More light has been shed on the alleged shenanigans that led to the collapse of spread-betting firm WorldSpreads, which abruptly halted trading in March after an investigation revealed a financial shortfall of £13m on its books. WorldSpreads was supposed to be prohibited from offering financial advice to clients, but sources have told The Telegraph that company directors misled clients into taking “long bets” on the company’s own shares in a bid to inflate its share price. The firm did not compel clients to make good on losses when WorldSpreads’ shares failed to rise, making it a clear case of “market abuse.”
WorldSpreads’ former clients know the first £50k of their accounts are protected by the Financial Services Compensation Scheme. Anything above that, they’ll be treated as preferred creditors in any liquidation proceedings. Clients holding more than £100k in their account have set up the WorldSpreads Action Group to explore legal action against the company’s directors, insurers and auditors. Over 80% of WorldSpreads employees have lost their jobs and have been told not to expect any back pay they may be owed.
Meanwhile, Ireland’s Central Bank has ordered the country’s leading spread-betting company MarketSpreads to immediately suspend trading, citing “capital adequacy and audit opinion issues.” MarketSpreads was once WorldSpreads’ Irish arm, but has been an independent entity since 2009. The Irish Times reports that MarketSpreads sent emails to clients insisting that it remained “profitable and solvent” and client funds were “properly segregated.” The company claimed it had sought a High Court injunction to suspend the Central Bank’s “completely unexpected” order, but the judge denied their request. As a result, the company was “in the process of closing down all client positions … as fairly and efficiently as we possibly can.”