Former customers of shuttered prediction market Intrade have been asked to accept payment of 50 cents on the dollar as part of a plan to resuscitate the Dublin-based company. Intrade abruptly closed its doors in March after auditors detected ‘financial irregularities’ on the company’s books, which included $2.6m in questionable payments to Intrade’s founder, John Delaney, who died in 2011 while attempting to scale Mount Everest. Intrade’s business was cut off at the knees in late 2012 after the US Commodity Futures Trading Commission (CFTC) filed a complaint in federal court accusing Intrade of acting as an unlicensed commodities exchange. Intrade immediately withdrew from the US market, and the resulting plunge in its customer base brought action on its markets to a virtual standstill.
Bloomberg News has since reported that Intrade’s former customers have received emails from Ronald Bernstein, who joined Intrade’s board in November and is leading efforts to bring the company back from the dead. The emails reveal that there is currently a $700k shortfall in client funds on the company’s books, and these clients have been asked to (a) accept immediate payment of 50% of the value in their frozen accounts and (b) agree to waive claims on the remaining 50% and rely on Intrade’s “solemn promise” that the company will do its best to make customers whole at an unspecified later date.
Should Intrade’s customers fail to accept this deal, Bernstein says the company is “extremely likely to be forced into liquidation.” Bernstein claims that Intrade’s 40 largest account holders have already signed on to the rescue plan, and if this group “remains fully intact,” Bernstein maintains Intrade can “remain solvent.” Investors have been given until Tuesday, April 9 to make up their minds. In the meantime, Intrade directors are engaged in “active” talks with prospective investors to help right the ship.
While the CFTC’s legal action was allegedly sparked by Intrade’s willingness to offer markets in traditional commodities like gold, grains and pork bellies, Intrade was arguably better known for its election betting markets. In April 2012, the CFTC rejected a proposal by a US company to launch a political futures market to serve domestic political junkies, but Nevada legislators have since put forward a proposal that would allow the state’s sportsbooks to offer prop bets on federal election contests, including congressional and presidential races.