| Anyone been keeping an eye on the Football Index scandal? 13:41 - Mar 7 with 7600 views | BlueStreak |
Absolutely unreal from the owners who have basically committed £100m fraud.
Be interesting to see what happens here but some people have lost tens of thousands of pounds overnight.
I have lost £500, so not too much in the scheme of things but the arrogance of the FI board is incredible. Will be some serious fall out from this. |  | | |  |
| Anyone been keeping an eye on the Football Index scandal? on 13:50 - Mar 7 with 5949 views | J2BLUE |
I had a dabble a while back but realised it was basically a giant Ponzi scheme. I have family who had a lot of money in there. I tried to warn them but they were actually trading on there for a living at one point. Hopefully they got out. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 14:45 - Mar 7 with 5742 views | TractorWood |
I assume nothing will happen. This is not an investment, it's gambling. They use language like shares and dividends but in reality these are bets and payouts. When you couple this with tech startup business valuation modelling (aka active users and funds 'on deposit') they have clearly grown massively with foundations made of sand. As someone else says, it has all the hallmarks of a posh Ponzi scheme.
Call me stupid but I honestly don't see the appeal. If you like football, bet on football. If you like risky investing, invest in the stock market. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 22:58 - Mar 7 with 5150 views | backinbeige |
I agree with you, it seems dishonest.
How is it a fraud? I’m not looking to be provocative- I genuinely don’t understand but am interested. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 23:17 - Mar 7 with 5062 views | BlueStreak |
| Anyone been keeping an eye on the Football Index scandal? on 22:58 - Mar 7 by backinbeige |
I agree with you, it seems dishonest.
How is it a fraud? I’m not looking to be provocative- I genuinely don’t understand but am interested. |
They were minting shares on players last week, ie selling shares of Sancho for example at £7 each when they knew this would be coming and he wouldn’t be worth more that £1 after this announcement.
Taking money from people knowing that what they were selling would be worth significantly less when they changed the rules. | | | |
| Anyone been keeping an eye on the Football Index scandal? on 23:26 - Mar 7 with 5033 views | Trequartista |
I don't really understand these things at all. If the Football Index company reduced all the dividends because they were losing money and all the shares went down so all the customers have lost money, then who's got the all the money? |  |
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| Anyone been keeping an eye on the Football Index scandal? on 23:56 - Mar 7 with 4970 views | BryanPlug |
[content removed at owner's request] |  |
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| Anyone been keeping an eye on the Football Index scandal? on 01:38 - Mar 8 with 4849 views | wkj |
Not really an "i told you so" post, but when it was fresh and new and some people were waxing lyrical about it, I failed to see how an app developer would successfully simulate an entire economy and build a game around it. I really am not shocked by where it all ended up. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 09:58 - Mar 8 with 4431 views | PrideOfTheEast |
| Anyone been keeping an eye on the Football Index scandal? on 01:38 - Mar 8 by wkj |
Not really an "i told you so" post, but when it was fresh and new and some people were waxing lyrical about it, I failed to see how an app developer would successfully simulate an entire economy and build a game around it. I really am not shocked by where it all ended up. |
I don't know anything about it but to put all your life savings into it, which the person in the tweet referenced above seems to have done, was clearly very silly. |  | | |
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| Anyone been keeping an eye on the Football Index scandal? on 10:04 - Mar 8 with 4407 views | Giant_Midget |
I liked the concept, but never got involved. The value in the shares of footballers are backed by nothing, so it shouldn't be a surprise some sort of foul play has gone on. |  | | |
| Anyone been keeping an eye on the Football Index scandal? on 10:12 - Mar 8 with 4371 views | DanTheMan |
| Anyone been keeping an eye on the Football Index scandal? on 23:56 - Mar 7 by BryanPlug |
[content removed at owner's request] |
Life savings in Football Index... |  |
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| Anyone been keeping an eye on the Football Index scandal? on 11:05 - Mar 8 with 4212 views | backinbeige |
Context: I find the whole thing absolutely fascinating and I'm devastated for those who have lost significant amounts of money, not because of poor betting decisions but the total collapse of the market. That's out of their control. It's an innovative game that as long as you only stake what you can afford to lose is an interesting way to speculate and gamble. I didn't have any money invested and I am bitterly disappointed for those who have lost significant sums of money.
I don't think there will be any legal recourse - or if there is it will be hard to make it stick. But more power to those who try it.
