Intrade, the betting website that halted trading last month amid a probe into suspected financial irregularities, told customers it has found a $700,000 shortfall in client funds as it seeks their backing for a survival plan.
The company uncovered the shortfall after comparing cash on hand and in member accounts with balances on the exchange’s system, Ronald Bernstein, who became a director in November and is leading the rescue effort, said in an e-mail to clients this, a copy of which was obtained by Bloomberg News. He confirmed the letter’s contents.
Intrade, which let people bet against one another on the outcomes of events, such as U.S. presidential elections, stopped taking wagers and froze member accounts on March 10 after saying it had uncovered suspected financial irregularities. The company is now asking members to accept immediate repayment of half their frozen money and waive claims to the rest on the “solemn promise” that Intrade will try to refund that later.
The company is “extremely likely to be forced into liquidation” if members don’t support the plan, Bernstein said. Almost all of the 40 members with the largest account balances have agreed to support the proposal, he added. “If the group that I have spoken with remains fully intact, I believe the company can, in fact, remain solvent,” he said.
Investors have until Tuesday to sign up to the plan, he wrote. The company is still in “active” talks with investors to secure its financial position, he added.
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