WorldSpreads has €15.6m shortfall

Irish-controlled financial spread-betting company WorldSpreads has a £13m (€15.65m) black hole in its accounts which will result in serious losses for clients of the London-based firm.

Yesterday the High Court in London special administrators Jane Moriarty and Samantha Bewick of KPMG were appointed under the Special Administration Regime. Worldspreads Limited is a wholly owned subsidiary of Worldspreads plc, incorporated in Dublin.

KPMG said the group’s 15,000 customers were owed £29.7m but the group has only £16.6m in cash, leaving them facing a large shortfall.

However, clients may be reimbursed up to £50,000 (€60,175) by the British Financial Services Compensation Scheme, depending on their circumstances.

“One of the immediate priorities of the special administrators will be to investigate and attempt to reconcile all client positions in order to establish the extent of the shortfall,” KPMG said.

On Wednesday, chief executive, co-founder and the company’s largest shareholder Conor Foley resigned, just two weeks after chief financial officer Niall O’Kelly stepped down following a profits warning. &

WorldSpreads shares were suspended from trading on the Irish Stock Exchange’s ESM market and London’s Alternative Investment Market on Friday.

KPMG has said it will manage WorldSpreads’ business and property for the time being.

Job losses among WorldSpreads’ 66 staff, mostly London based, are likely as the administrators wind down the business.

The Financial Times reported that WorldSpreads mixed money from customers’ accounts, which should have been segregated, with its own funds.

Some of the company’s clients, including other spread betting firms, are believed to be owed large sums, raising the prospect of a lengthy legal struggle.

Clients’ accounts were frozen on the afternoon of Mar 16, preventing them from withdrawing money or adding to their funds, according to Sorrelle Cooper, a spokeswoman for KPMG in London.

Any open positions were also closed, she said.

Former finance minister and European commissioner Charlie McCreevy, joined the board in June of last year.