First it was the headline about November Niner Sam Holden in The Sun: “Jobless Brit eyes £5m poker prize”. At the time, we all thought it was funny. Those silly people, they just don’t get it. Sam Holden isn’t jobless – he’s a pro poker player! It should have been a wake up call for us. Those silly people have some control over what we do, and they’ve been flexing their talons – ready to grab – for some while now.
The next headline in the general press wasn’t so funny. Full Tilt Poker (FTP) was apparently a “global Ponzi scheme”. Before we go any further, I just need to make it clear why this is categorically not the case.
A Ponzi scheme is a kind of pyramid scheme. The investors find people lower down the chain to invest in it. They then pay themselves with that money, and find some more investors. The process is then repeated until they get caught, or disappear into the sunset.
You can say what you like about FTP (and I guess a few of you out there will have some choice words), but this was not the point of their business. They had revenue, and most clearly of all, the players depositing on the site were not investing in the company, but merely transferring money to the site. In theory at least, the money was still theirs.
The closest sense in which FTP was like a Ponzi scheme was the bubble-like way in which the company continued to take deposits in the States when its payment processors there were not releasing the money. In that regard, they were more like rogue traders who had run out of credit, and needed more and more leverage to win back their losses.
Of course, they were incredibly stupid to carry on the way they did, and their behaviour is bordering on criminal (even before we get to the issue of bank fraud). As a few people have pointed out, Black Friday certainly didn’t help, but even if it didn’t happen, FTP might well have collapsed, such was the desperate nature of their debt. But the debt itself and indeed the way they tried to service it does not constitute a Ponzi scheme.
So why did Preet Bharara use the phrase? Surely a US attorney knows what a Ponzi scheme is? Why would he say that when he knew it wasn’t one and the comparison was tenuous at best? We need look no further than the above-mentioned headline in The Sun.
Just as with the word “jobless” in The Sun headline, the words “Ponzi scheme” can sell newspapers. That was one hell of a press release by Bharara. Poker can confer eight-figure amounts of money on people – the biggest individual prize in sport/gaming – and the papers barely sniff at it. They leave us alone in our cosy little niche. But a Ponzi scheme, that your nearest and dearest could be involved in? Scamming on that most dangerous of forums, THE INTERNET? This is big news. Bharara knew how to get this story in the papers.
The biggest irony of all is how good FTP were at marketing. If anything, they were more adept at it than PokerStars. The sleek black and white adverts; the moody lighting; the globetrotting millionaire heroes of the felt. In the end they were totally undone by a masterpiece of PR. Even without the debt problems, there would be no way back from this.
The trouble is that Bharara’s publicity stunt has damaged the name of poker in the US (and further afield) for a while. With the words “Ponzi” now associated with online poker, it’ll be tough to get a new law through Congress allowing it to be regulated nationwide.
This affects not just the global poker market, but marketing budgets for magazines, TV shows and global poker tours. All of these things will be at least 30% smaller for some time. As Kathy Liebert put it, without all those sponsored pros, there’s going to be a whole lot less money flying around.
If online poker can recover from its association with the word Ponzi, it’s doubtful that Chris Ferguson and Howard Lederer will. The tweets of Doyle Brunson speak of a desire still to see them as decent folk (“These guys are our friends”; “let’s wait and find out everything before we rush to judgement”; “I truly believe Howard and Chris didn’t know about this. Some maybe, but not all of it”). Whether they are guilty of anything more than stupidity and greed is debatable, but I’m afraid with Bharara’s pronouncement, they are forever damned.
I can’t put it any more succinctly than poker blogger Pot Committed, who compared the supremos at FTP to Stringer Bell from the TV series The Wire. This character is one of two kingpins at the top of a huge drug ring. While his partner is the streetwise, pugnacious one, Stringer is the intellectual with pretensions of going legit.
Throughout the third series we are treated to an object lesson in how the real world is that much more conniving and cruel than the small world of crime and drug money that Stringer is trying to elevate himself from. The climax comes when Stringer gives a suitcase full of money to a corrupt Senator so that he can secure him the rights to redevelop some land. If it works, Stringer will have what it takes to climb out of the ghetto and go legit, get out of the drug dealing game.
I’ll spare you the outcome. Suffice to say that the comparison with FTP’s attempts to go legit through their lobbying dollars via the Poker Players’ Alliance is perfect. The hapless Ferguson and Lederer have lost their roll trying to get in with the big boys.
Perhaps they were fools to think that they could do it. Perhaps the reason they held on for so long, hanging on to a rising balloon, accepting more deposits, more deposits, until their company went broke, was because they believed they could hold on long enough to secure legitimacy: a share of the regulated US online market.
Alas, it was all an illusion. The big boys (the DOJ) were always there, and they had been since 2006. They got to the payment processors first, throttling the life blood out of FTP, all the while building a criminal case against them. When they finally did take their shot at FTP, the fall was spectacularly fast. In March Bluff Magazine declared Lederer the most powerful man in poker. By September he is on the run, facing criminal charges and has his assets frozen. Welcome to the big league.
This article first appeared in Bluff Europe magazine.
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