when they were rattled and confused and continued to try to cover their tails by more fraudulent activities.

Like the Emperor’s New Clothes, in the final analysis they were standing there, guilty, naked, and ashamed.  The 1990 Sinéad O’Connor song, “The Emperor’s New Clothes,” ends with these lines, “through their own words / they will be exposed / they’ve got a severe case of / the emperor’s new clothes.”

Now that French buyout and turnaround firm Groupe Bernard Tapie has expressed an interest in purchasing Full Tilt—contingent, of course on reaching a “favorable” settlement with the
Department of Justice—there may be a ray of light at the end of the tunnel.  But Tapie has a big mountain to climb.  Full Tilt faces major legal challenges in addition to their financial operating issues, never mind the significant cost of paying off the players.

I’m sitting here pondering just how Tapie will pay back all the players owed money by Full Tilt, and even if they are able to write a check that large, how will Tapie restore player confidence in Full Tilt so that acquiring them becomes profitable.

Many people these days, when faced with a tough ethical or moral dilemma, have taken to asking themselves, “What would Jesus do?”  But if you’re a poker player considering WWJD, you better be sure you pick the right Jesus to model your behavior after.

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