Football Index Repayments Begin
Administrators have confirmed that former customers of the collapsed sports betting platform Football Index can now withdraw funds from their accounts. Customers have been left out of pocket since March, when the self-styled “stock market of football” went under. It has been estimated that customers may have lost £90 million in total.
Customers can now log in to accounts to withdraw funds from their accounts. ©Mikhail Nilov/Pexels
Index Labs Dispute
Begbies Traynor, the administrators called in to deal with the collapsed sports betting site’s parent company BetIndex, announced on July 13th that customers affected would finally be able to withdraw the left-over funds from their accounts. It has not been a straight forward process for the administrators though, who faced one of their most complex cases to date.
A day prior to the announcement, Begbies Traynor informed Football Index customers that those withdrawals would be delayed. After a dispute, Index Labs, the company providing the platform to process the payments, said that it would stop making payments. However, it swiftly reversed that decision.
In June, a judge ruling on the case said that payments to customers of BetIndex’s service could be made. However, Index Labs reportedly said that they would no longer work with the administrators to distribute the funds. Their resistance put the whole administration process in jeopardy, as Begbies Traynor said that it could not process payments without them.
Less than twenty-four hours later Index Labs decided to cooperate, and agreed to commence processing payments later that day. Begbies Traynor issued a statement to inform customers of the development, explaining:
“Further to our statement of yesterday, the joint administrators are pleased to confirm that the Board of Index Labs has agreed to process the customer repayments. This will begin at approximately midday today and customers will receive communications confirming this.”
CEO of the Gambling Commission, Andrew Rhodes, confirmed on Twitter that the regulator was investigating the delay to processing customer payments. He also explained that the repayments being made cover cash balances in e-wallets, rather than the larger share funds. These are yet to be valued by the administrators. Rhodes stated:
“We were aware of an issue that prevented Football Index customers withdrawing their ewallet funds. We’ve been in touch with all parties today in relation to this development and have now received confirmation from the administrators for BetIndex that the issue has been resolved.”
Football Index to Continue
The High Court approved the payouts after it heard that Jersey-based parent company BetIndex had maintained a trust account for the funds of its 280,000 customers, for use in the event of financial difficulties. The judge was told that £4.5 million was in the account before the operator went into administration, and that customers were owed in the region of £3.2 million.
Judge Robin Vos went further, explaining how the administrators have planned to allowed BetIndex’s business to continue. New arrangements will be made with existing creditors and new funding will be secured on the basis of different business model. If successful, the judged said that customers could recover twenty pence to the pound in unsecured claims.
In comparison, if BetIndex were to go into liquidation customers would only be likely to receive eight pence in the pound. The judge described Football Index’s setup as an unusual arrangement, “clearly betting” but with the appearance of buying and selling shares. The stock market model was both part of Football Index’s huge success and ultimate downfall.
Customers, also known as traders, placed bets by buying shares in football players. The value of those shares fluctuated based on the performance of players. Customers then received winnings as dividends. They could sell their player shares to other traders, based on the changing value of the shares.
According to the judge, BetIndex derived its income from the sum customers initially paid for a share, in addition to a 2% commission charge when shares were sold between traders. Critics have since compared the platform to a Ponzi scheme, due to this practice. Football Index offered consumers a novel way to bet on football, that was unlike any other sports betting platform on the market.
Gambling Commission Under Review
Football Index’s business model meant that it was reliant on customers continuing to buy shares for it to pay out dividends to other customers. Its downfall came when it cut player dividends from 33p to 6p. Customers were outraged, as they felt that they had been encouraged to invest in new shares released shortly beforehand.
The value of trading portfolios was dramatically reduced from 50% to -90%, and customers angrily withdrew their funds. Without continual investment to pay out the shares, BetIndex was soon forced to go into administration. It is estimated that customers may have lost as much as £90 million in total, and many have been left with financial problems as a result.
The collapse caused an outrage not only amongst affected customers, but ministers and the general public too. Many questioned how the collapse had been allowed to happen and why action had not been taken earlier to prevent it. A particular cause for concern was the fact that the Gambling Commission had been warned about Football Index’s business model a year prior, but had seemingly not taken adequate action against its license.
In June, the government announced that it had appointed Malcolm Sheehan QC to lead an independent investigation into how Football Index was regulated. The review will examine the regulator’s handling of BetIndex from 2015, when it first issued its license, until the suspension of the operator’s license last March.
The Gambling Commission has maintained that it sought advice from the Financial Conduct Authority in July 2019, after issues were raised during an internal assessment. In May 2020, it launched a review into the operator’s license, which was still ongoing when it finally withdrew the license.
While the Gambling Commission has denied that CEO Neil McArthur’s snap resignation in March was related to the platform’s collapse, its timing did raise eyebrows. McArthur had led the regulator for almost fifteen years, but his sudden departure came out of the blue and was effective immediately.
