Betting exchange closes doors. Clients lose funds?

<!--StartFragment -->From http://www.betasia.com/betasia/features.asp?language=&id=180


Sporting Options, the third largest betting exchange in the UK, have called in the administrators and stopped taking bets.

An official announcement by Paul Clark of administrators Menzies Corporate Restructuring was posted on the company`s website late on Monday afternoon.

Bettors now face an anxious wait to know whether they will see any of their deposits returned. The company`s official rules stated that all client funds were held in a segregated bank account at HSBC Bank.

However, Bet Asia has learned that the company that appears to have been set up to hold clients` funds was dissolved on 23 March, 2004. A listing for Sporting Options (Clients) Limited with the same address as Sporting Options` parent company is listed as dissolved according to the UK Companies House register.

Sporting Options has been up for sale for at least six months. A potential sale to online sportsbook Blue Square was under discussion but talks broke off suddenly at the end of September. At the time, senior sources at Blue Square said that the two companies `did not fit well together`.

There have been persistent rumours that Sporting Options might merge with rival exchange Betdaq, owned by Irish business tycoon Dermot Desmond, or may be acquired by Ladbrokes or William Hill. Both betting giants have been rumoured to be looking to launch a betting exchange and may still emerge as buyers of Sporting Options.

One professional punter contacted by Bet Asia last night expressed his anger at the news. "I have more than $25,000 on deposit with Sporting Options and now I have no idea whether I will ever see it again. I hope this is just a temporary problem but past experience has shown me that the last people to see any money back when a betting company has problems are the clients."

The official administrator statement said: "On 15 November 2004 Paul John Clark and Andrew John Duncan, from Menzies Corporate Restructuring, were appointed as administrators of Sporting Options Plc.

As a result, for the time being, the company has suspended all betting activities on this website.

The administrators are currently assessing the financial position of the company and reviewing its business operations. This web page will be updated shortly with a view to providing further information to the customers of the company.

We will also be issuing statements in the press and corresponding directly with the stakeholders."

Rival betting exchange Betfair, which is estimated to have 90% of the global betting market, issued a statement saying that all client funds held by them are protected.

In the light of recent events concerning Sporting Options, Betfair has reassured its customers that their deposits are completely safe.

"All client funds are held on trust in ring-fenced client accounts with the Royal Bank of Scotland and are completely segregated from company funds," said Stephen Hill, Betfair’s chief executive.

Both the trust account and Betfair’s accounts are rigorously audited by KPMG, one of the big four accountancy firms. Under no circumstances could third parties have a claim on Betfair clients’ money. Further, Betfair does not conduct any internal proprietary trading.

"Betfair has built up its reputation on fairness, integrity and transparency. Simply put, your money is as safe (if not safer) with Betfair as with a bank and Betfair will always have 100 per cent of its customers’ money available for them to withdraw whenever they want it," said Mr Hill.

Rival exchange Betdaq issued a similar statement. Rob Hartnett, UK chief executive, said: "We are surprised by the news that the Sporting Options betting exchange
has today gone into administration. We have
sympathy for those who may be adversely affected, and are keen to assure our
customers that Betdaq remains in rude good health.

"Betdaq customer funds have always been fully ring-fenced from the daily
operating expenses of the exchange. In addition, and in recognition of the
absolute priority we give to customer confidence, and to the security of
customer funds, we placed a cash bond of $10 million with our bank in 2001.
This instrument was a first in the betting industry and continues to give
Betdaq users an unprecedented level of financial protection in their
dealings with the exchange.

"Betdaq is a professionally run, very well funded company enjoying a
significant share of a still rapidly expanding market. The low margin on
which the exchange model is based does require a rigorous control of costs,
but that is a discipline which successful exchanges adhere to.

"We continue to have great confidence in the future growth potential of the
exchange industry as a whole, and look forward to playing our part in that
growth in Britain and around the world."

Betfair steps upto the plate, ala Royal Sports style, with a rescue package for punters who would otherwise have been stiffed.

Sporting Options had told their clients that their funds were ring fenced and safe in a separate account. However the sporting options directors quietly dissolved the ring fencing company and used client's post-up funds to provide liquidity on the betting exchange.

Of course they went on to gamble with and lose their client's post-up funds and have now been caught with their pants down.

Betfair, great job.


London (16/11/04) Betfair, the leading online betting exchange, has launched a rescue package for Sporting Options’ customers who have lost money as a result of Sporting Options going into administration on 15th November. This means 5,000 of the 5,300 Sporting Options’ customers (or 95 per cent) owed money could be compensated in full in the next few days.

The package has been agreed with Sporting Options’ administrator and approved by Betfair’s board of directors.

“Our rescue package reflects Betfair’s commitment to the betting exchange punter and to the nascent betting exchange industry. It is a testament to Betfair’s financial strength that we are in a position to be able to do this,” said Stephen Hill, Betfair’s chief executive.

“The demise of Sporting Options shows why we urgently need the new Gambling Bill, not only to regulate online bookmakers but also to update regulation for the wider betting industry so that all punters are properly protected,” said Mr Hill.

Mr Hill noted that customers’ funds at Betfair are held on trust in a separate, ring-fenced account which is audited by KPMG. “Protecting customers’ funds should be a condition of a bookmaker’s licence and further, the new Gambling Commission should have the power to conduct spot-check audits of online and bricks and mortar bookmakers to ensure that this is the case,” said Mr Hill. “The confidence that our customers have in the security of their deposits with Betfair has helped us to become the global leader in our field.”

Mr Hill added: “We very much welcome Sporting Options customers to Betfair and we look forward to helping as many of them as possible. We hope we have gone some way in restoring their confidence in the betting exchange industry.”

Notes to Editors:

Sporting Options customers with up to £1,000 in their Sporting Options account will have the amount they are owed credited to their Betfair account, if they have one. Customers of Sporting Options who do not have a Betfair account will be required to open one and pass the standard Know Your Customer checks, which involves supplying two separate forms of ID and a bank account or card details. Customers with over £1,000 will receive a minimum of £1,000 credited to their Betfair account, or 20% of their total Sporting Options account balance, whichever is the greater. Once credited to your account the amount can be withdrawn at any time. Further, these customers will then be eligible to receive cash rebates in the form of a reduced commission rate until their account balance has been discharged, or until 30th November 2006 at the latest. Conditions of the rescue package include that each customer satisfactorily completes Betfair’s Know Your Customer process. Full details of Betfair’s rescue package are available on www.betfair.com

The extent of the shortfall (fraud) of client funds is in excess of 6.5M USD.