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Football Index: heartbreaking stories but no compensation

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British parliamentarians spent Monday consumed by a vote of confidence against Prime Minister Boris Johnson, but the next afternoon around 15 MPs spent their time on a very different topic.

In a wood-panelled room next to Westminster Hall, a special debate took place on the ‘impact of the collapse of Football Index’, the gambling company which was ubiquitous in gaming before it dramatically imploded last March .

A member mentioned Athleticism recent history about a former Football Index officer who ran a new website trading player ‘stocks’while another mentioned an earlier story about business owners spending £15m of customer money on a global expansion plan as the site collapsed.

MP after MP, they shared harrowing stories of voters whose lives were ruined by the collapse, with many demanding the government compensate those who lost what several MPs described as a “Ponzi scheme”. after shares of virtual footballers worth £120m become worthless.

Unfortunately for them, the government representative at the debate did not grant their wish.

“We don’t think it would be appropriate for the government to use public funds to cover private individuals’ losses resulting from the collapse of a gambling business,” said MP Nigel Huddleston, Minister at the Department of Digital, Culture, Media and Sports.

Football Index was a company regulated as a gambling website, but marketed itself as a “football exchange”. Users would buy and sell ‘shares’ of footballers – just like someone might buy and sell shares in a company.

In addition to stock prices, one of the draws of Football Index was the cash “dividends”, which worked much like fantasy football points but with real money. Investors would receive money to hold shares of players who scored goals or racked up assists and clean sheets.

Several insiders said Athleticism about the chaos of working for a company that exploded in popularity and was advertised on football shirts, London taxis, Sky Sports TV and Talksport radio, as well as some of Athleticism podcasts, before everything goes wrong.

On March 5, 2021, the company’s board suddenly announced drastic cuts to those dividends “to ensure the long-term sustainability of the platform.” This led to a dramatic collapse in stock value.

The company was then placed in receivership and its license from the Gambling Commission was suspended.

At the heart of the controversy is whether Football Index can really be considered a gambling company. There is no doubt that it has been licensed by the UK Gambling Commission and regulated as such.

Liz Twist, the Labor MP who called for the debate, told the heartbreaking story of a voter named Chris who lost £13,000 he had saved for a wedding.

“He said Football Index was touted as a great way to invest and buy stocks; it turned out to be a better way to save compared to the rates offered by banks,” she said.

Other MPs have made similar remarks.

“It presented itself as a package of investments and is a total failure of regulation by the Financial Conduct Authority and the Gambling Commission,” said MP Jessica Morden. “Clients felt mistakenly assured that their long-term investments in the index were safe.”

Others spoke of the emotional and mental impact of people losing such huge sums.

“Individuals have been pushed to the brink of suicide, marriages have crumbled, families have been affected and life savings for marriages, homes and pensions have disappeared,” Morden said. “More than a year later, they are still dealing with scars on their sanity and finances.”

Bristol Rovers Football Index

Bristol Rovers were one of the clubs to advertise Football Index (Photo: James Baylis – AMA/Getty Images)

The Gambling Commission has suffered heavy blows in the debate after the regulator was heavily criticized in a Malcolm Sheehan QC report published last September which noted that executives had been warned that the product operated as a “dangerous pyramid scheme “.

In May, a release of court documents contained startling revelations, including that the company appeared to be planning administration nearly a month before it would happen, while users piled cash on a platform that they thought they were working fine.

Although no one thinks players should be reimbursed when they lose money on unsuccessful bets – for example, betting on a team to win a football match which they lose – many MPs have argued that this The situation is very different, with “open bets” disappearing into thin air.

To them, the analogy is more like betting on a team to win a football match, the team winning the match, and then the company retaining the player’s stake, all exacerbated by the fact that the company presented as an investment product.

“He is not a gambler and has never placed a bet,” says Alison Thewliss, MP for a constituent called Marc. “He got involved in it because he was reassured that it was a regulated product…it was sold as an investment opportunity based on knowledge of football.”

Ben Lake MP is a long-time campaigner on the issue.

“We must not let the false narrative emerge that these people overplayed and were irresponsible,” he said. “Far from it – we heard insiders warning regulators, trying to expose failures, in 2020.”

He noted that the Advertising Standards Authority had issued several warnings against Football Index for failing to clarify the financial risks and for “giving the impression that it was an investment opportunity rather than a betting product”.

Yet those warnings were ignored by the Gambling Commission or the Financial Conduct Authority, which several MPs said should have played a bigger role in regulating the product.

One of the most interesting interventions came from Aaron Bell, Conservative MP for Newcastle-under-Lyme in Staffordshire, not far from online gambling giant Bet365 where he worked for 15 years.

“I have a long experience with the Gambling Commission, and while I was in that role she was often behind the curve and asleep at the wheel, which is one of the charges leveled against them regarding Football Index” , he told the committee.

“The Gambling Commission did not identify the main features of the product, which then changed while Football Index ran it, and the Gambling Commission did not seem to notice.”

Bell also likened the website to a Ponzi scheme, before making a broader point about the uneasy marriage between football, gambling and new iterations of financial risk.

Other MPs have linked the issue to the UK government’s ongoing review of gambling, which is likely to restrict gambling sponsors who have become ubiquitous in top-flight football. although many appear to facilitate illegal gambling, as revealed following an investigation by Athleticism.

Huddleston listened to the horror stories and expressed sympathy for those who lost so much.

He cited the Sheehan report and agreed that there were ‘areas of improvement’ for the Gambling Commission and the FCA, saying the two bodies had acted on recommendations which should ensure that a company similar would no longer get a license.

He also said the two bodies were signing a “memorandum of understanding” to enhance cooperation.

However, on the main point of contention, the government remains indifferent. Compensation from public funds is “not possible”, he said.

While other MPs have suggested using fines issued by the FCA and the Gambling Commission to reward victims, the law limits what this can be used for, he said.

“The FCA is required by law to transfer the revenue from fines to the Treasury, net of enforcement costs,” he said, adding that the money is to be used for “important public services.”

“Gambling Commission fines are used for socially responsible purposes, usually for specific projects aimed at reducing the harms of gambling.”

That point was disputed by MP Ronnie Cowan, a longtime voice on the football index collapse, who suggested that compensation could be paid by the minister imposing a levy, as permitted by a clause of the Gambling Act 2005.

But in addition to challenging the legal acrobatics of paying compensation, Huddleston then dismissed the main argument.

“We don’t think it would be appropriate for the government to use public funds to cover personal losses resulting from the collapse of a gaming company,” he said.

“Consumers putting money into gambling is not the same as putting money into other things, like savings products.”

The line was a rebuttal by MPs who raised the precedent of London Capital and Finance, a savings company which collapsed in 2019 when 11,625 bondholders invested more than £237million in the products of LC&F.

The government eventually gave about half of that sum in compensation because a later report was scathing about the regulator’s actions, so the government was found partially responsible.

Those who lost money on Football Index, who despair that they were ‘problem players’ rather than people duped by a poorly regulated system, hope a similar thing could happen for failure somewhat similar regulations.

But it seems that the government’s position on the issue is firm.

There is still some hope for those hoping to recover some of the money they lost.

Activists set up a Football Index action group following research into possible causes of action by law firm Leigh Day, taking into account the ongoing liquidation process.

(Top photo: Alex Burstow/Getty Images)