When the Madoff thing went down, I said to myself, I’d never be dumb enough to fall for a Ponzi scheme like that.
Federal Prosecutors are now, essentially, telling me that I was wrong. They’re saying that FullTiltPoker.com, an online poker website at which I used to play, was a Ponzi scheme.
I posted that on facebook an hour ago, and my law school classmate Adam left a pretty smart reply:
“As far as I can tell, it isn't a Ponzi scheme. Fraudulent, sure. Theft, most likely. Illegal, almost definitely. But not Ponzi. A Ponzi scheme involves getting new investors to pay off promised rates of returns to older investors. Full Tilt didn't promise any returns and didn't pay anyone, they just took the money and ran.”
A good point, no? The prosecutors are saying, simply, that the website took money from players’ accounts and gave it to the directors (to the tune of $440 million.)
I think what’s happening is this: The media spent so much time mastering the term “Ponzi scheme” during the Madoff thing, that they’re looking for a return on their linguistic investment. So they’re having a field day busting the term out again, even if it doesn’t fit the Full Tilt situation perfectly.
(Full Tilt, I should point out, says that the real reasons they don’t have enough money to pay their players are 1) the government seized their cash, and 2) one of their payment processors stole from them.
Let’s see how this all plays out.