18 thoughts on “Least surprising headline of the year”

      • Okay, I’ll be more precise. Your headline implies an ordering among website developers / operators, where poker is for some reason (among) the most likely to cheat its users, as opposed to something like eBay or a shady investment site or indeed any other website that people engage in these sorts of financial transaction with. My question is, what characteristics of poker, poker players, or the developers of a poker site lead you to this ordering?

        My question arises out of the fact that, though I don’t play much any more, I am a poker player myself. My initial response to your post was to be offended, but now it’s turned to curiosity; you clearly have some opinion about poker that led you to say this, and I’m just wondering what that is.

        • Steven:

          1. I enjoy poker too!

          2. Gambling, like drugs, is associated with crime. This may be a stereotype, but I’m certainly not the only one to make this association.

  2. I happen to subscribe to a blog of one of the owners (although I do not play poker online,and I didn’t even know he was involved with Full Tilt Poker until I saw his post today).

    He made his post today. A lot of anger in the comments…

  4. I actually am affected by this. Only for a very small amount of money though. I don’t see how this is any less surprising than a lot of scams. In fact I would characterize it as much more surprising than money being stolen from your university pension. There have been innumerable cases of financial firms dipping into investor money. This is the first case of a casino doing it that I am aware of.

    It’s strange to see it characterized as a ponzi scheme everywhere. Ponzi schemes pay unearned profits to old investors with the money of new investors. Simply dipping into investor accounts for personal gain is an entirely different crime. Full Tilt just stole money.

    • And now one more blog falls into the feckless task of defining a Ponzi scheme. FWIW, I agree with you… Ponzi scheme is just a way of saying “thing I don’t like.”

      But Andrew, I’m not sure I understand your surprise either, or at least your minimal surprise. the site made its money by raking out of every pot… doesn’t further 9alleged) monkey business with the amounts deposited kill the goose that laid the golden egg?

      • Jonathan:

        Without knowing anything about the topic, my guess is that the kind of person who would set up an offshore internet poker site is the kind of person who would not be averse to cutting corners and stealing some money where they can. I mean, look at it from the other direction. Pretty much the only reason to start this sort of business is (a) love of poker and (b) a desire to make big bucks. The business itself seems like a bit of a get-rich-quick scheme for the owners so it just doesn’t surprise me to hear that they’ve been stealing. They’re already operating at the edge of the law as is.

        • Believe me… all of these guys would have set up US-based businesses if they were allowed to do so. And having US-based regulation would have made them much more trustworthy and made them a lot more money. The reason to start up this business is a market for people who want to play poker. The reason to set it up offshore is to allow people to indulge this desire.

  6. Andrew, the way you present the headline implies that you think that in the world of (online) poker, people are more likely to “cheat” than anywhere else. I personally do not think that’s true, at least I cannot see any evidence for that claim. It is probably just a general misconception based on some longstanding prejudices etc. As for the motivation to set up an online poker site, I do not think it is necessarily a “get-rich-quick scheme”. Take Chris Ferguson, for example (one of the owners of Full Tilt). He received a PhD in Computer Science but by the time he graduated he made more money with playing poker than he could have made with his degree and a regular job. He was also interested in programming poker software and was one of the first who played online poker with his friends online in the early days of the internet. The whole thing grew into what later became Full Tilt Poker. I am not saying the whole online poker thing is of great social value, but that is probably true for most of today’s economic endeavors. Now, why did they “cheat”? I do not know the details here but I do not think they “stole” from their customers as that would have been pretty dumb because, as Jonathan put it, they would have killed the goose that laid the golden egg. The site was running very well and they made a lot of money anyway. My guess is that they just considered it as highly unlikely that they had to pay out all player funds at once and, essentially, they just ran an ill advised policy/strategy, as Zach pointed out. However, the role of the US government is pretty dubious in this case as they tried very hard for years to come up with new laws which the poker sites just were not able to obey at the end. The driving force behind these efforts is probably just money. The poker sites created a lot of revenue off which the IRS did not see a penny. My guess for the future is that there will be a bunch of online sites which are regulated and pay taxes. In a way, it is a little bit like racketeering: first destroy everything, then leave them alive once they pay.

