Spent money that wasn’t theirs
The Football Index scandal was bad. It was a disaster for thousands of the site’s users, but there was still some question when all was said and done as to whether or not management was incompetent or unethical. Signs leaned toward the latter, but what The Athletic recently uncovered tilts the needle firmly in that direction. According to documents acquired by the sports media site, Football Index’s owner used player funds for company operations.
Between 2019 and early 2021, BetIndex, Football Index’s parent company, shipped £15m to its holding company, Index Labs. Index Labs wanted to expand, duplicating the Football Index model into other countries like India, Germany, and the United States.
If a gambling company using customer funds for its own operations sounds familiar, it is likely because you remember Full Tilt Poker. Full Tilt paid its owners bonuses and dividends with customer deposits, but it got away with it for a long time because there was never a run on the bank. But when Black Friday came along ten years ago and the federal government seized funds and froze payment processing, the jig was up. Full Tilt didn’t have its customers’ money when customers wanted it back.
Football Index killed its own business
To get the full picture of how badly Football Index customers were damaged, let’s rewind a little to review what exactly Football Index was. The site was a soccer betting platform, but in the form of a stock exchange. Users would buy and sell shares of European soccer players either on a peer-to-peer exchange or directly from Football Index. Share prices would fluctuate like real-life stocks and user portfolios would increase and decrease in value.
The important feature of the site, though, was the dividend payments Football Index made. Depending on how a real-life soccer player did on the pitch or even how popular he was in the media, Football Index would pay customers up to 14p per share per day. This, of course, made holding shares of good players quite the money maker, in turn driving up the price of those players’ shares.
But Football Index realized early this year that it could not keep paying the dividends and hope to survive. Thus, in March, it announced that the maximum dividend per share would be just 3p. With future income streams per share basically gone, share prices cratered, some as much as 99%. Portfolio values went along with them and users lost millions in paper value.
Customer cash balances were still intact, but it is estimated that £90m in share value was lost forever.
In July, customers were allowed to start withdrawing balances, but it was only a total of £3.2m, whereas Football Index had £4.5m in a player protection account. Had it not used player deposits for its expansion project, it would have had more money available to reimburse its customers