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The Royal Court has taken control of funds totalling £4.5m from the parent company of a ‘football stock market’ gambling site that suddenly ceased trading last month.
The decision to look after the funds until their fate becomes clearer came as Jersey-registered BetIndex – owner of Football Index – took the first step in an insolvency process, which it had said it would undergo in a bid to rescue the company as a “going concern”.
Users of the platform, which involved buying imaginary stock in players and being paid a ‘dividend’ if they played well in real life, are currently facing losses totalling around £90m after its licence to trade was suspended by both Jersey and the UK’s gambling authorities.
There are around 100 customers in Jersey and more than 100,000 in the UK. One islander told Express he stands to lose up to £7,000.
As the company is based in Jersey, it applied to the Royal Court on 18 March to issue a letter of request to the High Court in England and Wales that it place the company into administration.
Pictured: One islander, who used the platform as an investment vehicle, told Express he is facing losses of up to £7,000.
This, the presiding Deputy Bailiff Robert MacRae was told, would be “more beneficial to the company as a whole that compulsory liquidation in England or winding up or désastre in Jersey.”
The Deputy Bailiff, who approved the application, was also asked to consider what should be done with funds of £4.5m held on behalf of the company by Nedbank in the Isle of Man.
The funds, pursuant to a trust deed dated 18 February 2020, were said to be “held on behalf of customers”, consisting of either “unspent funds” or “unclaimed dividends”.
In his judgment, which was published this week, the Deputy Bailiff noted that the deed’s effects on the cash were a “matter of some dispute” – something that would be ironed out during the insolvency proceedings.
The Jersey Gambling Commission and leading counsel Andrew De Mestre QC both expressed a view that the funds should be paid to the Court in the meantime. The Deputy Bailiff agreed and directed Nedbank to transfer £4,504,357.8 to an account held by the Viscount.
Investigations by Jersey’s Gambling Commission and the UK Gambling Commission, into Football Index’s operations and subsequent meltdown remain ongoing.
The Guardian reported last week that the UK regulator had warned that Football Index was in trouble more than a year before it reported liquidity issues. That warning apparently likened the gambling site’s set-up to a ‘Ponzi scheme’, as it was reliant on new users to continue to turn a profit.
The UK Gambling Commission then issued a statement confirming that it had started its review into Football Index in May 2020, which involved an accountant and barrister grapple with questions over the “appropriate regulatory framework”. It said it found no grounds to suspend Bet Index’s trading licence at the time.
More than 5,000 individuals have joined a potential legal action against Football Index, while MPs are calling for an inquiry.
Pictured: MPs are calling for an inquiry.
In Jersey’s States Assembly this week, Deputy Steve Ahier asked whether the island’s Government was planning to launch one.
Assistant Economic Development Minister Deputy Kirsten Morel responded that it was a “matter for the Jersey Gambling Commission”, who were already cooperating with the UK’s regulatory body on the matter.
“The Gambling Commission Jersey law 2010 ensures that the JGC takes proper action to protect the young and the vulnerable to ensure games are fair and to ensure that the industry is not a source of crime. Article 3 places a specific duty on the Commission for the general supervision of gambling, including in particular the supervision of providers of gambling services and of investigation as to whether any person is complying with, contravening or committing any offence under the enactment relating to gambling,” he said.
He later added: “I note that the matter is now before the English courts and so it would be wrong to comment any further.”
Deputy Ahier then asked the Assistant Minister whether he thought the JFSC would be a more appropriate regulatory body given that Football Index involved the “buying and selling of shares”.
Pictured: Assistant Economic Development Minister Deputy Kirsten Morel says he wants to know what Jersey's Gambling Commission understood of Football Index's operations.
Deputy Morel explained that genuine share exchanges were already regulated by the JFSC, but said that gambling models based on a “template which suggests to the players that they are buying or selling shares… creates an interesting situation.”
“It is one which I wish to understand further, as to understanding how the model that BetIndex were following was seen and understood by the Jersey Gambling Commission. That is a question that I would like to have answered,” he said.
Jersey football 'stock market' meltdown facing probe
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