    • Joerg:

      1. I hardly think it’s “racketeering” for the government to want business to pay taxes! Also, gambling is illegal in many places in the U.S. You might not like that gambling is illegal—personally, I like to play poker for money now and then—but given the laws, which in turn represent the views of (many of) the voters, it’s not unreasonable for the police to do a bit of enforcement. Maybe the regulators aren’t doing a good job of things but the general principle seems sound to me, that the police can forbid things that the legislature has declared illegal (subject to the usual constitutional constraints, of course).

      2. We don’t know the details, but based on the news article, the owners of this company appear to have taken money out of people’s accounts. That sounds like stealing to me.

      3. I’m suspicious of the goose-that-laid-the-golden-egg argument. According to reports, these dudes took tens of millions of dollars. If you can grab that many eggs, you don’t need the goose anymore. They may well have felt that their future dominance in this market was not assured and so it might have seen like the best decision to just grab every dollar they could get and then declare bankruptcy.

      • 1. Again, you’ll have to take my word for it, but these companies would have loved to set up in the US and pay taxes. But since they’re not US companies, they don’t owe US taxes. the only people who should owe US taxes are the US citizens who play and make money. And if these sites had been allowed too set up in teh US, they could have generated teh necessary paperwork to the IRS…. just like casinos do.

        2. Tell it to Nate Silver (see the Reason link above). Banks take money from your account, lend it to people and pocket the interest. and they don’t have nearly enough mmoney to pay people if they all ask for their money. is there anyone who truied to get their money and couldn’t for any reason other than the fact that the US gov’t made it almost impossible to do so?

        3. To take tens of millions of dollars instead of taking that much every year strikes me as foolish. I grant that if the barriers to entry are low enough, a business has incentive to steal from the customers on the way out. But what makes you think they were on the way out? The story you tell is plausible, but far from the only one you can tell.

        • Jonathan:

          1. I don’t know the details, but given the various laws against gambling, I could see why it might be illegal for these companies to set up in the U.S.

          2. Sure, I thought about that too—but they’re not a bank! They don’t need to operate by lending money. If they were doing everything as they said, the money would all be there at all times.

          3. It might have been foolish of these guys to steal—in retrospect, it appears like a bad decision—but people do foolish things all the time.

        • 1. It’s probably illegal under the wire fraud act. But there are defenses, and lawyers no doubt all told them (quite rightly in retrospect) to not try it. The next step was for the gov’t to threaten credit card companies and banks with conspiracy to violate the wire fraud act if they carried out normal banking services in connection with these companies. This would seem to be forbidden under the Supreme Court precendent this year in the Stoneridge case, but again, nobody wants to test it — it’s just not worth it for the banks to get on the wrong side of the gov’t, even if they’re right (which, I hasten add, isn’t a slam dunk).

          2. Just not true. All they need to do is have money available for anyone who has it on deposit and requests it. Now iot may be that there are some such people, but the reason artiocle seems to say it isn’t true.

          3. You got me there…. unless of course they didn’t steal anything.

        • I agree with the complaints that the US government caused this, but Andrew’s point #2 is correct. They set up to be a poker site, not a bank that lends money. Their customers, unlike those of a bank, were not aware their funds were anything but locked down for their own use. What apparently happened is that the government prevented them from transferring funds from a user’s actual bank account, but was continuing to credit their poker account at Full Tilt rather than saying “Sorry, you can’t transfer funds to us”. Since they never took money from those people, that doesn’t give rise to a real complaint. What was criminal was using funds that were supposed to be in user accounts to cover the operating costs of the company (which they couldn’t cover through normal methods because they couldn’t transfer any more funds). Maybe they hoped it would all blow over and they could transfer the funds that users had agreed to transfer, and then everything would be hunky-dory as if nothing happened. But things didn’t work out that way.

          Jonathan, I don’t see any where in the Reason article where it says users were aware their funds were not separated. I think the default assumption would be that they are.

  7. One of my fellow GS classmates is an ex-Poker Pro who played on, and was sponsored by, Full Tilt. I imagine he lost quite a bit of money. :(

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