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."

Comments

When Mitt Romney asks, "Why punish success?"...

[bennomatic]

...I suggest people think about this sort of thing. Not all businesses are scams, but the people raking in millions of dollars a year aren't earning it. Their inheriting it, winning it or stealing it, and they deserve to be taxed at a higher rate.

Re:When Mitt Romney asks, "Why punish success?"...

[Moryath]

Uhm... if anything, Capital Gains is UNEARNED income, therefore it should be taxed at a higher rate than earned (e.g. worked for) income if we want to encourage people to work.

Or do you disagree?

Re:When Mitt Romney asks, "Why punish success?"...

[LBArrettAnderson]

*Corporate* income tax plus capital gains. The corporation that you invested in is taxed on its earnings. Those earnings are where your gains come from.

Re:When Mitt Romney asks, "Why punish success?"...

[Solandri]

1. I am for the new tax on people with incomes over $1 million. The long-term trend in incomes supports the notion that the wealthy are profiting disproportionately from increased productivity gains in the last few decades.

2. I even buy that they deserve to be taxed at a higher rate. That said, 60 seconds looking at the IRS tax statistics will tell you that they are already taxed at a higher rate:

The effective average federal income tax rate for people making $1 million or more ranges from 22.6% to 25.8%.
The effective average federal income tax rate for people making $500k-$1M is 24.4%.
The effective average federal income tax rate for people making $200k-$500k is 19.6%.
The effective average federal income tax rate for everyone else ranges from 0.1% to 11.9%

Maybe Warren Buffet pays a smaller percentage of his income than his secretary, but he's an outlier. You don't justify policy based on outliers.

3. If you play around with the tax statistics, you'll see that even if you taxed everyone making $1 million or more at 100% their income, it would only increase revenue by about $550 billion. That's right - you could've confiscated every dollar made by "evil rich people" in 2009 and it only would've reduced the 2010 deficit by half. If you taxed them at 50%, you'd increase revenue by only about $200 billion, which compared to our current deficits and debt is peanuts.

I don't begrudge you your right to hate rich people. But check it at the door when you come to discuss policy. The simple fact is that despite increasing income disparity, the U.S.still has pretty good income dispersion. The bulk of the U.S. income base sits between $50k-$500k per year (68.6% of all income). The bulk of the U.S. tax base sits between $50k-$1M per year (72.5% of all income tax revenue). That's where you need to raise taxes if you want a significant increase in income tax revenue. Going after people who make over $1 million (10.6% of all income, 20.4% of all income tax revenue) makes for good headlines and may make you feel better, but it's pretty ineffective at increasing tax revenue when your deficit is 8% of GDP.

Re:When Mitt Romney asks, "Why punish success?"...

[dkleinsc]

Almost every ordinary person buys all the stuff they need using income from work that has been taxed, and in most states pay a sales tax of some kind. The corporation they bought the item from was also taxed in various ways, and some of that cost (not all of it - read about Tax incidence) gets factored into the price, making the price higher than it would be without the taxes. And if whatever that person bought improves the value of their property, they'll get taxed again via their local property tax. And so on. The same dollars basically get taxed almost every time they change hands.

For some reason, though, the concept of "double taxation" only comes up when talking about taxing investments. Which suggests the objection is not really to taxing the same money twice (which would inevitably happen if there's more than 1 kind of tax in existence), but rather either (a) paying any kind of tax at all (a much more common position than you might think), or (b) really rich people paying taxes at all (which probably was why some think tank guy game up with "double taxation" in the first place). I simply see it as yet another expression of this gem by John Cleese in How to Irritate People:

The rich don't say "We want more money." They say "This increased taxation is reducing personal incentive."

Re:Ha ha ha

[blue trane]

Look up Ponzi Scheme. It requires fraud, misrepresentation. US Govt is not lying about where the money goes. The Poker company is.

Re:Ha ha ha

[Anonymous Coward]

Similarly, the US postal service wouldn't be having a problem if the Republicans hadn't raided the fuck out of them in the 1980s (when they were profitable) while holding up and blocking bills this year that would have required the US to pay back the $50 billion stolen from it.

But this is rather like other Republican attitudes - raid raid raid, golden parachute.

Re:fractional reserve?

[Anonymous Coward]

Haven't you ever watched It's A Wonderful Life? In fractional reserve banking, the money has been lent by the bank. Those loans are assets. They are nonliquid assets, which means the bank can't just pull all the money out of their vault if everyone comes and wants to cash out, but they are assets, and they will eventually be repaid.

