Bad news for Intrade punters
News on 6 Apr 2013
News on 6 Apr 2013
The financially troubled betting firm Intrade, which served as a predictions platform for elections and non-sports-related events before coming short amid allegations of financial irregularities and suspicious multi-million dollar payments to deceased founder John Delaney now faces liquidation, according to a report Friday in the New York Times and Bloomberg business news.
A month ago Intrade halted trading and froze the client accounts on its books.
In an attempt to salvage the company, Intrade director Ronald Bernstein has now apparently communicated with the firm’s clients revealing that the current shortfall in funds on the books is $700,000.
He has proposed that those owed accept 50 cents in the dollar immediately, based on their currently frozen accounts, waiving the balance and accepting the company’s rather nebulous assurance that every effort will be made to ensure they are full compensated at an unspecified date in the future.
Bernstein claims that the shortfall resulted from unspecified actions by two other parties, whom he did not name.
“We are now very confident about the reasons which caused the current circumstance of the company; however, for legal reasons we are not yet at liberty to document them to you,” Bernstein write in his communication.
“I can confirm that the company, if it is able, intends to vigorously pursue two substantial monetary claims against two distinct parties for an aggregate amount greater than $3,500,000.”
Clients are faced with a rather stark choice; Bernstein says: “If the company is not able to rectify this cash shortfall position very quickly, the company will become insolvent and therefore is very likely to go into liquidation.”
The 14-year-old Intrade web site functioned as a gambling hub for both professional and amateur investors, letting customers buy and sell contracts tied to the outcome of a future event. It had often been cited for its predictive abilities on matters ranging from the outcomes of American presidential elections to the probability of developments like an Israeli airstrike against Iran.
Last month, the company announced that it had halted trading after auditors found potential financial irregularities involving more than $2.6 million in payments to Intrade’s founder, John Delaney, and other unnamed third parties. In 2011 Delaney passed away in an attempt to reach the summit of Mount Everest.
Intrade also found itself under fire from the Commodity Futures Trading Commission in the United States, which filed a complaint accusing the company of offering contracts outside traditional exchanges and without regulatory approval, and of filing false forms with regulators.
Thus far Bernstein has managed to persuade Intrade’s 40 largest clients to opt in to the 50 percent deal; the rest of the client list has until April 9 to decide, and in the interim Bernstein is in discussions with other parties who may be prepared to make investments and assist in keeping Intrade alive.
