Football Index: Heartbreaking stories but no compensation
By Joey D'Urso
British parliamentarians spent Monday consumed by a vote of confidence against prime minister Boris Johnson but the following afternoon, a couple of dozen MPs spent their time on a very different topic.
In a wood-panelled room off Westminster Hall, a special debate took place on “the impact of the collapse of Football Index”, the gambling company that was ubiquitous in the game before imploding spectacularly last March.
One MP mentioned The Athletic’s recent story about a former Football Index officer running a new website trading “shares” in players, while another mentioned an earlier story about company owners spending £15 million of customers’ money on a global expansion plan as the site collapsed.
MP after MP shared harrowing stories of constituents who had their lives ruined by the collapse, with many demanding the government compensate those who lost out to what several MPs described as a “Ponzi scheme” after virtual footballer shares worth £120 million became worthless.
Unfortunately for them, the government’s representative at the debate did not grant their wish.
“We do not think it would be appropriate for the government to use public funds to cover losses to individuals resulting from the collapse of a gambling company,” said Nigel Huddleston MP, a minister at the Department for Digital, Culture, Media and Sport.
Football Index was a company regulated as a gambling website but marketed itself as a “football stock market”. Users would buy and sell “shares” in footballers — just like someone might buy and sell shares in a company.
As well as the share prices, one of the appeals of Football Index was cash “dividends”, which worked rather like fantasy football points but with real cash. Investors would receive cash for owning shares in players who scored goals or racked up assists and clean sheets.
Multiple insiders told The Athletic about the chaos of working for a firm that exploded in popularity, and was advertised on football shirts, London taxis, Sky Sports TV and Talksport radio, as well as some of The Athletic’s podcasts, before everything went wrong.
On March 5, 2021, the company’s board suddenly announced drastic reductions to these dividends “to ensure the long-term sustainability of the platform”. This led to a dramatic collapse in share values.
The company then went into administration and had its Gambling Commission licence suspended.
At the heart of the contention is whether Football Index can truly be considered a gambling company. There is no dispute that it was licensed by the UK Gambling Commission, and regulated as one.
Liz Twist, the Labour MP who called the debate, told the harrowing story of a constituent named Chris who lost £13,000 he had been saving up for a wedding.
“He said that Football Index was advertised as a great way to invest and buy shares; it was shown to be a better way to save compared to the rates banks offer,” she said.
Other MPs made similar points.
“It modelled itself as an investment package, and is an utter failure of regulation by the Financial Conduct Authority and the Gambling Commission,” said Jessica Morden MP. “Customers felt wrongly assured that their long-term investments in the index were secure.”
Others spoke of the emotional and mental impact of people losing such huge sums.
“Individuals have been driven to the brink of suicide, marriages have collapsed, families have been affected, and life savings for weddings, houses and retirements have vanished,” Morden said. “Over a year on, they are still dealing with scars on their mental health and finances.”
The Gambling Commission took a battering in the debate after the regulator was heavily criticised in a report Malcolm Sheehan QC published last September that noted executives had been warned the product operated like 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 whole month before it happened, while users were piling money into a platform they thought was doing well.
Although nobody believes gamblers should be refunded when they lose money on unsuccessful bets — for example, betting on a team to win a football match that they lose — many MPs argued that this situation is very different, with “open bets” vanishing into thin air.
For them, the analogy is more like betting on a team to win a football match, the team winning the match, and then the company keeping the gambler’s stake, all exacerbated by the fact the firm marketed itself as an investment-like product.
“He is not a gambler and has never so much as put on a bet,” says Alison Thewliss MP of a constituent called Marc. “He got involved with this because he was reassured that it was a regulated product… it was sold very much as an investment opportunity based on football knowledge.”
Ben Lake MP is a long-time campaigner on the issue.
“We must not allow the false narrative to emerge that these people gambled too much and were irresponsible,” he said. “Far from it — we heard of insiders warning regulators, trying to blow the whistle on the failings, in 2020.”
He noted that the Advertising Standards Authority had issued several warnings against Football Index for not making clear the financial risks and for “creating the impression that it was an investment opportunity rather than a betting product”.
Yet these warnings were not heeded by the Gambling Commission or the Financial Conduct Authority, which multiple MPs said should have had a greater role in regulating the product.
One of the more interesting interventions came from Aaron Bell, Conservative MP for Newcastle-under-Lyme in Staffordshire, not far from the online gambling behemoth Bet365 where he worked for 15 years.
“I have long experience of the Gambling Commission, and while I was in that role, it was frequently behind the curve and asleep at the wheel, which is one of the accusations levied at them regarding Football Index,” he told the committee.
“The Gambling Commission failed to identify the key features of the product, which then changed while Football Index was running it, and the Gambling Commission did not seem to notice.”