The controversy with Football Index is that the creators of the game (the mgmt) partially control how the market works. The market isn't entirely shaped by market forces. The mgmt have decided to massively reduce the amount of dividends paid on a share, so all those who bought a share for (for example) £7 and expected a regular payment of 50p are now getting 1-2p. Also, because the dividends have been cut, the owners of these shares are desperate to sell. So the shares they bought for £7 are now worth 7p. If they bought 1,000 shares for £7k they can now only sell them for £70, so they have lost £6,930. Or more if they bought more.
What are dividends (this is for any interested reader wishing to join this conversation - my intention isn't to patronise anyone already commenting - I suspect you know more than me):
There's two main ways of making money on a share. (1) You can sell it for more than you paid for it once the price has risen, and (2) you can collect dividends. When own a share you are entitled to receive a regular payment (a dividend) for as long as you own the share. It is mostly down to the share issuer how much they pay and how often, but paying better dividends to shareholders will increase the value of their shares. Sometimes the issuer might pay no dividends - you could buy a share in Tescos and get nothing for a year. That's the risk you take when you buy a share, but it's definitely allowed.
The difference with Football Index and the real stock market is that when you buy a 'real' share from a company ("issuer") you own a share of that company and have voting rights. If a company stops paying dividends on its shares then the shareholders could unite until they have either 51% of the votes, or enough votes to force a decision, and vote to remove the current mgmt in favour of someone who will pay them dividends. If Tescos stop paying dividends then their shareholders could unite to kick out the mgmt team and replace them with someone who will actually give them some money. So Boards reducing or removing dividends rarely happens as the Board is effectively asking to be sacked.
What is Football Index?
Shares are traded in footballers, not companies. Dividends are paid out based on his match performance, a better performance means a greater dividend. It's like FPL points but you get paid. If Fernandes is on a run of good form and shareholders are receiving good dividends then shareholders will want more money to sell you his share, thus his share price goes up.
In Football Index, when you buy a share you own none of the company ("asset"... the footballer). Buying 0.1% of the available shares in Bruno Fernandes doesn't give you control of 0.1% of Bruno Fernandes. So if the issuer wants to stop paying dividends the shareholders don't have the same comeback. They can't force change. It's not a real stock market, no shares in an asset are owned, they just use these terms.
The second point is that, in financial markets, there are regulators who can step in and act as the lawmaker. They'll correct perceived injustices and get everything working again. The FCA regulate conduct issues (when individuals act badly) and the PRA regulate systemic issues (stopping multiple companies topples like dominoes when one company collapses, so protecting the market overall). Football Index is regulated by neither, they're regulated by the UK & Jersey Gambling Commissions. I don't know much about their powers but I imagine they're different to the FCA/PRA so unlikely to have the same ability to rescue a market crash, they're likely to be more focused on the issues around betting companies like how they advertise deals and dealing with addicts.
Football Index have decided to reduce the size of the dividends they're paying to shareholders because they're losing money. They said in their recent statement they're reducing dividend payments because of their own financial troubles. Essentially, they can't afford the dividends anymore.
When a company sells/issues an initial £100m worth of shares they'll receive £100m, but they might also find they have an obligation to pay an average of £25m per year in dividends. After four years they're giving away more than they earned. The gamble for the issuer, ie Tescos, is to spend that £100m they received in a way that generates them £30m per year. Tescos would probably build more supermarkets. So they'll be giving away £25m but generating £30m and will finish £5m up each year.
Football Index didn't 'build enough supermarkets' after investors pumped their money in and bought shares, and now they can't afford the dividends. Shareholders don't actually own any stake (equity) in the footballer (asset) they bought a 'share' of so can't force change through. Football Index feel they can just decide to reduce dividends - regulation doesn't cover this and there are no real shareholders who can force change.
Interestingly, the best time to buy shares is when they're at their lowest. Football Index shares have crashed, they've never been cheaper. We know that the management are actively working to gain money so they can afford to resume paying healthy dividends, as this would mean the share prices would rebound. If £7 shares are now trading at 7p (a hundredth of their price), and the management succeed in gaining some money from someone else to resume dividend payments, the 7p shares will rebound back to £7.
Some are investing in Football Index now. If they don't mind gambling £7 and buying 100 shares at 7p, then if the mgmt are successful in gaining money, and dividends resume, then the prices rebound they could find yourself with £700 with of shares. Well, maybe not £700, no one really trusts Football Index anymore so the market will be smaller after this week as people leave not wanting to be burned again, but the shares will be worth more than 7p each.
