As of March, the company had only $60 million left in its bank accounts while owing around $390 million to gamblers around the world. That's a Ponzi, defined. They assumed that the rake would bail them out eventually.
In ponzi there is no revenue, no profit, no nothing. Just like banks DO NOT keep deposits locked up. It may or may not be fraud but it NOT ponzi. Thats all im saying. The gubmint is throwing around these terms for dramatic effect, they are unprofessional and jackass's.
Note Ponzi's original scheme was based on the arbitrage of international reply coupons for postage stamps; however, he soon diverted investors' money to support payments to earlier investors and himself. I'm guessing a lot of Ponzi schemes don't start out as that...they morph into them by necessity to keep the operation going. Anyway, Ferguson and Lederer probably need to be put away behind bars if they continued the operation in full knowledge that the customers assets were not covered...though presumably the client funds should have been in some form of segregated client account in any event...
I will say this, its hard to run a tidy professional business when you know what you're doing is illegal. So having said that, yes they got themeselves into this mess.
Banks have assets to back up deposits. SNLs have collateral. FTP took in client funds and moved the cash offshore. I don't understand what profitability has to do with it. They assumed that given enough time the rake would cover the shortfall from the scam. It didn't, so the legit business (rake) was proven insufficient. Clients are out 85% of their principal and will likely see nothing after the blood-sucking lawyers. Bitar et al were not moving profits off the balance sheet.... they were stealing client funds. Call it whatever you like, but Ponzi started legit as well.
Just don't call it Ponzi. It wasn't a Ponzi, it was just bad business and they ended up stealing the clients money. It wasn't even pyramid structure. By the way in the original Ponzi there was never Italian stamp buying (as told to investors), so no, it didn't start out as legit...
I stated you may call it whatever you like, but it is/was a Ponzi. Charles Ponzi did attempt the stamp arbitrage with early investor's funds. Bitar and cronies moved 100s of millions offshore which was obtained directly from client accounts. What makes it a Ponzi is the fact that the monies were not obtained from operational cash flow. The "rake" was illegitimate as it was fronted by the player's stake, which now is known in large-part to not have existed (85% of client funds missing). Clients deposit funds with the expectation of profits through a table game. FTP paid-off the small players in full, which gave the illusion that player's funds were protected. (BTW.... Bitar's money is at UBS. He was involved in some big MBS deals at UBS)