Bell also likened the website to a Ponzi scheme, before making a wider point about the uneasy marriage between football, gambling, and newer iterations of financial riskiness.
Other MPs tied the issue to the ongoing gambling review by the UK government that is likely to restrict the gambling sponsors which have become ubiquitous in top-flight football despite many appearing to facilitate illegal gambling, as revealed following an investigation by The Athletic.
Huddleston listened to the horror stories and voiced his sympathy for those who have lost so much.
He cited the Sheehan report and agreed there are “areas of improvement” for the Gambling Commission and FCA, saying both bodies have acted on recommendations which should ensure a similar firm would not get a licence again.
He also said the two bodies are signing a “memorandum of understanding” to boost cooperation.
However, on the core point of contention, the government is unmoved. Compensation from public funds is “not possible”, he said.
While other MPs suggested using fines issued by the FCA and Gambling Commission to recompense victims, the law restricts what this can be used for, he said.
“The FCA is required by law to pass revenue from fines to the Treasury, net of enforcement costs,” he said, adding that this money must be used for “important public services”.
“The Gambling Commission fines are used for socially responsible purposes, usually for specific projects to reduce gambling harms.”
This point was disputed by Ronnie Cowan MP, a long-time vocal voice on the Football Index collapse, who suggested compensation could be paid out by the minister imposing a levy as made possible by a clause in the 2005 Gambling Act.
But as well as disputing the legal acrobatics of paying compensation, Huddleston then went on to dismiss the core argument.
“We do not think it would be appropriate for the government to use public funds to cover losses to individuals resulting from the collapse of a gambling company,” he said.
“Consumers staking money on gambling is not the same as their placing money into other things, such as savings products.”
That line was a rebuttal to MPs who have raised the precedent of London Capital and Finance, a savings company that collapsed in 2019 when 11,625 bondholders had invested over £237 million in LC&F’s products.
The government eventually gave out roughly half of this in compensation because a subsequent report was scathing about the regulator’s actions, thus the government was deemed partially responsible.
Those who lost money on Football Index, who despair at the idea they were “problem gamblers” rather than people duped by a badly-regulated scheme, are hoping a similar thing could happen for a somewhat similar regulatory failure.
But it seems the government’s position on the matter is firm.
There is some hope left for those hoping to get back some of the money that they have lost.
Campaigners have 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.
https://theathletic.com/3355084/2022/06/09/football-index-parliament-no-compensation/
Football Index: Heartbreaking stories but no compensation
By Joey D'Urso
British parliamentarians spent Monday consumed by a vote of confidence against prime minister Boris Johnson but the following afternoon, a couple of dozen MPs spent their time on a very different topic.
In a wood-panelled room off Westminster Hall, a special debate took place on “the impact of the collapse of Football Index”, the gambling company that was ubiquitous in the game before imploding spectacularly last March.
One MP mentioned The Athletic’s recent story about a former Football Index officer running a new website trading “shares” in players, while another mentioned an earlier story about company owners spending £15 million of customers’ money on a global expansion plan as the site collapsed.
MP after MP shared harrowing stories of constituents who had their lives ruined by the collapse, with many demanding the government compensate those who lost out to what several MPs described as a “Ponzi scheme” after virtual footballer shares worth £120 million became worthless.
Unfortunately for them, the government’s representative at the debate did not grant their wish.
“We do not think it would be appropriate for the government to use public funds to cover losses to individuals resulting from the collapse of a gambling company,” said Nigel Huddleston MP, a minister at the Department for Digital, Culture, Media and Sport.
Football Index was a company regulated as a gambling website but marketed itself as a “football stock market”. Users would buy and sell “shares” in footballers — just like someone might buy and sell shares in a company.
As well as the share prices, one of the appeals of Football Index was cash “dividends”, which worked rather like fantasy football points but with real cash. Investors would receive cash for owning shares in players who scored goals or racked up assists and clean sheets.
Multiple insiders told The Athletic about the chaos of working for a firm that exploded in popularity, and was advertised on football shirts, London taxis, Sky Sports TV and Talksport radio, as well as some of The Athletic’s podcasts, before everything went wrong.
On March 5, 2021, the company’s board suddenly announced drastic reductions to these dividends “to ensure the long-term sustainability of the platform”. This led to a dramatic collapse in share values.
The company then went into administration and had its Gambling Commission licence suspended.
At the heart of the contention is whether Football Index can truly be considered a gambling company. There is no dispute that it was licensed by the UK Gambling Commission, and regulated as one.
Liz Twist, the Labour MP who called the debate, told the harrowing story of a constituent named Chris who lost £13,000 he had been saving up for a wedding.
“He said that Football Index was advertised as a great way to invest and buy shares; it was shown to be a better way to save compared to the rates banks offer,” she said.
Other MPs made similar points.
