In a breaking story, it has been reported that directors of the failed sports investment fund Centaur have had their assets frozen in order to repay investors. It is believed that managing director Keith Sobey skipped town trying to avoid prosecution however he either naively thought Ireland was a safe enough place to hide or had a lingering feeling of guilt and sat waiting for that knock on the door.
Sobey, the name behind Centaur (read the original story here), is believed to own four houses, worth more in total than the missing £1.6m. His willingness to sell them to repay investors is likely to keep the matter out of the courts, and at least one other director, Andrew Cork, will apparently follow suit.
All this adds weight to anecdotal evidence that the collapse of the fund came down to mismanagement rather than fraudulent deeds. As costs grew (why would you set up a training academy in central London?), margins evaporated and keeping the business afloat went through money like an 'It' girl in a Christian Louboutin shop. However there are allegations that £400k in directors loans were paid from client funds late in 2011 which were splurged on cars and expensive holidays.
The business focused on three areas: securing investment money, training Betfair customers and investing (punting with) client funds.
Centaur was way too shiny and fake for serious investment. Sobey simply thought everything he did on a small scale could be multiplied linearly and they'd all be rich. A few signed up to it, but the Gibraltar-based firm who managed the funds for them need their heads examined for expecting the public to stump up £50m to trade with. Any punter will know that when you step up from £5 stakes to £50, things change. Put another zero or two on the end and you start having great difficulty getting set, unless you are A - a complete mug, B - betting only into the bigger markets (eg Cheltenham, EPL football etc) which are so tight there is little edge, or C - you falsely claim your bets were on at price X, when actually you got £5 at the best price and the rest went on much lower because bookies see you coming a mile off and slash the price because you're not wise enough to use beards/bowlers to get set properly. But, apparently this practice (C) is legal under advertising standards....
Centaur partnered with Betfair for a while to conduct training seminars for customers. Sobey's scale problem arose again - filling four seminars of 20 people in a week made him think they could do that every week of the year, and run several at the same time. It just doesn't work like that and Betfair weren't interested in hammering their database regularly to plug it, nor to subsidise expensive training for low-value customers which simply doesn't add up, unless it is part of an underlying company ethos which has long disappeared.
My spies tell me the training they offered was of high quality, however it all centred around one individual. Centaur made no effort to train/hire additional staff to roll the programme out, believing anyone could do it, and Betfair cannily had the partnership deal linked to the programme being led by one person. When that person left the business, one of his assistants was given the opportunity to take over, but Betfair felt the writing was on the wall and the get-out clause was activated.
Once the individual left and Betfair pulled the training, the new man, Neil Daldy came up with the idea to allow 40 people to come in and do a four-week "intensive" course and then trade for the company. So 40 people applied and came in every day for four weeks at their own expense, no payment with the promise of a job at the end of it. They were trained on BetTrader Evolution for 4 weeks on training mode and of course, with no pressure, they all made money. Then they let them loose on the REAL markets and you don't need me to tell you the result. One guy was abused so badly by Neil Daldy he went home one night, opened his own Betfair account and transferred via obscure markets the whole £15,000 bank allocated to him. Police were not called as this would have exposed the whole situation at Centaur and the guy was allowed to leave with no consequence. Daldy, who allegedly took a four-hour lunch break every day on the company credit card and came back pissed mid-afternoon, was eventually fired for trying to destroy Centaur and steal the clients and start up on his own.
Punting with client funds was always going to be the hardest part. Any half-serious punter will tell you how hard it is to stay on top of the game. If you expand the business or your turnover, you need extra resources, and these resources don't come cheap. Bookmakers these days have mostly switched from expensive, high quality staff to cheaper operators who mostly monitor automated systems. There aren't that many experts left. On the other side of the counter, unless you have developed/purchased your own sophisticated programmes to do most of the work for you, then there is no option to recruit cheaper, less skilled labour. It was soon very evident that Centaur could not get anywhere near promised targets so it went back to square one - Keith Sobey using his tipping line bets for straight out punting. Ever tried punting your way out of a deep financial hole? Has it ever worked? Not likely. Complicate that with all the stresses of trying to hold a business which you have invested heavily in and it's a desperate picture. No time to do the form properly, bookies seeing him coming a mile off and laying unders every time and lo & behold, the business collapsed because for all the good intentions in the world, if you don't arm yourself with the resources to make the business a success, you have more chance of flying to the Moon than turning a profit....
If reports are true about Sobey and co being prepared to pay back investors, then I'm glad and that's one less nasty black mark against the industry. But it will make it very hard for a sports investment fund to get off the ground unless they are far more professional about it. An Australian firm called Priomha are making positive steps at doing that, following basic business school principles, and importantly for punters and investors, being very transparent about what they do. I am certain it can be done properly - but there is no room for sloppiness, cutting corners or ill discipline as we've seen from the Centaur fiasco.