Football Index administrators request swift resolution of £4.5m customer fund repayment

A hearing to determine how £4.5m in cash will be distributed among Football Index customers and stakeholders will commence on 10 May after administrators requested a swift resolution to proceedings.

Rescue and recovery specialists Begbies Traynor, which was appointed on 26 March to administrate the finances of Football Index, revealed it was under mounting pressure from the UK Gambling Commission (UKGC) to ensure that customers receive their lost monies sooner rather than later.

“The joint administrators would be most grateful if the application could be heard as soon as possible,” wrote Begbies Traynor administrator Adrian Hyde in his second witness statement.

“The reasons for the urgency are because the company is regulated by the Gambling Commission in the UK and the Jersey Gambling Commission in Jersey.

“Both commissions are understandably very keen for the monies in the trust account to be disbursed to the proper beneficiaries as soon as possible and the UK Gambling Commission, in particular, is applying a significant amount of pressure in this regard,” he added.

On 30 April, Begbies Traynor applied for the Business and Property Courts of England and Wales to determine the appropriate distribution of £4.5m being held in the Football Index Player Protection Account and to identify which customers may be entitled to reclaim those funds.

“This is the first step towards the distribution of cash balances to customers of the Football Index platform,” Hyde confirmed.

The Football Index Player Protection Account, or trust account, which is held by Isle of Man-based Nedbank, was previously frozen by the bank amid speculation of Football Index falling into administration.

Nedbank has since been instructed to transfer the sum into the Jersey Viscount’s account, although EGR understands these have not yet been received due to delays relating to the early May bank holiday.

Football Index customers earned dividends on individual footballer shares in their portfolios based on the real-life performance and media buzz surrounding that player.

These shares were a three-year bet on whether a player would rise in value. Users could sell their shares at any time back to the Football Index using the Instant Sell function, although this option was removed last year and replaced with stock market-like order books. It was a highly criticised move which caused market crashes and portfolios to plummet in value.

Dividends, which were slashed shortly before the firm’s collapse, were typically credited to customer e-wallets the day after they accrued, while Football Index would transfer money from its general account to the trust account to reflect these dividends on a weekly or monthly basis, according to a company director.

Since the trust account was frozen by Football Index and Nedbank, dividends have continued to mount and are available to view via the Football Index app.

“This is misleading to the customers because there are no more transfers being made from the company’s general account to top up the trust account,” wrote Hyde.

“On the face of it, the accruing but non-transferring post-administration dividends represent an unsecured liability of the company owing to the trust beneficiaries.”

As player accounts fluctuate while dividends have continued to increase, Begbies Traynor has been tasked with recommending an appropriate calculation date for payout settlements.

For example, one specific customer account with dividends accrued until 26 April is expected to receive £6,000 on the lifetime cycle of its player share portfolio.

“Each of the calculation dates and interpretations have different implications for the calculation of each customer’s entitlement to the sum depending on their relative cash balances, portfolio sizes and length of the term of their bets remaining,” wrote Hyde.

As a result, Begbies Traynor has recommended the administration date of 26 March as the appropriate calculation date. The Football Index trust account was in surplus by more than £1m at that time and therefore customers would be paid the full amounts showing on their e-wallets as their entitlements, as of that date.

This does not help to account for overall portfolio investments, which could see Football Index customers lose out on a combined total of more than £90m, according to reports.

From a total of 278,585 Football Index customer accounts, 119,510 belong to those with a zero cash balance in the trust account or on their e-wallets. The remaining 159,075 have accrued funds in the trust account and should be entitled to reclaim their cash balances.

A Football Index director revealed to Begbies Traynor that 40% of customer accounts had no cash balance or share portfolio, or the equivalent to no outstanding bets, while 13% had cash balances but no ‘shares’ in their portfolios.

Around 34% of customers held small portfolios, while 9% where considered to have medium portfolios, dropping to 4% for large portfolios.

At least five “large portfolio” customers had an e-wallet account balance in excess of £50,000.

There were 261 customers with trust account balances between £1,000 and £100,000 as of 11 March.

Reiterating his desire for a swift resolution, Hyde wrote: “Significant hardship is being suffered by such customers, as well as the other customers with smaller balances.

“I am also aware that a number of customers with claims on the trust account are experiencing a large degree of stress in relation to the ongoing situation and we have been made aware that many are suffering from mental health issues, which would be alleviated by the expedited return of the monies in the trust account,” he added.

Finally, the administrators suggested a swift resolution would allow for their CVA to be completed, which could pave the way for Football Index to be relaunched before the start of the 2021/22 football season, with “work being progressed urgently” behind-the-scenes to achieve this aim.

The full witness statement can be read here.