Plans to relaunch collapsed betting company Football Index have been branded "insulting" by campaigners who say customers who have lost millions of pounds are effectively being asked to pay for a worthless business.
Football Index, which promoted itself as the football stock market, was put into administration in March owing an estimated £90m to gamblers.
Documents published by Football Index as part of insolvency proceedings confirm that for months before its collapse the company had been reliant on new deposits to cover liabilities on existing bets and that it could never have been sustainable without a drastic reduction in payouts.
They also show Football Index paid £9m to its parent company for "support fees" last year and shelled out almost a fifth of its revenue on marketing, including adverts on the London Underground and sponsorship of Queens Park Rangers and Nottingham Forest football clubs.
Football Index, a trading name of Jersey-based BetIndex, was supposed to keep a little over two thirds of the amount its customers staked in reserve to pay out what it called dividends to customers who bought "shares" in football players.
But the documents show it would owe customers £90m if all bet contracts were terminated and customers paid out their initial stake minus dividends that have already been paid. “The total liability that would be due to the customers, as unsecured creditors of the Company, in these circumstances would be circa £90,000,000,” the company stated.
Despite its dire financial position, Football Index is aiming to persuade customers to back a turnaround plan that would see it relaunch.
Under the proposals, Football Index's parent company, Index Labs, would maintain the company's software - arguably its only valuable asset - while customers are left with huge losses.
"This would effectively force Football Index users to pay for the privilege of taking over a worthless company," said Matt Zarb-Cousin, director of Clean Up Gambling, which is supporting those affected.
"It’s insulting to the thousands of people who have lost life-altering sums of money after being misled. Thankfully we are already geared up for a fight.”
The documents show that the company was losing money even before it doubled the payout on bets through a series of changes during July and August 2020 in a bid to attract more deposits.
But that meant that it did not have enough to cover the £2.2m it was paying out in dividends each month.
The disclosures will add to questions about the Gambling Commission's oversight of Football Index. Under heavy pressure, the regulator revealed in March that it had launched a formal review of the company in May last year with the help of forensic accountants.
Yet shortly afterward the review began, Football Index made changes to its bet terms which meant it was on an unsustainable path while repeatedly telling customers it was in good financial health.
The documents also reveal Football Index appointed insolvency specialists Begbies Traynor on 15 February but continued to urge people to deposit more money until it collapsed on 11 March.
Begbies Traynor declined to comment on why the company was allowed to continue accepting new bets during this period. BetIndex, did not respond to a request for comment.
Football Index hopes to enter a company voluntary arrangement (CVA), an insolvency procedure which would allow it to write of some of its debts in a bid to continue trading.
It would also mean that there is unlikely to be any further investigation into the conduct of the company’s directors. In order to go ahead, the CVA would need the backing of 75 per cent of creditors.
Lawyers who are seeking to bring a legal claim on behalf of customers said they were reviewing the newly published documents.
Paula Lee, a partner at law firm Leigh Day, said: “Our investigation into potential claims that can be brought continues and remains unaffected by the administration process.”