Football Index Wrongfully Used Customer Funds for Expansion, Leaked Docs Show

Failed soccer trading platform Football Index plowed £15 million (USD $20 million) of its customers’ money into a speculative international expansion in the lead-up to its , The Athletic has discovered.

According to leaked documents seen by the sports media group, the money was funneled from its parent company BetIndex on the island of Jersey in the English Channel to holding company Index Labs between 2019 and early 2021.

This would fund what the company called “Project Hadron,” which sought to repackage Football Index technology for sale abroad. The plan was to sell the platform in India as a cricket platform, in Germany as a soccer platform, and in the US as a football platform, documents show.

Under UK Gambling Commission rules, licensees are required to keep operating funds separate from player balances.

Typically, companies seek outside investment for the kind of expansion project Football Index envisaged. But there’s a good reason why it may not have wanted third-party investors sniffing around its accounts. Insolvency documents show that it had £124 million (USD $169 million) in “open bets” at the time of its demise, but only around £4 million (USD $5 million) in cash.

Football Index advertised heavily in the UK, marketing itself as a “virtual stock market” that was less risky than conventional sports betting.

Users could buy and sell virtual “shares” in professional soccer players, which would fluctuate in value depending on real-world factors. Successful traders received payouts based on the performance of their shares, known as dividends.

But because these shares were purely notional, with no underlying value, the business model required the constant sale of more shares to new users to pay its liabilities. That would have been the case even if the owners weren’t using customers’ money for expansion projects.

But according to a recent government report on the fiasco, when the company was facing cash flow problems in August 2020, it increased its dividend payout by 100 percent in a risky strategy to attract more players.

In March 2021, the owners faced facts and announced they would slash dividends to ensure “long-term sustainability.”

In fact, Football Index was unable to sustain itself for 24 hours after the announcement. Users panicked and cashed out, causing the market to crash overnight. Those who missed the window saw the value of their shares evaporate. And meanwhile, Football Index was running out of cash.

Average individual losses were estimated to be around £3,000 (USD $4,120) each, while some lost six-figure sums.

The government report heaped blame on the gambling regulator, the UKGC, which knew of Football Index’s financial problems, but failed to suspend its license. It says this was to avoid the kind of dramatic collapse that eventually happened.

But the report says UKGC was slow to understand the novel betting product and may have even awarded it the