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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.*
...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.
The CB App. What's your 20?
Look up Ponzi Scheme. It requires fraud, misrepresentation. US Govt is not lying about where the money goes. The Poker company is.
The FDIC ensures that your money is safe, even in the event of a bank run. There is no such assurance for Full-Tilt Poker.
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.
You should really look up the meaning of the word "definition". SS is only a Ponzi scheme in the politically-motivated opinions of extreme right-wing talking heads. A politically-motivated opinion does not equal "by definition".
The CB App. What's your 20?
Real casinos are not required to keep cash on hand for the full value of the chips they give players, and the reason is quite simple - the games are designed such that the casino will always make money! This is even more true in a virtual casino! Every once in a while, someone wins a lot of money, but it's usually at the expense of other players or nothing that can't be recovered in a day or two. However, now that the cat is out of the bag, a lot of players may end up trying to cash out at once.
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
Even their aims are different: a Ponzi scheme is meant to concentrate the wealth of many into the hands of the few people who are running the scheme. Social Security aims to achieve a level of wealth redistribution, nominally to ensure that people no longer in the workforce are able to support themselves. Whether or not you feel it achieves that aim is certainly something that can be discussed, but a Ponzi scheme it is not.
The CB App. What's your 20?
Banks don't have cash on hand to pay every account holder should they all choose to cash out their accounts.
They don't have enough cash to pay every account holder if they came in to collect on same day. They do, however, have enough assets and accounts receivable (outstanding loans) to cover. It may take some time but, they could, in principle pay off all their account holders.
Full Tilt, on the other hand, doesn't have the money in any form. What they owe to their subscribers can not be paid. The money isn't on loan to another entity who is obligated to pay it back. It is "spent". That's a big difference.
Yeah, and so the pizza delivery guy shouldn't have to pay taxes because the money I use to buy the pizza has already been taxed before I use it to buy the pizza.
You're conflating capital-gains / earned-income / wealth / job-creation.
They aren't the same. I can invest money in a publicly traded company that opens an office in China and hires Chinese workers. How does that help jobs in the USofA? How does that get people earning money by their labor in the USofA?
Social security isn't a ponzi scheme, its just the victim of the United State's own success and radical advancements in medicine and thus life expectancy. The life expectancy in the US in 1935 was 58, in 2000 it was 74. The initial planners probably just didn't expect the majority of people to live long enough to collect. I guess that's gambling, but making it out to be ponzi scheme I think is an incorrect assessment. It looks like the retirement age started out with SS at 65 or 62 at half pay or whatever. But the life expectancy increased past that dramatically after World War II, especially with women. So for the past 60 years now, we've had the average life expectancy greater than that of the retirement age, and probably social security didn't plan properly for that. I'm just looking at the numbers though, so it might be more or less than that.
how can you have fraud when the books are open?
Social Security is an excellent example. All the money that goes into Social Security is used to purchase internal bonds, immediately transferring the money to the general budget. That's the first element of this "open" scam, namely, that there's no investment of Social Security funds. It's merely a tool so that Congress can spend more.
That's especially mendacious given the propaganda, particularly, the supposed "untouchable" nature of Social Security. The money goes into a "lock box", but that money is already spent.
Second, Social Security shows the defining characteristic of a Ponzi scam, latter entrants get less return than the early ones. There has been a consistent decline in the ratio of payout to payment ever since the beginning of Social Security. The late babyboomers (say born in late 50s or early 60s) are the first group that's going to get less out than it put in. Later generations will have it even worse.
Know when to Fold Em.
If you don't know who mark is at the poker table, you are it.
As is my pay. As is every dollar in my wallet. The taxes have been paid.
And once I have paid the taxes on my income, what is "left over *belongs*" to me.
Therefore, the taxes have been paid and the pizza delivery guy does NOT owe any taxes (by your logic) on the money I pay him.
No. I understand it. Again, you are the one incorrectly conflating:
capital gains
earned income
wealth
job creation
but they are NOT the same.
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.
except for the fact that you don't go to jail if you choose not to play online poker.
http://docs.justia.com/cases/federal/district-courts/new-york/nysdce/1:2011cv02564/377900/49/1.pdf
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.
It may seem like a fractional reserve banking system... to those that don't know how a regulated casino is managed. A legitimate casino will always hold sufficient cash to cover all of the chips in play. What ever chips the croupier wins from the players at the point the table closes... only then can the casino take the money to the bank.
Luke, help me take this mask off
At least you got that partially right.
Yes it is "exchanging hands a second time". It is a asset of the company's. It is NOT an asset of yours until the company pays a dividend (and is taxed).
