The legal complaint against Full Tilt Poker is worth reading. It’s pretty obvious that the company was guilty of bank fraud and money laundering, as all the online sites doing business in the United States were, and that was obvious years ago. The Unlawful Internet Gambling Enforcement Act forced them to set up hundreds and hundreds of dummy companies to get around the limitations on transferring money to online gambling sites, despite the fact that online poker is not actually illegal in this country.
But the far worse crime is what Full Tilt Did but the other sites apparently did not, which was use player deposits for operating expenses instead of holding them in accounts. As the complaint says:
According to a balance sheet prepared by Full Tilt Poker, as of March 31, 2011, Full Tilt Poker owed players from around the world over approximately $390,695,788 but had only approximately $59,579,413 in its bank accounts. Full Tilt Poker relied on new deposits from players to ensure its ability to fund withdrawals to players’ accounts.
Rather than protect player funds as promised, Full Tilt Poker distributed hundreds of millions of dollars to its owners…
That’s the same thing that got Dutch Boyd and Poker Spot in trouble long ago, but this one has cost poker players more than $300 million. But as Felix Salmon rightly points out, this is all the government’s fault:
In a weird way, strict anti-gambling regulations in the US are responsible for this fiasco. If poker sites were legal and regulated, we could trust the regulator — an arm of the US government — to protect gamblers’ funds. Casinos are strictly regulated; online poker sites should be as well. Instead, they became international fugitives, going to great lengths to make it possible for US gamblers to skirt regulations and use their sites.
No one worries that if they transfer money into the cage at the Bellagio or the Venetian, they won’t get the money back when they’re done. And they shouldn’t worry about that because the Nevada Gaming Commission has strict regulations and monitors the situation to make sure that those companies have the funds on hand to pay for every chip in the casino. If the federal government would stop pandering to the moral busybodies who object to gambling on religious grounds and legalize and regulate online poker, none of that money would ever have been lost.
The online poker sites have all but begged the government go regulate and tax them, but the government instead created a black market and paved the way for poker players to get more than $300 million stolen from them.