Almost $5 million kept in the Football index commonly known as “player-protection account” will not be redistributed to 280,00o former customers who were the victims of the stricken soccer trading scandal. London High Court has recently ruled the order of repayment into the player’s fund.
The player protection account was held by the third party and kept isolated from the company’s operating costs. It will now be turned over to Begbies Traynor who is the administrator at the firm. The amount is considered as the reimbursement for the player who still had funds on the platform when it collapsed in March.
The amount available in the layer protection account is just a drop in the ocean with the estimated $138 million that gamblers lost during the calculation of the aftermath of the Football Index’s demise. Some gamblers lost hundreds of thousands of pounds in their gambling activities.
It is still undecided on how customers who had active accounts and bets when their accounts were frozen, will be repaid. But it is likely possible that players will be provided with ‘dividends’ by the company.
Faulty Stockmarket of Soccer
Football Index was launched in 2015 and marketed itself as soccer’s stock market. People were able to buy and sell “shares” in professional soccer players. The shares would fluctuate in their value depending on various scenarios.
Successful players were rewarded with “dividends” based on the performance of the shares they own. Many critics have highly criticized the business model of the company and commented that it overextended itself by overpaying the successful players.
As per the court documents, by the summer of 2020, the football index was dependent on getting new deposits to pay its liabilities to win players.
The company initially increased its dividend payments with the motive to attract more depositors. When the strategy didn’t work out for the firm, it announced that it will slash 80% of the dividend in order to long-term sustainability.
A sense of panic increased among the customers and in the panicked efforts to cash out the stock market crashed. The average estimated loss per individual was up to $4,120 each.
According to the court filings the company has appointed Begbies Traynor, insolvency specialists, three weeks before the market collapsed. Even after the market collapsed, the company still encourage the customer to deposit money.
Football Index has continuously reassured users about their financial health, especially during the pandemic. The firm also claimed to be less risky and more responsible than any other traditional betting site.
Ultimately the company’s business model depended on the constant sale of shares and for its growth rate to increase excessively which is something that could not be guaranteed.
Government Launched Review
UK government officials have announced on Monday that they had appointed barrister Malcolm Sheehan QC to introduce an independent review related to the Football Index affair. The inquiry will look into whether there was a failure in the business model which was in oversight by the UK Gambling Commission.
The regulators informed that they have launched an investigation into Football Index a year before the market collapse, but were hesitant that suspending their license would have increased its financial problems and would immediately lead consumers to greater risk.