In a Ponzi scheme, there isn't enough money in the system - it has been taken out. It is gone. The only way to keep the system running and seemingly healthy is to keep adding new money to it, because the numbers just don't add up. In other words - whoever is running the scheme has treated it like their personal piggy bank.

The problem isn't that they have $60m cash and outstanding debts worth $390m. The problem is that they have no assets other than the $60m with which to repay their outstanding debts.

Re:Ha ha ha

[PopeRatzo]

Ss became a ponzi scheme when it (the federal goverment) raided the social security assets and replaced them with IOUs

Excuse me, but those "IOUs" you are referring to are Treasury Bonds.

Do you know what you call someone who owns a million dollars in Treasury Bonds? A "millionaire".

I don't understand why when they are in the Social Security Trust Fund everyone calls them "IOUs" but when they are in your 401k they're called "AAA rated, blue chip securities". (I guess technically, one of the three rating agencies has them rated as "AA+" or some such. But either way, they are by far the most popular security in the world. Even more popular than Apple stock.) The Treasury Bonds that are in the Social Security Trust Fund are more certain, more valuable than gold bullion. And they are valued more highly around the world than gold bullion.

Whenever you see someone say "Oh, there is no Social Security Trust Fund, it's just a bunch of IOUs!" you know immediately that you're hearing from someone who has obtained their understanding of Social Security and the operations of the US government from right-wing AM radio talk shows.

It's not a "Ponzi scheme" it's an insurance program. Do you think that your insurance company has a box somewhere with funds equal to the maximum possible payout on every single policy they have written? If Social Security can be called a "Ponzi Scheme" than the entire Insurance industry needs to be behind bars for fraud immediately. Actually, that last part may not be such a terrible idea.

Social Security is by far the most successful, most popular government program in the history of the United States of America. It's more popular than the military. It's more popular than the space program for chrissake. And it has created, practically single-handedly, what was the strongest, most prosperous middle class in the world until that fuckstick Ronald Reagan decided to destroy America at the behest of his corporate donors and a bunch of backward ideological god botherers.

Re:No.

[cpt kangarooski]

SS is a ponzi scheme

Of course this is not true. First, the way that Social Security works is clear, whereas an actual Ponzi scheme is always disguised as something else. Second, Congress can always modify Social Security so as to keep it funded, even if there are fewer people paying into the system later than at present, e.g. by raising taxes or lowering payouts. This is not really possible with a Ponzi scheme. Really, the only thing that makes it even appear to be like a Ponzi scheme is that the population of the country is variable; if it were constant, it would be clear that it is merely pay-as-you-go.

SS is absolutely clearly NOT SHOWN TO BE CONSTITUTIONAL in this judgment. At the very minimum it's a "maybe", but it's definitely not a "YES", which is what SCOTUS is SUPPOSED to show.

I'm not familiar with that case, but I do know that standard procedure for courts in the US is to decide questions of law rather narrowly. If it's possible to resolve the case without deciding on the constitutionality of a law, that's what will be done; anything further would be superfluous. Likewise, if one part of the case is contingent on another part, the court will only worry about it if it absolutely has to. E.g. if it is alleged that Alice killed Bob, and Alice claims that she did not, but that if she did, it was in self defense, and the court finds that she didn't kill Bob, the question of self defense will be ignored since it's not important anymore.

Whether or not everyone is on tenterhooks about a particular issue that the court manages to sidestep isn't really something they care about. If you really want to find out the answer, come up with a better test case that will compel them to give you an answer.

social security

[circletimessquare]

is a social trust

it says that we do not want our older generations, and, by reference, our older selves, to die in the street

anxiety over how the system actually works financially is a red herring: it doesn't matter how it works. what matters is that you agree it is wrong that our older people should suffer because the society they live in is callous and brutal. once you agree that such a callous society does not represent the sort of society that shares your values, there is no anxiety about how it works financially. you just agree it is supposed to work and should therefore be funded

i have no problem with people who complain about the details of how social security works, or what it should fund and what it should not fund

i have a problem with those who use their lack of trust and anxiety as a cover for doubting the entire legitimacy of social security itself

if such people prevail on the national debate over this and other related issues, the united states is doomed to second class or third class status in the world, and our best and brightest children and grandchildren will surely leave for wiser and more humane societies that actually cares about its citizens' well being. those who are left will lead brutal lives, due to the opinions of people like you see posting here, and, for some reason, loudly and proudly trumpeting their inhumanity on the political stage without apparent shame or self-awareness about what callous and ugly people they are. whatever they are, they aren't americans and they don't represent american values as far as this american and the majority of americans are concerned