UKGC WAS WARNED ABOUT FOOTBALL INDEX ‘PYRAMID SCHEME’ IN JANUARY 2020

Serious questions have been raised regarding the recently collapsed Football Index, after it emerged the UK Gambling Commission (UKGC) had been warned about dangers over a year ago. 

According to The Guardian, in January 2020, the UKGC received a document which described Football Index as “an exceptionally dangerous pyramid scheme” masquerading as a “football stock market,” and called for urgent action “to alert and protect” users.

Football Index was granted a license by the Gambling Commission in 2015, and was not licensed by the Financial Conduct Authority, which regulates investment products.

Several fundamental issues were flagged regarding the betting firm’s business model, and it was accused of deliberately misleading customers by portraying itself as a legitimate investment service rather than a gambling product. 

The seemingly obvious liquidity issue, which ultimately sunk the operation, was also highlighted, with the document pointing out that if user growth stopped or declined, the company would be unable to pay liabilities to its users. 

Specifically, the document said Football Index was “vulnerable to and destined for a bank run in which the first ‘X’ percent of users manage to get some money out before the system collapses and the remainder lose everything.”

As previously reported, in a collapse Football Index itself said was largely triggered by the impact of the COVID-19 crisis on football, the platform saw prices for footballers plummet, causing a liquidity crunch, which resulted in it slashing dividends by 80% in a desperate attempt to remain afloat. 

This move sparked an instant backlash from customers, some of whom found themselves facing huge losses, with Football Index even having to disable its Twitter account due to the level of anger directed at staff. 

On 11 March, the UKGC suspended Football Index’s license, and said: “The suspension follows an ongoing section 116 review into the operator, as we had concerns activities may have been carried on in purported reliance on the licence, but not in accordance with a condition of the licence, and that Football Index may not be suitable to carry on with licensed activities.”

As reported last week, Football Index then announced it was suspending operations and entering administration.

AYO.NEWS says:

As we said last week, there is no realistic way Football Index can possibly hope to recover from this. Indeed, we wouldn’t be surprised to see several new investigations into the business, and those behind it. And, if the Gambling Commission itself was seen to turn a blind eye, expect fireworks on that front too. 

In absolutely, totally unrelated news, earlier this week, just days before The Guardian bombshell, UK Gambling Commission CEO, Neil McArthur, announced his resignation.