Justice Plays a $731 Million Winning Hand After Full Tilt Poker's Flop
NEW YORK ( TheStreet) -- The U.S. Department of Justice has played a winning hand in its high-profile, high stakes shutdown of the online poker industry, sending Full Tilt Poker -- an alleged Ponzi Scheme -- away from the table for good, and guaranteeing a repayment of millions in missing customer funds through a $731 million settlement with the world's largest online poker company, PokerStars, on fraud charges.
For the U.S. Attorney's Office for the Southern District of New York, it's not an all-in win, but a walking away from the table with a sizable chip stack.
Tuesday's settlement appears to be the U.S. District Attorney's best effort at recovering missing funds from the collapse of Full Tilt, while also ending an era of internet poker on computers throughout the U.S. Still, online gambling continues unfettered abroad and PokerStars remains a leading Internet presence globally.
As part of a $731 million settlement, PokerStars will take over defunct competitor Full Tilt Poker and repay its burned customers $184 million in missing funds over the next 90 days, helping to curtail losses after the company's April 2011 collapse. As part of the settlement on civil fraud charges, PokerStars will also forfeit $547 million to the U.S.
In April 2011, the U.S. Attorney seized the domain names of PokerStars, Full Tilt and Absolute Bet in the U.S., but allowed customers in the likes of PokerStars to cash out their funds. Subsequently, a near-$400 million plus shortfall was discovered at Full Tilt Poker, prompting an ongoing fraud inquiry.
Full Tilt was built by Ray Bitar and was supported by poker legends Chris "Jesus" Ferguson and Howard Lederer. After its collapse, the U.S. Attorney in Manhattan called the online poker operation a "Ponzi scheme," and filed criminal fraud charges against founder Bitar.
Full Tilt Poker defrauded players by misrepresenting that player funds on deposit in online gambling accounts were available for withdrawal at any time, noted the U.S. Attorney on Tuesday. In reality, the Attorney says Full Tilt did not maintain funds sufficient to repay all players, and even used players' funds to distribute more than $400 million to its owners.
The DOJ worked to web poker operations in the U.S. following the 2006 passage of a federal law that banned online poker. As part of a widespread online gamine crackdown, U.S. Attorney Preet Bharara also filed fraud charges against PokerStars founder Isia Scheinberg. While Tuesday's settlement resolves Bharara's inquiry into PokerStars, Full Tilt's Bitar continues to face criminal charges. He is awaiting trial and has pleaded not guilty.