“It modelled itself as an investment package, and is an utter failure of regulation by the Financial Conduct Authority and the Gambling Commission,” said Jessica Morden MP. “Customers felt wrongly assured that their long-term investments in the index were secure.”
Others spoke of the emotional and mental impact of people losing such huge sums.
“Individuals have been driven to the brink of suicide, marriages have collapsed, families have been affected, and life savings for weddings, houses and retirements have vanished,” Morden said. “Over a year on, they are still dealing with scars on their mental health and finances.”
The Gambling Commission took a battering in the debate after the regulator was heavily criticised in a report Malcolm Sheehan QC published last September that noted executives had been warned the product operated like 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 whole month before it happened, while users were piling money into a platform they thought was doing well.
Although nobody believes gamblers should be refunded when they lose money on unsuccessful bets — for example, betting on a team to win a football match that they lose — many MPs argued that this situation is very different, with “open bets” vanishing into thin air.
For them, the analogy is more like betting on a team to win a football match, the team winning the match, and then the company keeping the gambler’s stake, all exacerbated by the fact the firm marketed itself as an investment-like product.
“He is not a gambler and has never so much as put on a bet,” says Alison Thewliss MP of a constituent called Marc. “He got involved with this because he was reassured that it was a regulated product… it was sold very much as an investment opportunity based on football knowledge.”
Ben Lake MP is a long-time campaigner on the issue.
“We must not allow the false narrative to emerge that these people gambled too much and were irresponsible,” he said. “Far from it — we heard of insiders warning regulators, trying to blow the whistle on the failings, in 2020.”
He noted that the Advertising Standards Authority had issued several warnings against Football Index for not making clear the financial risks and for “creating the impression that it was an investment opportunity rather than a betting product”.
Yet these warnings were not heeded by the Gambling Commission or the Financial Conduct Authority, which multiple MPs said should have had a greater role in regulating the product.
One of the more interesting interventions came from Aaron Bell, Conservative MP for Newcastle-under-Lyme in Staffordshire, not far from the online gambling behemoth Bet365 where he worked for 15 years.
“I have long experience of the Gambling Commission, and while I was in that role, it was frequently behind the curve and asleep at the wheel, which is one of the accusations levied at them regarding Football Index,” he told the committee.
“The Gambling Commission failed to identify the key features of the product, which then changed while Football Index was running it, and the Gambling Commission did not seem to notice.”
Bell also likened the website to a Ponzi scheme, before making a wider point about the uneasy marriage between football, gambling, and newer iterations of financial riskiness.
Other MPs tied the issue to the ongoing gambling review by the UK government that is likely to restrict the gambling sponsors which have become ubiquitous in top-flight football despite many appearing to facilitate illegal gambling, as revealed following an investigation by The Athletic.
Huddleston listened to the horror stories and voiced his sympathy for those who have lost so much.
He cited the Sheehan report and agreed there are “areas of improvement” for the Gambling Commission and FCA, saying both bodies have acted on recommendations which should ensure a similar firm would not get a licence again.
He also said the two bodies are signing a “memorandum of understanding” to boost cooperation.
However, on the core point of contention, the government is unmoved. Compensation from public funds is “not possible”, he said.
While other MPs suggested using fines issued by the FCA and Gambling Commission to recompense victims, the law restricts what this can be used for, he said.
“The FCA is required by law to pass revenue from fines to the Treasury, net of enforcement costs,” he said, adding that this money must be used for “important public services”.
“The Gambling Commission fines are used for socially responsible purposes, usually for specific projects to reduce gambling harms.”
This point was disputed by Ronnie Cowan MP, a long-time vocal voice on the Football Index collapse, who suggested compensation could be paid out by the minister imposing a levy as made possible by a clause in the 2005 Gambling Act.
But as well as disputing the legal acrobatics of paying compensation, Huddleston then went on to dismiss the core argument.
“We do not think it would be appropriate for the government to use public funds to cover losses to individuals resulting from the collapse of a gambling company,” he said.
“Consumers staking money on gambling is not the same as their placing money into other things, such as savings products.”
That line was a rebuttal to MPs who have raised the precedent of London Capital and Finance, a savings company that collapsed in 2019 when 11,625 bondholders had invested over £237 million in LC&F’s products.
The government eventually gave out roughly half of this in compensation because a subsequent report was scathing about the regulator’s actions, thus the government was deemed partially responsible.
Those who lost money on Football Index, who despair at the idea they were “problem gamblers” rather than people duped by a badly-regulated scheme, are hoping a similar thing could happen for a somewhat similar regulatory failure.
But it seems the government’s position on the matter is firm.
There is some hope left for those hoping to get back some of the money that they have lost.
Campaigners have 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.
https://theathletic.com/3355084/2022/06/09/football-index-parliament-no-compensation/
