WorldSpreads admin reveals £13m black hole

WorldSpreads has entered the special administration regime after the discovery of “accounting irregularities” that left £13m missing from its clients’ accounts.

The AIM-listed spreadbetting company had is shares suspended on 16 March and entered the Special Administration Regime (SAR) on 18 March, according to the Financial Services Authority (FSA).

The FSA said that after the irregularities were discovered it quickly became apparent that the company was unable to continue in business and that the best course of action would be to place the company into special administration.

The board put forward an administration application to the High Court yesterday and insolvency proceedings were announced along with the appointment of Jane Moriarty and Samantha Bewick of KPMG as joint special administrators.

Moriarty and Bewick will review the client cash holdings positions and return as much cash as possible to clients.

The FSA added: “clients should be aware that any shortfall in the client money accounts will impact the amount of money that can be returned.”

Gross amounts owed to clients at close of business on 16 March were £29.7m, the company’s cash balances were only £16.6m, leaving a shortfall of about £13m. According to the Financial Times “money from client accounts, which should be segregated, had been mixed with the company’s own funds”.

Over the weekend both IG Group and London Capital Group decided not to pursue a takeover of the company through a pre-pack administration.

Two days before the discovery of irregularities chief executive Conor Foley and FD Niall O’Kelly left the company with immediate effect, however neither has been accused of any wrongdoing.

Ernst & Young is the auditor of WorldSpreads and would have been responsible for signing off annual accounts at a time when the alleged fraud was being carried out.