WorldSpreads clients await losses as ETX eyes up assets
ETX Capital is poised to mop up leftover assets from the spectacular collapse of its rival WorldSpreads as the firm’s administrators start work on finding millions in missing client money.
ETX, a rival to spread betting firm WorldSpreads, which went into administration over the weekend, is most interested in snapping up technology assets and the firm’s 15,000-strong client list.
But many of those clients will be out of pocket after WorldSpreads confirmed that it owes its customers £29.7m but can only find £16.6m of that money.
A source close to the situation said that the shortfall is due to alleged fraud that could have been going on for as long as five years.
Administrators at KPMG, which is charged with dismantling the firm, believe it could take months to get any money back to account-holders because the case involves allegedly mixing client cash with the company’s own reserves, meaning the money could be particularly difficult to allocate.
Industry insiders said they were “shocked” as details emerged over the weekend.
One told City A.M. that he had at first thought it was a problem of the firm having too little capital before reports indicated that an alleged fraud is being examined.
There are also fears that it could have repercussions for the reputation of the relatively new spread betting industry.
Patrick Latchford, formerly of CMC Markets and founder of industry consultancy Perpal, said: “It’s bad for the industry because it puts out all the wrong noises. It suggests it’s badly run. Whilst there has been a reluctance to professionalise the management in some firms, it is well-run in most companies. Worldspreads falling into administration in this way has shocked the industry.
“It’s never good for an industry when a competitor crashes like this and it can never be worse than when client funds are missing,” he added.
Clients of the collapsed company now face months of waiting to see how much of their money can be recovered. Many will be covered by the industry-funded Financial Services Compensation Scheme up to £50,000.
They could also have their personal details published under transparency rules for administrations.