5 ms·

I can't help but think of the reaction that online poker players had when first told that UltimateBet admins were cheating, or that celebrity-backed FullTiltPok

by yscale 13y ago

I can't help but think of the reaction that online poker players had when first told that UltimateBet admins were cheating, or that celebrity-backed FullTiltPoker was insolvent. When it came to UB, the common response was that the company was making money hand over fist and that cheating a few high rollers out of $50 or $100k would jeopardize the much larger legitimate source, so they clearly wouldn't do that. Except that some of the admins really were cheating individual high-rollers. And with FullTiltPoker, the business really was as profitable as the players guessed, but the company directors weren't actually treating customer deposits as deposits, but were instead paying themselves most of the money and paying withdrawals using new deposits (which works seamlessly, so long as deposits exceed withdrawals which is the usual case for both gambling websites and bitcoin exchanges). So, I hope you're right. But I'd note that MtGox's actions are ALSO fully aligned with the actions of an insolvent company that wants to continue operations, and realizes that it is possible that they can recover so long as sufficient confidence is maintained by depositors such as yourself. After all, if Gox is insolvent, then Tux's best hope for a new fortune is to use your deposits as his working capital... which is exactly what you're letting him do.

frandroid 13y ago
What you describe people did at FullTiltPoker is called a Ponzi scheme.
- dublinben 13y ago
  Not at all. A Poker Site didn't make any claims of guaranteed returns on your 'investment.' They probably considered player deposits to become virtual Poker Dollars, that have no legal value.
  - wpietri 13y ago
    That might be a too-generous interpretation. They could also be bad at business, which is pretty common. With some people it's more, "Hey, there's a pile of money in this account. I like money! Why don't I take some." The separation of accounts is very much a learned set of disciplines. Some never learned it, and some just don't get it.
  - at-fates-hands 13y ago
    >>> A Poker Site didn't make any claims of guaranteed returns on your 'investment.' This is irrelevant. They didn't need to make any guarantees on investment, they just needed more players. Just because they didn't need to bait people to play doesn't mean it wasn't a Ponzi scheme. What defines a Ponzi Scheme is this: http://en.wikipedia.org/wiki/Ponzi_scheme http://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation" Which is exactly what FTP was doing.
- yscale 13y ago
  No, it wasn't a ponzi scheme. FTP was a real, legitimately profitable business, and it could have run quite successfully without secretly borrowing from the customers. But secretly borrowing from the customers allowed the directors of the business to give themselves $400mm with no waiting, whereas operating as they claimed they were (with segregated accounts for the customer money) would've required that they wait a few years to pull that much out. The plan fell apart when some laws changed in the US, and the outflows started exceeding inflows, but the directors were unable and/or unwilling to put the money they'd taken out of the company back into the company. It's quite likely this was because several of them used the money to speculate in the real estate market.

by yscale 13y ago

frandroid 13y ago

What you describe people did at FullTiltPoker is called a Ponzi scheme.

dublinben 13y ago
Not at all. A Poker Site didn't make any claims of guaranteed returns on your 'investment.' They probably considered player deposits to become virtual Poker Dollars, that have no legal value.
- wpietri 13y ago
  That might be a too-generous interpretation. They could also be bad at business, which is pretty common. With some people it's more, "Hey, there's a pile of money in this account. I like money! Why don't I take some." The separation of accounts is very much a learned set of disciplines. Some never learned it, and some just don't get it.
- at-fates-hands 13y ago
  >>> A Poker Site didn't make any claims of guaranteed returns on your 'investment.' This is irrelevant. They didn't need to make any guarantees on investment, they just needed more players. Just because they didn't need to bait people to play doesn't mean it wasn't a Ponzi scheme. What defines a Ponzi Scheme is this: http://en.wikipedia.org/wiki/Ponzi_scheme http://en.wikipedia.org/wiki/Ponzi_scheme "A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from existing capital or new capital paid by new investors, rather than from profit earned by the individual or organization running the operation" Which is exactly what FTP was doing.
yscale 13y ago
No, it wasn't a ponzi scheme. FTP was a real, legitimately profitable business, and it could have run quite successfully without secretly borrowing from the customers. But secretly borrowing from the customers allowed the directors of the business to give themselves $400mm with no waiting, whereas operating as they claimed they were (with segregated accounts for the customer money) would've required that they wait a few years to pull that much out. The plan fell apart when some laws changed in the US, and the outflows started exceeding inflows, but the directors were unable and/or unwilling to put the money they'd taken out of the company back into the company. It's quite likely this was because several of them used the money to speculate in the real estate market.