You are a stockholder. That is all. That gives you certain rights in certain situations but that does NOT mean that a portion of the profit that the company makes is yours.
Here's a simple experiment to prove that. Buy stock in Microsoft and then go there and demand x% of their profits as your right by stock ownership.
>> 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.
Then do it. Wait, there's going to be some caveat to that statement, isn't there?
And now you cannot tell the different between DIVIDENDS and capital gains from selling stock.
You lose.
For a comparison, I own the money in my bank account. I OWN it. It is mine.
When I go to the bank and say I want $X from my account, they give it to me.
You do NOT own any of the profit that the company makes OTHERWISE you could go and claim it from the company.
I'll expand my earlier statement about the things you are incorrectly conflating:
capital gains
earned income
wealth
job creation
THE STOCK MARKET
and DIVIDENDS.
There is a good reason that casinos have to be able to cover every bet they make. Looking over the rules (beware, this thing is dense to the point of being dangerous) http://gaming.nv.gov/documents/pdf/06feb23_bankroll_instr.pdf it seems that in Nevada casinos do, in fact, need to have enough cash on hand or available the very next business day to cover all bets and chance events that are conceivable to within a rather generous statistical margin.
The comparisons to fractional reserve banking, though provoking, are also in contradiction with laws that are in place for good reason.
Now comparing the financial system to a casino... Well, I'll not press my luck. The casinos get jealous seeing someone else do it better. Even my far right wing family 'plays' the stock market and they think gambling is a sin.
md5sum
d41d8cd98f00b204e9800998ecf8427e
Of course you don't. As I said, you are incorrectly conflating:
capital gains
earned income
wealth
job creation
THE STOCK MARKET
and DIVIDENDS.
If you really owned part of the company's profit then you could go into the company and take the portion of the profit that you own.
You failed to understand that concept and instead you switched to a tangent about selling stock.
Selling stock is NOT the same as taking a portion of the company's profit (that you claim you own). But feel free to keep arguing that it is.
Here is what you posted:
Damned by your own posting. Looks like you lose ... again!
At first jab I really wanted to take a jab at that, I really did. Some others have posted some excellent points this way and that about FRB (I'm tired of typing it) and looking at it all I'm inclined to think that FRB is done well. Really well. Take a look at all the wonderful things a healthy strong credit system can and has done. Lines of credit to smooth out payroll and unexpected expense, people building homes and investing into the community and economy at large, new business and old alike benefiting from the stability of others. Really good stuff.
Now, on the reverse of that same token there is also the ugly truth that the system is larger, more subtle, complex, and faster than it was ever imagined (not itself a flaw) but also more-so on every account than it NEEDS to be. The global economy would get on just fine if even a small percentage of the current trading took place and more (if not total) human supervision was enforced. The only liquidity that a market requires is that which is needed to balance incoming and outgoing money (forgive the gross simplification) and any changes in position that the "players" wish to make (for example, moving stock from Apple to IBM on the careful and considered opinion of a fund manager. He needs sellers and buyers within a reasonable time and he needs them to also behave reasonably to pricing and the market)
These needed transactions, amplified to the volume of the needs of humanity, are diminutive along side the volume that the market supports out of misguided attempts to skim money from the market. See, money coming and going is a pretty balanced game and stocks only generate real value when the company buys them back or issues a dividends. The rest is everyone throwing money around at each other.
The amount of money moved is staggering. Beyond the mortal ken. It also moves faster and in ways outside out control. Money won't, contrary to popular belief, disappear should something go awry. It will end up in the wrong places, though. The people who were throwing money around expecting to get more back suddenly find themselves dealt out of the game. This is the problem. The risk of a subset of the banking and financial populace to suffer harm is real. It is compounded by the desire to extract some of that money zipping around. Risks are taken, balanced against with the best of intents (at least from the point of view of the balance sheets) and as much caution as seems needed.
In the end when these players find themselves short handed or in a bad way for one reason or another they try to move the blame around. Sometimes the force of government is enlisted to change the rules. They sometimes beg to make the game more lively (to try and keep it moving as fast as it can) or to withdraw a tactic from allowed use so that nobody feels the sting anymore. These changes rarely have the effects intended (yes, I'm trying to give the law makers, on the whole, some benefit of the doubt. It is too messy otherwise.)
Back to your original point (and I did have this in mind) it is true that Full Tilt Poker was taking risks beyond their means to remediate them and, I think, that it is comparable to an aspect of the financial system. However I find it much more akin to the internal and large scale strategies of banks than to the details of the FRB system.
