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A “let down” islander standing to lose up to £7,000 is among thousands of punters asking whether regulators had their eye off the ball ahead of the sudden demise of a Jersey-based ‘football stock market.'
Football Index suddenly ceased trading last week following notices from Jersey's, and the UK’s, gambling watchdogs.
Users of the platform - which is owned by BetIndex, registered in Jersey with an office in Wharf Street - are now facing losses totalling around £90m, and MPs are calling for an inquiry.
Founded in 2012, Football Index operates like a stock market, allowing users - known as ‘traders’ - to buy imaginary stock in different players and receive a payout if they play well in real-life matches. The company primarily made its money through the ‘minting’ of those shares, and taking a commission on buying and selling on the platform.
But traders were left shocked earlier this month when it was suddenly announced that dividends would be slashed by 80%, leading player values to crash.
Pictured: MPs are calling for an inquiry.
Football Index justified the change on the basis of recent “substantial losses”, despite having said in November that it had “never been a stronger financial position."
Yesterday, it emailed users to say it was entering administration to provide a chance for the company to be “rescued” and relaunched in a “restructured form." It will be asking Jersey's Royal Court tomorrow if this process can happen in the UK rather than Jersey.
Some critics have likened the business model to a ‘Ponzi scheme’ because it continued to mint new shares despite its financial difficulty - something denied by Football Index - and questioned whether gambling regulators missed a possible ticking time bomb.
Matt Zarb-Cousin from the ‘Clean Up Gambling’ campaign claimed the business was run in an “entirely unsustainable way, which people do not expect of a licensed operator in a regulated sector,” and described regulators as “asleep at the wheel."
“Football Index executives are even on record in podcasts saying the Gambling Commission did not fully understand its product or business model,” he said.
The All-Party Parliamentary Group for Gambling Related Harm has written to the UK Culture Secretary to demand an inquiry. Its Chair said the watchdog had “failed to enact adequate oversight” and that the “scandal” proves the sector needs reform, possibly with the creation of a ‘Gambling Ombudsman’ to protect consumers.
Really glad to be able to speak out alongside my friend & @GRHAPPG colleague @carolynharris24
— Richard Holden MP (@RicHolden) March 14, 2021
Fans have been done out of tens of millions by the collapse of #footballindex @GamRegGB have a LOT of questions to answer as this will devastate the lives of many fans & families https://t.co/DAWYRyvg38
Pictured: A Tweet from Conservative MP Richard Holden, who is part of the All-Party Parliamentary group calling for a public inquiry.
Wounded traders, meanwhile, are taking to social media to complain that they feel misled by Football Index, while some are considering legal action.
Among them is islander Victor* (33), who told Express he is facing losses of between £5,000 and £7,000.
Despite never having previously put “big money” in gambling sites, he started using Football Index in May 2020 due to his dual interest in football and the stock market.
While, with hindsight, he feels he was “over-exposed”, he says he viewed the platform as “more of an investment vehicle”, which he could use to “save a bit each month and it would build into a pot at some point”.
“I understood the risks/benefits but would never have expected these ‘bets’ to be changed so drastically and to ultimately risk everything that was deposited. I always believed that even through standard ‘market movements’ I would be able to pull out if it wasn’t performing as well. Little did I expect it to turn so dire overnight,” he explained.
Pictured: Victor*, who lives in Jersey and is facing losses of up to £7,000, used the platform as an investment vehicle.
Learning that dividends were to be dramatically slashed left him “shocked” and feeling like they had “pulled the rug from under everyone,” he said, “mainly because they said in previous communications that they were in a strong financial position, they were minting new shares at high prices and kept pumping their product.”
He continued: “Their T&Cs mentioned that they would only change the dividend structure in January or June each season unless there were ‘extraordinary circumstances’ - no one ever expects the extraordinary circumstances get-out clause to come into effect from a regulated business.”