Crucially- only gamble what you are prepared to lose. | |
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| Anyone been keeping an eye on the Football Index scandal? on 11:14 - Mar 8 with 4166 views | rattram |
Amazed that people will gamble without understanding what they're doing. I gamble on horses but never more than a tenner a horse, and never more than i can afford | | | |
| Anyone been keeping an eye on the Football Index scandal? on 11:17 - Mar 8 with 4150 views | Swansea_Blue |
| Anyone been keeping an eye on the Football Index scandal? on 10:12 - Mar 8 by DanTheMan |
Life savings in Football Index... |
I feel for them, but quite right. I'd never stick my life savings in one place, and especially not one like that. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 11:26 - Mar 8 with 4100 views | SamWhiteUK |
Backinbeige - thanks for the informative post. I put about £20 quid in at the start and basically forgot all about it - I bought some shares, but didn't really know how it was all going to work. I was planning just to buy low and sell high, didn't pay any attention to the dividends.
I saw some people on here putting in £500 quid or so, which I thought was a big risk, but I also wondered if I was missing out on something. Appears not. |  | | |
| Anyone been keeping an eye on the Football Index scandal? on 11:27 - Mar 8 with 4091 views | Superfrans |
| Anyone been keeping an eye on the Football Index scandal? on 23:17 - Mar 7 by BlueStreak |
They were minting shares on players last week, ie selling shares of Sancho for example at £7 each when they knew this would be coming and he wouldn’t be worth more that £1 after this announcement.
Taking money from people knowing that what they were selling would be worth significantly less when they changed the rules. |
Like others, I'm genuinely a bit baffled by this.
My understanding is that gambling businesses are regulated (by the gambling commission?) and banks/building societies and other financial institutions are too.
If this operation wasn't for whatever reason and was simply an app (as someone else on this thread has suggested), why did people put their life savings into it? It seems to be naive at best. |  |
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| Anyone been keeping an eye on the Football Index scandal? on 11:29 - Mar 8 with 4070 views | J2BLUE |
| Anyone been keeping an eye on the Football Index scandal? on 11:17 - Mar 8 by Swansea_Blue |
I feel for them, but quite right. I'd never stick my life savings in one place, and especially not one like that. |
It's a Ponzi scheme. You buy something which has no value that requires a bigger mug to buy it off you in the future. Yes there are a few dividends but when you have players going for £7 it really is asking for trouble. The sad thing is that there are some FI traders on Twitter who have clearly enjoyed their fame who are now planning to double down in the hope more mug money comes in to save them. | |
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| Anyone been keeping an eye on the Football Index scandal? on 12:02 - Mar 8 with 3991 views | backinbeige |
The scandal here is that the owners didn't do their sums properly.
They didn't realise that if X thousand people own shares, they would need to be paying XX thousand out in regular dividends. So they needed to charge more for the shares, or pay out less in dividends, from the start.
Not sure how they managed to get their calculations so badly wrong when their entire product is built on this calculation.
I suppose it became a ponzi scheme (buying something that's essentially worthless and hoping to sell it to the next person for more) when it became apparent that the mgmt couldn't deliver on all these dividends they promised. But it wasn't a ponzi scheme in intention from the start, instead they got their sums wrong and offered to pay more in dividends than they had coming in. It became a ponzi at the point it was unsustainable.
... Perhaps Football Index figured they'd take the money they earned from selling shares and 'build some supermarkets' by doubling it on the real stock market. Except the real stock market has been a bit...wobbly... the past 12 months.
... Perhaps Football Index figured they'd become one of these tech startups like Uber or Deliveroo, which are losing spectacular amounts of money but investors still give them cash because they trust they'll figure out a sustainable model in the future and return a profit. Or they become too important within society to fail and governments will support them.
There's controversy over FI still issuing shares in the last few weeks, when they knew they were in trouble. They issued the shares so they had enough money to pay the next few week's dividends. They needed to keep it going and then lower the dividends to a sustainable amount. But by lowering the dividends they've crashed the market and those people who bought £500k+ worth of shares to gain these dividends can only sell them for £500+. | |
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| Anyone been keeping an eye on the Football Index scandal? on 12:09 - Mar 8 with 3962 views | Deano69 |
Depends if you were on this for a bit of entertainment by pitting your wits on a sport you love, knowing you can afford to lose it all. Or you have decided it is a 'Get Rich Quick' option.
