It was a great idea though. And they did state the rules clearly, so it was your fault if you still played the game. And as Spolsky said, as users lost money, they just dropped off.
I guess they did make money for a while, so it's wasn't terrible, but having a business model that makes your customers leave? I'll pass on calling that 'Smart'.
(If you think about it, a practical definition of "scam" is something that is profitable but doesn't generate repeat customers.)
Even in casinos, the odds are stacked heavily against the player. Still, people do keep playing. Swoopo was similar. I guess it's hard to get new users when every blog calls you a scam.