Tuesday, September 20, 2011

Online Gambling As a Ponzi Scheme

Full Tilt Poker was a Ponzi scheme all along.

That, at least, is what U.S. authorities are saying in papers filed with a federal court today. The allegation simply means that the company took money that belonged to customers and used it to pay for operations — and perhaps $1 billion in executive salaries. A business would do that, of course, only if it wasn’t actually making a profit from operations.

If the allegations are unfounded, that will be established in a matter of a few days by a proper accounting of the company’s assets. But if the bank accounts are not there, the company and its managers and associates will be in legal trouble not just in the United States, where its online gambling and money laundering are illegal, but in every country — Ponzi schemes are not an accepted business practice anywhere.

It would not be the first time that morally shady operations were used as a cover for serious crimes. A criminal business might get involved in something controversial such as smuggling or pornography as a front, just to have a base of supporters and sympathizers. Meanwhile, its real profits come from something much worse, something very few people would support such as theft, slavery, or assassination. That appears to have been the idea behind Full Tilt Poker, where the online gambling was never the purpose of the business, but apparently just an excuse for the Ponzi scheme and money laundering operation.