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Feds Call Full-Tilt Poker a 'Global Ponzi Scheme'
blair1q writes "Popular (and heavily advertised) poker website Full-Tilt Poker was sued today by the U.S. government, following an investigation that revealed it to be a massive Ponzi Scheme. The principals in the company set up a complicated system to direct funds from subscribers' poker accounts into their own bank accounts. This was in contravention of their own claim that users' money was untouched. Players' accounts amounted to $390 million, but the company only has $60 million in the bank, having over time distributed $440 million to its own directors and executives."
I wonder if there is any precedent or international agreement that the US government has to abide by in order to get monies back to international players? Probably not. Can you imagine players begging the US for their money and us just saying "well, we'll have it to you as soon as we can." *years and years pass.*
That's not the way it works. You don't pay income tax on (long term) capital gains, you pay the capital gains tax. You pay income tax on ordinary income, including short term capital gains.
make imaginary.friends COUNT=100 VISIBLE=false
Bzzzt. Wrong. "hoping to get paid by future workers". It is 100% clear how the system works: less workers in the future means less money in the future; it is funded ad hoc (in theory) by the current labor force. It is in NO WAY a guarantee! That's not a ponzi scheme.
My problem with SS is that it takes in more than it spends and then the surplus has been used by greedy politicians since it first funded the Vietnam War. The program isn't the problem, it is the theivery of the surplus. It should be saved to extend the program, or refunded to taxpayers every year.
But it is no way a Ponzi scheme.
https://www.accountkiller.com/removal-requested
You said "If you want to compare apples to apples, look at capital gains PLUS corporate income tax. It amounts to over 50%, except for companies that are in bed with the white house (GE)."
You are not double taxed on capital gains. Yes, you (may have) paid income tax on the money you earned to make the investment. However, you don't pay tax on that amount a second time, it's capital, not a gain. You only pay capital gains tax on the long-term "gain" you earned from that investment, which is to say, you deduct out your initial investment from the sale price, leaving only the "gain" that you pay "capital gains" tax on. Neither the corporate income tax, nor the capital gains tax is over 50%.
make imaginary.friends COUNT=100 VISIBLE=false
Check again, in Nevada it only need be available "next business day". Casinos can also issue payouts in credit or checks in case insufficient cash exists on premises. Look up the regulations around the Corporate Treasury Waiver and Bank Balance Waiver. So, yes, the casino must cover every bet on the floor - but not necessarily in cash, which was my original point.
Why do people shouting the "poor people don't pay (income) taxes" meme always leave out the other taxes they do pay? It's pretty much universal, and seems rather disingenuous.
It's almost as bad as the confusion of "pay x% rate of income tax" versus "pay x% rate of income tax only for income over y amount", which can be a rather significant difference, although at least that's often an honest misunderstanding.
Social Security as it is now is robbing your children and grandchildren to pay for yourself, because the trust fund was spent and all payouts now come from the vastly-in-debt general fund. Call it what you want, it's certainly not a retirement savings plan.
And what does it matter what the intentions of the plan are. Nothing could matter less. What it is and what it does and what it will do are important. Not one person can retire on intentions.
Socialism: a lie told by totalitarians and believed by fools.
>> So in other words is exactly like social security, except for the fact that you don't go to jail if you choose not to play online poker.
That's cute, and completely inaccurate.
Any retirement investment method is counting on the gradual growth of the value its investments over time. Most methods assume investment into activities that will result in value-added business from which surplus value can be extracted. Since any one investment has a risk of either under-performing or going completely tits-up, risk is managed by making a diverse group of investments.
The US Federal Government is "invested" in the prosperity of the US. Social Security is therefore diversified over an entire national economy, recovering taxes from a range of activities. The advantages of this "ultimate index fund" are low administrative overhead and risk.
Both private and public retirement plans are predicated on the assumption that there is long term growth in the investments, the basis for the continued function of a modern market economy. If/when this isn't the case, the paradigm falls apart, and members of a cash economy would need to salt away the entire value needed to provide for their post-earning years.
Luke, help me take this mask off
Actually, it is the very definition of a Ponzi scheme.
There should be two distinct piles of money here. First, we have the business's money. I don't know how they earn this (percentage of play maybe), but it doesn't really matter. This is the money they can use to operate the business. For this fund, it is perfectly reasonable to expect money to keep coming in, that is how businesses operate.
However, there should be a separate pile of money that belongs to the account holders. This is NOT the business's money. They should, at any time, be able to pay off every single account holder every penny they hold in the account. If you have to keep having new accounts (or more money added to them) to pay off other accounts, that is a Ponzi scheme.
> accounts amounted to $390 million, but the company only has $60 million in the bank
So then Full Tilt Poker is just like a major US bank, except with more reserves.
Indeed... that's certainy fraudulent (unless they had a bank charter, and were paying insurance on their deposits, which they didn't and weren't), but it doesn't sound like the definition of a Ponzi scheme at all.
A Ponzi scheme relies on the promise of future returns. Poker is a zero-sum game (actually, less than zero if you take commission/table fees into account). Investors in a Ponzi scheme don't believe they're taking each other's money, they believe the investment strategy is paying profits to all investors.
It sounds like these guys just decided to give themselves some interest-free (and illegal) loans from their players' deposits.