You must be kidding me. You are clueless if you believe that 3-8% bs. This is exactly the description of a Ponzi scheme. Anyone directly involved should be locked away for many years. Total scum!
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You must be kidding me. You are clueless if you believe that 3-8% bs. This is exactly the description of a Ponzi scheme. Anyone directly involved should be locked away for many years. Total scum!
This was very well put in my opinion.Quote:
Originally Posted by Houdini9
Yes, they were wrong to state that all funds were kept separate if in fact they aren't. But, there is no reason for a poker site to keep 100% of players' funds on hand in an isolated account. A solvent, highly profitable company need only keep a fraction of its player deposits on hand, since a "run" on player funds is unlikely. Again, I agree it was very wrong for Full Tilt to claim they kept 100% of players' funds on hand when apparently they didn't. But that does not make it a ponzi scheme. I don't wee any reason why a site with hundreds of thousands of players and tens of millions of dollars of players money would need to keep more than 10% of that money on hand. No, full tilt is not a bank, but if, for some reason, they found their reserves running low, I doubt it would be difficult to liquidate some assets or take a short term loan to fix the problem. Again, before the U.S. government started interfering, Full tilt was solvent and highly profitable. Suppose their players' deposits total $400 million and they keep $80 million on hand (a 20% reserve ratio). That would be plenty. They certainly wouldn't be insolvent. The only reason their fractional reserve ratio became a problem is that the actions of the U.S. government caused a "run" on funds. Had the U.S. government left well enough alone, none of this would have happened.Quote:
Originally Posted by Houdini9
By your definition, almost every bank and financial institution is a ponzi scheme.Quote:
Originally Posted by JWD_51
I want to review some key points here.
1) For years, Full Tilt was a solvent, highly profitable company. Of course the site's owners and primary investors made millions; that is the case with any billion dollar company.
2) Apparently Full tilt was operating under a fractional reserve system similar to the way every bank and financial institution operates. I don't have a problem with in principle, though, a I stated before, I do have a problem with the fact that they misled the public about this fact.
3) That said, I believe that Full Tilt had enough money on hand to cover any reasonable expectation of player withdrawal requests at any given time. Hence, they were solvent. The only way their fractional reserve system would become a problem is if some external force caused a "bank run" (so to speak).
4) Enter the U.S. government, which did exactly that. First, the government prevented Full Tilt from collecting its deposits from players; this action depleted their reserves and placed them in danger of insolvency in the event of a run.
5) Then, the government exacerbated this folly by actually causing a run by shutting the site down and ordering it to return 100% of its customers' deposits.
If the government did this to any bank, the exact same thing would occur. If the government froze all of a bank's accounts, prevented the bank from collecting any of its outstanding debts, and then shut the bank down and told the bank to return 100% of the customers' deposits, the bank would not be able to. It would only have 10% of the funds necessary to do so. And, the bank would NOT be able to get loans from other banks to sole the problem; why would any other bank lend money at that point to an insolvent bank that has been shut down and forbidden from collecting its outstanding debts or making further investments with the money it does have? Does that mean the bank is a ponzi scheme? No, it just means it (correctly) thought there was no reason to keep more than 10% of customers' funds on hand.
Frank Jones knows what he's talking about. Without any government interference everything would be just fine.
This absolutely does NOT excuse FTP for misusing the funds for operational purposes/huuge paychecks. They did, in fact, lie straight to our faces about segregated accounts.
When the processors stopped processing payments (upon government interference) and FTP started crediting accounts (quite recently apparently), THATS when the shit REALLY hit the fan. But FTP was already in a 'hole' from huuge paychecks, loans, and the 42 mill that was stolen from a payment processor. And if they stopped taking any new US deposits (like they should have), they would've had a huuge run on their remaining bankroll, when people start to lose trust in FTP, which they couldn't handle financially. They should've been fully prepared for that situation and just bowed out of the US market with enough of a BR to take the huge hit when everyone starts to lose confidence. Things wouldn't have gotten as bad. Unfortunately, they were extremely greedy, taking gigantic chunks of players money to pay themselves with no regard to the long term stability of the company.
And for the record. Ponzi schemes don't EARN money. FTP was still earning money.
With no gov interference (BF), cutting back on the huge paychecks and loans, and ending the crediting of accounts they COULD'VE (eventually) recovered all the player deposits. Shame that the gov had to step in.
Yes, but when somebody puts money into a bank account, they are agreeing to let the bank invest/loan that money out as the bank sees fit and, in return, the people collect interest on their accounts. FullTilt did not pay interest and, therefore, had no right to touch the money that was in any player accounts. That money was not given to FullTilt unless you bought into a poker game, otherwise, it was just money in an account that could be quickly spent on the site. It's the same as if you wired money to the Rio so you could play at the WSOP. Until you actually buy into an event, that money does not belong to the Rio. It is merely sitting in their cage waiting for you. There is no way the Rio is going to only keep 10% of what you sent them on hand.Quote:
Originally Posted by FrankJones
I think EVERYONE is missing a key point........banks are regulated, insured and in most cases have an independent board. Fulltilt Poker was not a bank, but pretended to be a bank and they were not operating in the black for along time. It was a ponzi scheme, once they could no longer cover all the accounts that they claimed were active! They all need to go to jail....or a least a real bounty put out on them!
Banks do NOT operate on a fractional system. They are allowed to "borrow" up to 40% (depends on bank) of account deposit. The government FDIC insures each deposit. The banking system in the US is one of the few that pays out all clients at the same rate if it should ever be in receivership by the FDIC.....there have been over 485 banks that have failed since 2007 and everyone received their money back up to the insured amount. There is a difference between banking accounts and investment accounts which are not insured at any bank!
There are so many things wrong with this statement.Quote:
Originally Posted by 5thmardiv
"Banks do NOT operate on a fractional system"
That could not possibly be more wrong. Banks operate on a fractional reserve system. That is a fact.
Also, as far as people receiving their money back, people only receive amounts up to the limits promised by the FDIC. So, monetary loss is possible even for customers of a bank.
Third, and again, I feel like I am beating a dead horse here, none of this would have been a problem had the U.S. government not taken two ill-advised steps that CAUSED the insolvency of full tilt and CAUSED the run on player funds.
Just to be clear, I am in full agreement that Full tilt was wrong to tell the public it kept 100% of funds on hand if it wasn't; and, full tilt was wrong to act like a bank when it isn't one. That said, it would have worked out just fine for everyone if not for the U.S. government.
And for the last time, FULL TILT IS NOT A PONZI SCEHME. Do you people even understand what that term means, or so you just regurgitate what you hear on TV?