To steal a quote from the late Douglas Adams (or was it Gaiman who penned the line?):
Banks move in extremely mysterious, not to say, circuitous ways. Banks do not play dice with money; They play an ineffable game of Their own devising, which might be compared, from the perspective of any of the other players*, to being involved in an obscure and complex version of poker played in a pitch-dark room, with blank cards, for infinite stakes, with a Dealer who won't tell you the rules, and who smiles all the time.
* ie., everybody
md5sum
d41d8cd98f00b204e9800998ecf8427e
Consider these sites can close player's account at any time, without an explanation. Back in 2006 when UIGEA weren't enacted yet, some of my friends lost tens of thousands of dollars from account being frozen due to "management decision", with no chance of appeal.
Now we finally see some possibility to regulate the industry. But before full legalization can happen, there are previous scores that need to be settle first.
New Economic Perspectives
> 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.
Except you were claiming that a portion of their profit was YOUR money because you were an investor.
So when you got some of that profit, it had already been taxed and you should not have to pay taxes on it.
So unless you're now trying to claim that you were talking about stock sales the whole time (which have NOTHING to do with corporate profits as you would know if you understood this) and just managed to use the completely incorrect terminology ...
What was that I've been saying? Oh yeah! It was that you are incorrectly conflating:
capital gains
earned income
wealth
job creation
THE STOCK MARKET
and DIVIDENDS.
Company profit is NOT owed you via increased stock prices. Do NOT try to conflate those items.
But keep posting. This is turning into an excellent educational thread for anyone else claiming "double taxation".
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.
You are welcome on my lawn.
Do you really think that if I sold some IBM stock that IBM would get any of the money?
Wasn't that what you were talking about? You selling stock to get money that was "double taxed"?
Keep it going! This is GREAT!
No. Stock sold to stockholder A by stockholder B does NOT do ANYTHING for the corporate profits.
Allow me to continue repeating the items that you are incorrectly conflating:
capital gains
earned income
wealth
job creation
THE STOCK MARKET
and DIVIDENDS.
Again, you are wrong. For an example of how wrong you are, look at LinkedIn's IPO.
But that is just another irrelevant tangent from you. Your ORIGINAL claim was about being "double taxed".
Well you had CLAIMED it was about being "double taxed". But you keep conflating different items.
Except you keep trying to incorrectly conflate them by talking about being "double taxed" and then claiming that you can sell stock and then trying to imply that the stock you sold increased the company's profits.
No I did not.
Probably because I understand that the stock price is set by buyers and sellers and fluctuates throughout the trading day.
Looks like I found something else you didn't know but were willing to try to claim that you did.
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.
A ponzi scheme is designed to enrich the ppl who created it. Social Security is not. Did FDR get rich by taking social security taxes? Using "Ponzi Scheme" to describe Social Security is clearly a blatant ploy to cloud the issue with emotion and ignore facts.
It never had a trust fund.
Government explicitly argued that SS taxes were NOT going into any trust fund, that they were NOT earmarked for anything from the get go, that's the only way they could even start that program.
SS taxes are unconstitutional (http://slashdot.org/comments.pl?sid=2437746&cid=37462432)
it's in a court decision that they are not going to make a ruling on whether the SS taxes are actually Constitutional or not, so it's definitely up for grabs, but it's clearly NOT declared to be Constitutional.
But the point of that case was to prove to the SCOTUS that SS NEVER HAD a trust fund :)
People don't get this simple thing, the only way that SS could ever pass was for gov't to argue it was NOT SS.
That's because SS payroll tax is an illegal (unconstitutional) way to do direct and illegal transfer of property from employer to employee.
You can't handle the truth.
I know that you CAN pretend, but it doesn't work to pretend, you cannot make something into something it is not by pretending.
Ever since the beginning of payouts, the amount of money that subsequent payers were paying into the scam was more than people who came before them, and the amount of money that was paid out, was eventually cut a number of times, people were means tested.
Here is how Ronald Reagan "saved" SS ponzi scam by more benefit cuts and more tax hikes:
------
In 1984 the payroll tax was raised from 10.8 to 11.4% and kept creeping up. They increased the amount of income subject to tax from 32400USD to 37800USD in one year (16.6%). So SS was raised in total by over 20% in one year. Also SS was originally (in 40s and 50s) paid by employees, not by self employed. However self employed didn't have to pay employer payroll portion of the tax. In 1983 they started collecting the "employer" payroll portion of the tax, so the SS tax went up from 6.8% to 14% 106% increase in one year. This + the SS tax increase of 16.6% described above, the effective rate of tax increase on self employed individuals was 140% tax hike in one year, and kept getting worse.
Reagan also imposed income taxes on SS benefits for higher earning individuals, which is means testing and reduction in benefits.