Beyond problems with Football Index, he says he also wonders if there was a “larger problem” with the regulation of the company.
UK law firm Leigh Day is now working with Clean Up Gambling to investigate potential legal claims on behalf of individuals who invested in Football Index, and is asking what regulators understood of its activities.
When people gamble in a regulated market, they should have the confidence they are doing so on the basis of the outcome of a wager
— Clean Up Gambling (@cleanupgambling) March 16, 2021
It should not also be a gamble on the solvency or sustainability of the licensed operator #FootballIndex pic.twitter.com/ctmk4WHRsl
Victor isn’t yet sure if he’ll register an interest in the claim, and says he’d ideally like the matter “resolved outside of a legal claim, either by the company refunding customers or the regulators issuing some sort of compensation.”
“Both long shots I guess,” he added.
Victor also said he was concerned about the reputational damage the island may sustain, as well as the impacts on the wellbeing of those facing significant losses.
“I’m also disappointed on how this is going to reflect badly on the island, if a Jersey-based company is going to destroy people’s livelihoods it’s going to portray quite a negative image, especially to the UK, who already brandish the 'tax haven’ brush on the island without much knowledge. Throw in the mental health elements already associated with gambling and addictions and it could turn into a real storm.”
Jersey Gambling Commission (JGC) Chief Executive Dr Jason Lane declined to comment while the matter remained “live”.
Pictured: Victor said he was concerned about the mental health impacts on individuals facing large losses as a result of Football Index's collapse.
A statement on the JGC’s website confirms that, following a virtual meeting last Thursday (11 March), it had instructed BetIndex to “suspend all licenced operations with immediate effect under enforcement powers specified under Article 35 of the Gambling (Jersey) Law 2012”.
“This suspension prevents the company taking on new business or transacting further gambling on its platform. It is the Commission's view that the licensee remains subject to its licence conditions; in particular customer funds that are under its duty to protect and return,” the statement added.
Jersey’s Gambling Law says such enforcements can be made if in the best interests of customers or creditors of licensees or if deemed “desirable in order to protect the reputation and integrity of Jersey in gambling matters, and in commercial and financial matters as those affected by commercial gambling.”
The UK Gambling Commission - whose CEO announced a surprise exit after 15 years' service two days ago - has said it is working “closely” with the JGC.
It has not provided any updates on Football Index since issuing a statement on 12 March, confirming that it had suspended BetIndex’s operating licence.
They said this followed an “ongoing section 116 review into the operator, as we had concerns activities may have been carried on in purported reliance on the licence, but not in accordance with a condition of the licence, and that Football Index may not be suitable to carry on with licensed activities.”
The statement added: “We have made it clear to the operator that as the investigation progresses, we expect it to focus on treating consumers fairly and keeping them fully informed of any developments which impact them.”
BetIndex will be appearing before Jersey's Royal Court tomorrow to ask that the High Court of England and Wales takes jurisdiction in the matter of its restructuring.
Pictured: BetIndex will be appearing before Jersey's Royal Court tomorrow.
It told users yesterday: "All Football Index customers will now be aware that there has been a suspension of the platform. The Directors of BetIndex Limited (the 'Company') have resolved that, as a result of the market conditions, customer sentiment and the current suspension, it is proper that the Company enters into Administration in the UK under the provisions of the UK Insolvency Act 1986.
"The benefit of that process is that it provides a chance for the Company to be rescued as a going concern, but it also ensures that independent third-party professionals are appointed to consider all matters relevant to the Company. That will include all customer complaints and points of view. Our priority is to safeguard the interests of our customers and to seek the best outcome for our community with the goal of continuing the platform in a restructured form.
"The Company is a Jersey company. It is therefore necessary to apply to the Royal Court of Jersey for an order of that Court asking that the High Court of England & Wales takes jurisdiction in this matter. That hearing will occur at the Royal Court of Jersey at 09:00 on Thursday 18th March 2021."
*Name changed to protect anonymity.
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