A plan to revive the stricken Football Index platform by giving customers equity in the business is “insulting” to those who lost money and were “misled” by the company.
That’s according to Matt Zarb-Cousin, director of Clean Up Gambling, who is advocating for former customers of the soccer trading platform. The plan would effectively “force Football Index users to pay for the privilege of taking over a worthless company,” Zarb-Cousin claimed.
Football Index’s management team filed documents to London’s High Court last week outlining the scheme to resurrect the platform. The court will ultimately decide how funds in a £4.5 million ($6.4 million) player-protection account will be distributed.
Football Index collapsed in early March, owing its players around £90 million ($127 million). Other court documents, filed as part of ongoing insolvency proceedings, suggest the company’s operations were unsustainable.
Market Collapse
Football Index launched in 2015, marketing itself as a soccer “stock market” where users could buy and sell notional “shares” in professional soccer players. These would fluctuate in value depending in real-world factors such as player performance and transfer value. Successful traders were paid “dividends” related to the performance of their shares.
But court documents show that by the summer of 2020, Football Index had overreached itself. The company was dependent on new deposits to pay its liabilities.
The company doubled the dividend payments in a bid to attract more deposits, but this meant it could not cover the £2.2 million ($3 million) it owed in dividends each month.
When Football Index announced in March it would be slashing deposits by 80 percent to ensure long-term sustainability, traders panicked and the market collapsed. Average individual losses are estimated to be around £3,000 ($4,120) each.
Massive Marketing Spend
The company was supposed to keep more than two thirds of customer stakes separate from operating costs, but it did not adhere to this policy.
Instead, court records show, it spent almost a fifth of its revenue on marketing and had expensive jersey sponsorship deals with two English Football League teams, Queens Park Rangers and Nottingham Forest.
According to court filings, the company appointed insolvency specialists Begbies Traynor three weeks before its collapse but continued to encourage customers to deposit money.
Football Index marketed itself as a smart way to make money, a product for savvy investors that involved less risk than regular sports betting.
Law firm Leigh Day is currently exploring the possibility of legal action on behalf of traders who lost money.
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