Intrade Said to Pitch Survival Plan With Initial 50% PaybackJoe Brennan
Intrade, an online betting website that halted trading last month after uncovering suspected financial irregularities, is seeking support from customers for a survival plan, said two people with knowledge of the matter.
The Dublin-based company is asking members to accept repayment of 50 percent of their currently frozen funds within weeks, with the rest returned if it survives and draws new investment, according to the people, who asked not to be identified, as the matter is private. Less than $2.5 million of funds are at risk, according to one of the people.
An internal investigation into the financial issues, due to be completed this week, partly centers on payments to the accounts of the firm’s late chief executive officer, John Delaney, one person said. The company’s auditors raised concerns in February about payments to Delaney, who died in May 2011, Bloomberg News reported on March 11.
Ronald Bernstein, appointed a director in November, is leading the survival plan, said the people. Bernstein declined to comment on what he called “active discussions under way.”
Intrade, which allowed members bet one another on binary outcomes of events, including U.S. presidential and Catholic papal elections, stopped taking wagers and froze member accounts on March 10. Owned by Trade Exchange Network Ltd., the company expects to finish its investigation into potential financial breaches by April 5, it said on March 24.
Most of the larger account holders and existing Intrade shareholders support the survival plan, according to one person, who said that the company has also drawn interest from potential new investors.
The firm had “insufficient documentation regarding payments made into bank accounts in the name of a deceased former director and other third parties,” Dublin-based Caulfield Dunne Accountants & Registered Auditors said in a report signed off on Feb. 4. “We have not obtained all the information and explanations we consider necessary.”
Financial accounts, filed with the Irish companies office, show $1.39 million of payments to Delaney in 2011.
Intrade is in the process of retaining new accountants and auditors, the company said. Clients’ bank accounts remain frozen until its financial position is resolved, it said.
“With the advice of counsel, the directors will determine the appropriate further course of action required,” it said. “Formal legal inquires have already been undertaken.”
In November, Intrade asked U.S. clients to close their accounts after the Commodity Futures Trading Commission sued the website for allegedly offering improper options trading. Trade Exchange in 2005 agreed to pay $150,000 to settle allegations it illegally offered contracts in the U.S., including some based on the price of gold and crude oil.
Alongside its existing European business, the company has told customers it may re-enter the U.S market, as states such as New Jersey and Nevada have legalized online gambling in recent months, according to one of the people.