The owners of Football Index transferred £15m ($20m) of customers’ money to a connected company even as it was collapsing in the UK in a bid to launch similar games around the world, according to a sports website investigation.
The money was spent on building technology to sell similar products in foreign territories, including Germany, the United States and India.
Documents leaked to sports website The Athletic revealed the money moved from parent company BetIndex to holding company Index Labs as part of "Project Hadron".
The plan was to repackage the Football Index technology and sell it elsewhere as a cricket platform in India, a football platform in Germany and an NFL platform in the US.
The UK Gambling Commission has apologised after an independent report slammed the regulator for not acting quickly enough to scrutinise Football Index before its collapse, and the latest revelations are likely to add to the criticism it has faced.
The review into the demise of BetIndex showed that while around £124m existed in virtual share portfolios on the site, only a small proportion of this was held in cash. Now it appears that some of the money was spent on the speculative project even in the weeks before it went into administration.
The Athletic reported that a presentation prepared in August by insolvency firm BDO sets out an attempt to obtain further funding from investors to continue building Project Hadron.
It outlines plans for an ambitious global expansion and a product called "Token Trader". Project Hadron was only 40 percent complete in August after £15m had been spent on it.
The plan was to launch products in new territories in January 2022, with the possibility of also relaunching in the UK.
However, technology provider Index Labs, which relied entirely on BetIndex for funds, has now also gone into administration. Documents cited by The Athletic reveal how Index Labs was pitching itself to investors and shows the company received £4.45m in 2019, £9m in 2020 and £3.8m in the first few months of 2021 from Jersey-based BetIndex.
Players who knew of the plans to expand hoped that the move would mean more buyers and higher dividends and player share prices. However, it seems that there was no chance of merging games between jurisdictions because of regulatory issues.
"Germany was the plan for a long time inside the company," a former employee told The Athletic. "It went crazy. [The customers were] really excited. They thought it would mean pooled liquidity and all the share prices would go up."
A video with Football Index engineering staff in February 2021 — just a month before the collapse — outlined how the company was planning to replace the UK product.
The BDO document added that the "opportunity" existed to "expand the brand into alternative sports categories and new geographic jurisdictions", with January 2022 proposed as a return to market.
"This new platform is being designed to enable the system to be readily modified to accommodate multiple different sports and with the ability to operate in multi-currency/multi-language and effectively in any territory."
The company was seeking investment of £19m to launch in Germany.
The document adds "there remains the possibility to relaunch in the UK market if clarity is obtained in respect of licensing". It also outlines plans for a new product called Token Trader, which appears to be similar to a fantasy football game.
The Athletic also saw a document prepared by Nasdaq in February 2020 for Football Index outlining the possibility of creating a new technology platform for the company.
A member of the Football Index Action group said: "If we had had the choice, we would have never in a million years have ever agreed to them taking our stakes and using them like that. It looks like they’ve spent nearly £15m of our money on this thing."
Another said: "We never thought they would be using our stakes to pay for it. That should have been kept to pay our winnings. Most companies get investment for that sort of thing. We could never have imagined the Gambling Commission would allow that."
Football Index’s collapse left around 280,000 customers out of pocket by £3.2m.
BDO declined to comment when contacted by The Athletic.
The Gambling Commission has pledged to make changes to the way it regulates innovative digital gambling products in light of the Football Index saga, during which it has faced widespread criticism over its role.