Wonder if people would send me a Tenner with a number between 1 and 10, I will let them know the outcome? |  |
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| Anyone been keeping an eye on the Football Index scandal? on 17:30 - Mar 8 with 3704 views | backinbeige |
One more point (told you I'm obsessed with this...).
When traders sold shares to each other, Football Index took something like 2% of the value of each trade. So if you bought a share for £10 you'd end up paying £10.20, with going 20p to Football Index.
For this to generate meaningful returns for Football Index they needed lots of trading activity. Lots of 2%'s would start to add up for them. Presumably there was not enough trades - there was no "liquidity" in the market - because they're going bust. It's safe to assume that most people who bought a share hung on to it. There wasn't enough trading.
They should have made the dividends more volatile. Traders needed to be punished more for having someone who didn't play well that week. This would mean that the traders are forever swapping shares depending on the slightest change in a player's form or who that week's opposition are, rather than hanging on to a share hoping a player gets over his barren scoring run. They needed to make it so that you needed to rebuild your team each week.
This clearly didn't happen as they didn't collect enough 2% commissions from the trades. | |
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| Anyone been keeping an eye on the Football Index scandal? on 17:33 - Mar 8 with 3674 views | Hipsterectomy |
can someone explain this to me like im 5 |  |
| Walter Smith's Barmy Army |
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| Anyone been keeping an eye on the Football Index scandal? on 17:36 - Mar 8 with 3671 views | wkj |
| Anyone been keeping an eye on the Football Index scandal? on 17:33 - Mar 8 by Hipsterectomy |
can someone explain this to me like im 5 |
You buy a stock.
The stock market arbitrarily changes the value of the stock.
Your investments are suddenly worthless. | |
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| Anyone been keeping an eye on the Football Index scandal? on 17:37 - Mar 8 with 3664 views | StokieBlue |
| Anyone been keeping an eye on the Football Index scandal? on 17:30 - Mar 8 by backinbeige |
One more point (told you I'm obsessed with this...).
When traders sold shares to each other, Football Index took something like 2% of the value of each trade. So if you bought a share for £10 you'd end up paying £10.20, with going 20p to Football Index.
For this to generate meaningful returns for Football Index they needed lots of trading activity. Lots of 2%'s would start to add up for them. Presumably there was not enough trades - there was no "liquidity" in the market - because they're going bust. It's safe to assume that most people who bought a share hung on to it. There wasn't enough trading.
They should have made the dividends more volatile. Traders needed to be punished more for having someone who didn't play well that week. This would mean that the traders are forever swapping shares depending on the slightest change in a player's form or who that week's opposition are, rather than hanging on to a share hoping a player gets over his barren scoring run. They needed to make it so that you needed to rebuild your team each week.
This clearly didn't happen as they didn't collect enough 2% commissions from the trades. |
Indeed, this is the crux of the issue.
They based their whole premise on something like an exchange and most exchanges exist on high volume in order to take their tiny cut. If there is no volumes then it's hard to generate the capital they required in the way they wanted.
SB |  |
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| Anyone been keeping an eye on the Football Index scandal? on 17:38 - Mar 8 with 3657 views | Hipsterectomy |
| Anyone been keeping an eye on the Football Index scandal? on 17:36 - Mar 8 by wkj |
You buy a stock.
The stock market arbitrarily changes the value of the stock.
Your investments are suddenly worthless. |
but it's football focused? in what way? | |
| Walter Smith's Barmy Army |
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| Anyone been keeping an eye on the Football Index scandal? on 17:39 - Mar 8 with 3645 views | wkj |
| Anyone been keeping an eye on the Football Index scandal? on 17:38 - Mar 8 by Hipsterectomy |
but it's football focused? in what way? |
The players are the subject of the stocks rather than a traded company. | |
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| Anyone been keeping an eye on the Football Index scandal? on 17:40 - Mar 8 with 3642 views | StokieBlue |
| Anyone been keeping an eye on the Football Index scandal? on 17:38 - Mar 8 by Hipsterectomy |
but it's football focused? in what way? |
Each share is actually a synthetic share in a player.
So you can buy 10 shares of Andre Dozzell for X and if he plays well others might want him for Y. You'll also get a dividend of Z.
Unfortunately when Y is 0 then so is your investment [*].
SB
[*] assuming that the sum (Z) < X. [Post edited 8 Mar 2021 17:41]
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