City of London police have been called in to investigate the events that led spread betting firm WorldSpreads to enter administration over the weekend. According to the Guardian, the Financial Services Authority (FSA) is thought to have already discussed the matter with the police with a “procedural move” expected to trigger off official police inquiries. WorldSpreads has a “black hole” containing customer funds to the tune of £13 million. As such, the collapse has unnerving similarities to the Full Tilt Poker case from last year when there was similar shortfall of funds.
Administrators KPMG reported yesterday: “The board of directors believe that as at close of business on Friday 16 March 2012, there was a shortfall of client money at WorldSpreads Limited of approximately £13m, and that gross amounts owed to clients are approximately £29.7m whereas the total cash balances available to the company are approximately £16.6m.”
Money was supposed to be segregated into different accounts for the some 5,000 customers on their books. This was something they failed to do and its demise goes to support the assertion by Calvin Ayre that regulation isn’t always the best way to stop this kind of situation arising.
Even as the police are in having a snoop around the administrators, KPMG are receiving interest from parties interested in the assets – namely the software and data centre. KPMG partner Jane Moriarty told Euronews: “We are receiving interest in and are talking to people about the residual assets, such as the software and data centre.”
As yet there’s no confirmation as to who these parties are with, the suggestion in the tabloids ETX Capital is interested in acquiring some of them. Moriarity confirmed that no sale of the 5,000 strong client list will take place. Administrators also want to talk to certain members of the board to check an “orderly wind-up” took place. This could mean former chief executive Conor Foley, former CFO Niall I’Kelly and board member Charlie McCreevy all called in.
