Sporting Options was an English

England

England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...

 betting exchange

Bet exchange

A betting exchange is an entity which provides "trading" facilities for retail or bookmaker customers to buy and sell contracts. Contracts are structured as binary options. Some betting exchanges may also offer CFD products...

, based in Sussex

Sussex

Sussex , from the Old English Sūþsēaxe , is an historic county in South East England corresponding roughly in area to the ancient Kingdom of Sussex. It is bounded on the north by Surrey, east by Kent, south by the English Channel, and west by Hampshire, and is divided for local government into West...

. The company was founded in 2000 by former City of London

City of London

The City of London is a small area within Greater London, England. It is the historic core of London around which the modern conurbation grew and has held city status since time immemorial. The City’s boundaries have remained almost unchanged since the Middle Ages, and it is now only a tiny part of...

 options

Option (finance)

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...

 traders Robert Byrne and Kevin Griffiths. Sporting Options went into administration

Administration (insolvency)

As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – an alternative to liquidation – is often known as going...

 on 15 November 2004 amid allegations of criminal wrongdoing. Industry leader Betfair

Betfair

Betfair is the world's largest Internet betting exchange. The company is based in Hammersmith in West London, England. Since Betfair was launched in June 2000 it has become the largest online betting company in the UK and the largest betting exchange in the world. Betfair claim to have over 3...

 stepped in with a rescue package.

Cause of collapse

Sporting Options appeared to be matching bets worth up to 15% of those matched at Betfair. But it was alleged the turnover was being financed by the owners of Sporting Options using their own funds to create the liquidity.

By late 2004, it was alleged Sporting Options was in fact fraud

Fraud

In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...

ulently financing its apparent liquidity by using funds from its own clients' account. On 15 November 2004 administrators were called in. By 8 December the administrators had determined that the company owed £3.6 million to its clients, but held only minimal funds in the clients' account.

Betfair rescue package

Soon after Sporting Options went into administration, Betfair announced a rescue package to compensate the 5,342 Sporting Options clients who had lost money. The clients affected were required to register as customers of Betfair to be eligible. Each qualifying client owed less than £1,000 was compensated for the full amount owing (in the form of a credit to his or her Betfair account). Those owed more than £1,000 received either £1,000 or 20 per cent of their Sporting Options account balance, whichever was greater. Any amount owing over and above this payout could be earned back though a commission rebate program, valid through to 30 November 2006.

Some speculated that Betfair's apparent act of generosity was a bid to protect the reputation of the betting exchange industry, while simultaneously securing exclusive access to Sporting Options' clients. Betfair and most other exchanges have stressed their clients' funds are ring-fenced to ensure the exchanges' financial integrity. One notable exception to this mantra, however, is BackAndLay, whose Chief Executive Ian Davies

Ian Davies

Ian Davies is an English former professional footballer who played as a left back. Active in both England and the United States, Davies made nearly 200 career appearances.-Career:...

stated that no funds, whether in the hands of an operator or a trustee, are 100% safe, and that the customer simply has to make a judgment call about whether or not to trust the entity they are lodging funds with.