Reagan basically cut SS benefits for higher income people by applying income tax to SS benefits, while increasing taxes on higher income people by 140%.
---------
So you can pretend all you want, but people are paying more and more percentage wise and in absolute dollars, they are getting less and less out of it.
Another important point is to understand that SS is unconstitutional, (http://slashdot.org/comments.pl?sid=2437746&cid=37462432)
the gov't argued that SS tax payments are not going to any fund, specifically to avoid the Constitutionality of direct illegal fund transfer from employer to employee. This means there was never a fund based on the case that was left undecided, as the judge said:
Of-course the judge in the Supreme Court was very lazy, he didn't care (*was complicit*) and wrote this: The argument for the respondent is that the provisions of the two titles dovetail in such a way as to Justify the conclusion that Congress would have been unwilling to pass one without the other. The argument for petitioners is that the tax moneys are not earmarked, and that Congress is at liberty to spend them as it will. The usual separability clause is embodied in the act. ' 1103. [cornell.edu]
We find it unnecessary to make a choice between the arguments, and so leave the question open.
Yet another important point (maybe not to you) is the entire morality of shifting at this point 17 Trillion dollars of payments that were paid out that never were paid into the system upon the children who are young or not even born yet.
That's right, 17 Trillion dollars was paid out more than was taken in by the system.
That's not JUST a ponzi scam, that's also money destruction - debt that is accumulated must be paid out and with interest. So it's a ponzi scam that is perpetrated upon people, not even born yet, who are forced into this and will get nothing out of it but a broken economy and society.
17 Trillion dollars were transfered via debt from the past to the future, I believe the future may not be willing to pay this.
To keep SS going right now they'll have to raise taxes on it, just like Reagan did. I hope you like paying more taxes into ponzi scams.
--
Last point: if it were an honest insurance program, with actual trust funds, assets, investments, the participation would not have to been mandatory.
Any voluntary participation in a pension program is not a problem, the problem is when an entire nation is forced into ONE AND THE SAME program.
One single monopoly system to keep the pension payments going.
One single place for politicians to get their money for their space programs and wars and bank bail outs.
Good luck with your pretending.
You can't handle the truth.
Again, allow me to reiterate the things you are incorrectly conflating:
capital gains
earned income
wealth
job creation
the stock market
dividends
BASEBALL
and TAXES.
You had claimed that you were being "double taxed" on corporate profits that you received that had already been taxed.
Now you're conflating that with a baseball. Another weird tangent from you.
Then you went on about how stock price is linked to corporate profits. When I showed you a company with a high stock price and NO PROFITS you claimed it you were talking about some kind of possibly expected future profits (but not actual profits that can be identified today).
Again, another weird tangent from you that has NOTHING to do with your ORIGINAL claim of being "double taxed". Or baseball.
If it really is your money then you can go in and take it.
Since you cannot, it is not your money.
Therefore, when you do receive it, it will be taxed.
So you are for taking money away from those, who don't need the SS at all, and reducing their benefits, so that's direct mandatory subsidy from some people in the country to some other people, and you think that's a good policy?
You think that taking money away from people who invest it, because they are not spending it, and thus they are growing the wealth of economy by producing stuff via investments and giving this money to people who spend it on produced goods is a good thing for economy?
You don't see that it is a net loss for economy to take investment capital, that would have been used for production and giving it to people who didn't produce enough to fund their own consumption, so they would spend this money on consumption, and you don't see the net negative economic result?
You don't see that you just want to take a failing ponzi scheme and extend it by worsening the situation of people, who are paying into it, who shouldn't be in it, and you think this magically changes the ponzi scheme into a non-ponzi scheme?
Sure, you can do all those things. Reagan did. He increased taxes and did means testing. He increased taxes on everybody by 20% and on high earners by 140% and he reduced payments of benefits to high earners and he increased the cap. But all this does is it pushes the eventual crash of the scheme into the future, but it doesn't change the ponzi scheme into a non-ponzi scheme system.
It's a ponzi scheme based on the way it's funded - direct money transfer that relies on current beneficiaries to be subsidized by current payers. There are no funds. There are no assets. It's all garbage government debt, complete junk.
If you actually CARED about PEOPLE and not about the government SYSTEM, you'd see that people would be much better served if they didn't have to play into ponzi schemes, they didn't have to pay into anything like that, if their work wasn't taxed at all and only consumption was taxed and so they could invest into any business without being punished for any work that they do, for any under-consumption and resulting savings and production.
You are not really addressing the problem of people and their economy, you are just interested in extending the existing system into some indeterminate future. But the future is very determinate, it's coming and it's a dollar collapse.
You can't handle the truth.