Worldspd Share Discussion Threads

[lennonsalive] 18/3/2012 22:13

WorldSpreads to be closed over alleged fraud

By Simon Mundy

WorldSpreads, one of the UK's largest spread betting operators, is to be wound up after the discovery of an alleged accounting fraud that left up to £12m missing from its clients' accounts.
Shares in the company were suspended on Friday after WorldSpreads informed regulators of accounting irregularities. People with knowledge of the matter said that money from client accounts, which should be segregated, had been mixed with the company's own funds.
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The board of WorldSpreads was set to make an application to the High Court for an administration order on Sunday, and the insolvency proceedings will be announced formally on Monday, sources close to the situation said. The shortfall in the client funds is estimated at between £10m and £12m.
Some people close to the process had suggested on Friday that a takeover of the company, through a so-called "pre-pack administration", might be negotiated over the weekend. IG Group and London Capital Group were among the companies mooted as potential bidders. However, both companies decided not to pursue an acquisition.

WorldSpreads, founded in Ireland in 2000, listed on London's Aim market in 2007. Its insolvency will be managed by KPMG under the Financial Services Authority's new special administration regime, designed to ensure a faster insolvency process for financial groups.

However, it raises the prospect of a lengthy legal struggle as nearly 5,000 clients of WorldSpreads try to recover the funds they deposited with the company. The first £50,000 of each account is protected under the Financial Services Compensation Scheme, but clients owed larger sums – a group likely to include some other spread betting companies – may not receive the full value of their accounts.
The situation will draw comparisons with the insolvency of MF Global, the US brokerage which failed to segregate clients' money as required by law. UK clients have criticised the handling of the insolvency by the FSA and KPMG, administrator to the brokerage's UK arm, arguing that clients in other countries have had money returned more quickly.

It is also likely to prompt criticism of Ernst & Young, WorldSpreads' auditor, for signing off on annual accounts at a time when the alleged fraud was being carried out. E&Y said it could not comment for confidentiality reasons.
The accounting irregularities were discovered on Friday morning, as the company's new executive team inspected its accounts, according to Lindsay McNeile, chairman of WorldSpreads. Two days previously, Conor Foley, chief executive, and Niall O'Kelly, financial director, had left the company with immediate effect. Neither has been accused of any wrongdoing.

Mr McNeile, who assumed an executive role on Wednesday, said that the discovery had "hit us with enormous force in a dark tunnel". Among the company's non-executive directors is Charlie McCreevy, a former Irish finance minister and European Commissioner, who joined the board in June last year. Mr McCreevy could not be reached for comment.

[sharesure4] 18/3/2012 22:13

I heard that the clients account had £45m in it, which implies just over a quarter has vanished. But isn't this what FSA regulation covers from its compensation fund?

[lennonsalive] 18/3/2012 22:09

Last statement they should have had 7 million euro's net cash. Guess the directors have spent this too?

What have they been doing with the cash, smoking it, eating it, losing it?

This all seems to be moving very fast and it doesnt feel good, I wonder if we will ever get our monies back? I hope the WSPRs front internet page is used as a communication tool to inform what the next steps are for us, if any.

Right, off to alter stops on all stock tomorrow in case of volatility!

[nasdaq_investor] 18/3/2012 22:08

FT repeating again 10m to 12m missing in client funds.

Key questions are :-

1) What are the total client funds and what percentage is 12m of this figure?

Once known we should be able to work out a % return rate on our cash balance.

2) Is the cash balance as stated in mid Feb still there (7m euros/ £6m) and therefore is the total liabilities that will be deducted from our % return is 12m minus the 7m cash and any fees the administrator incurs?

Of course a buyer could still emerge to add to the pot seems unlikely.

I foresee some legal action if the auditors have been remiss. Also, possible action against the directors but the insurance of any involved in alleged fraud will be invalidated. Anyone capable of stealing client funds is also capable of hiding their assets so that may not be fruitful.

Part of any claim will presumably be in missing out on any gains that take place in stocks positions that were closed out and unable to be repurchased while our funds are being retained.

[horndean eagle] 18/3/2012 22:05

Really sorry to hear what has happened here and for those caught up in the mess. I am guessing that KPMG are likely to take a firesale approach to existing positions and liquidate them ASAP. I doubt whether they will throw everything into the opening auction tomorrow but would expect them to have traded through most of everything they have by the end of the day. That could cause carnage in stocks where they have large holdings and possibly trigger a whole load of stops elsewhere. Your account balances at close of play on Friday will probably be used as the amount you will be able to claim as a creditor. Once all assets are liquidated you would will get your share of what is left over.

[mattjos] 18/3/2012 22:02

looks like game over then, as if there was much doubt .... seems bizarre that they can say already that the outgoing CFO is not accountable.

A simple advert in the FT requesting a law firm to act on behalf of affected parties, on a contingent basis ... seeking to bring the CEO & CFO (as named individuals), EY (as the auditors) & the FSA (as the ineffective regulator) might well attract some keen advocates.

[megabear] 18/3/2012 22:01

Does anyone have a view on what this means for all WSPR's white label partners? Are they all screwed?

[lennonsalive] 18/3/2012 22:01

The bstards, all closed down and I had to check from phone (luck I left the screen open to take pictures) as I cannot login online. It's stating I had an invalid login.

[con90210] 18/3/2012 21:55

If its about to cost you your marriage then yes! I hope people get their positions sorted as some must be leveraged up big time on positions. Disgraceful behaviour from WSPR if this is all true though..

[lw425] 18/3/2012 21:53

If anyone needs this for any reason in life.

[m.t.glass] 18/3/2012 21:42

"WorldSpreads, one of the UK's largest spread betting operators, is to be wound up after the discovery of an alleged accounting fraud that left up to £12m missing from its clients' accounts..." (FT)

[besbury] 18/3/2012 21:33

Latest from the FT

[taximania] 18/3/2012 21:33

just gone to my twowayspreads account , all positions gone and closed at way above market and got charged for carrying over the weekend !

[tradesense] 18/3/2012 21:11

For richer or poorer , in sickness and in health


Remind her of her vows

[tradesense] 18/3/2012 20:59

But say your account was worth 100k at Friday market close then it is still worth that ? Only difference is it will not go up or down tomorrow !?

As long as client money is protected then you should be okay , all the best to all worldspread account holders

[m.t.glass] 18/3/2012 20:49

Be sure to print every page that becomes visible during Worldspreads' actions - including everything since last statement recieved from them. And print off any past statements you need - in case they close everyone's accounts and discontinue access to historic ledger details.