Intrade Blows Up - Who Didn't See This Coming?

Discussion in 'Politics & Religion' started by pspr, Mar 11, 2013.

  1. pspr


    The founder of Intrade received $2.6m in insufficiently documented payments from the popular prediction markets company in 2010 and 2011, an audit revealed weeks before trading on the site was halted.

    Auditors for the Dublin-based company – an online hub where people can bet on everything from presidential elections to papal conclaves – highlighted concerns about “significant financial irregularities” and the payments made to John Delaney, according to financial records Intrade recently filed with Ireland’s companies registration office. Mr Delaney, who launched Intrade’s parent company in 1999, died on Mount Everest in May 2011.

    The documents also revealed that the company’s shareholders in 2011 included hedge fund managers Paul Tudor Jones and Stanley Druckenmiller, and a trust connected to Christopher Hehmeyer, the current chairman of the National Futures Association, a US regulatory body. None of the shareholders could be reached for comment on Monday.

    The revelations came a day after Intrade suspended all trading activity and froze its customer accounts. The company said in a notice on its site on Sunday that recently discovered “circumstances”, on which it did not elaborate, would be subject to an investigation and could uncover potential “financial irregularities”.

    The discovery raises questions about the oversight of unregulated prediction markets and comes three months after the US Commodity Futures Trading Commission sued to stop the company from offering prediction contracts to Americans, who were the most active users of the site. Intrade did not refer to the CFTC case in its notice to customers on Sunday.

    An Intrade official and Caulfield Dunne, the Dublin-based accountancy that performed the audit, did not immediately respond to requests for comment.

    The financial accounts show payments made to Mr Delaney worth $1.4m in 2011 and $1.2m in 2010.

    Brian Dunne, auditor at Caulfield Dunne, said in a written opinion on February 4 that proper books of account were not kept by Intrade for the year ended December 2011.

    He noted the current directors of the company were only appointed in November 2012 and were not in a position to comment on the maintenance of the books prior to their appointment.

    “The directors have also noted that they are aware of issues identified during the course of the audit with regard to significant financial irregularities in the internal accounts pertaining to previous years that had a material effect on the opening balances of the company at January 1 2011,” he said.

    He added: “There was insufficient documentation regarding payments made into bank accounts in the name of the deceased former director and other third parties.”

    The current directors say they have no knowledge to the background to these payments. They said the payments should be reflected in the profit and loss account as a prior year adjustment “until the matter has been fully resolved”. The financial accounts are signed by directors Imants Auzins and Ronald Bernstein.

    The development comes almost exactly a year after the spread betting firm Worldspreads went into administration after telling regulators it could not repay £13m of client funds.

    Worldspreads failed to segregate client money, instead mixing the funds with its own money, according to statements filed last year by Lindsay McNeile, the operator’s chairman. He said Worldspreads falsified its accounts to hide losses in the months leading up to its collapse.

    There is no suggestion this happened at Intrade.

  2. This news has saddened AK :(
  3. It must be good news then.
  4. I didn't see it coming but it's exactly why I never used the service.