An Irish online betting company backed by high-profile Wall Street hedge fund owners is facing court action and possible fines in the US for breaches of commodity trading regulations.
Dublin-based Intrade, which allows customers to wager on commodity prices, stock market indices and world events, has closed its website to US clients citing “legal and regulatory” pressures.
US regulator the Commodity Futures Trading Commission has filed a series of civil complaints against Intrade and its parent, Trading Exchange, in the federal courts, claiming that they unlawfully allowed US customers to “buy and sell” options predicting that gold prices or currency values would reach a certain level on a given date.
The complaint also alleges that the Irish companies knowingly filed false forms with the commission claiming that Intrade limited its activities to only to eligible market participants.
“Contrary to these representations, the complaint alleges that Intrade unlawfully solicited and permitted retail US customers to buy and sell off-exchange options on the website,”
A number of US hedge funds and their owners hold shares in Trading Exchange Network, including Stanley Druckenmiller of Duquesne Capital Management and Paul Tudor Jones of Tudor Investments.
When he worked with George Soros’s Quantum Fund in 1992, Mr Druckenmiller masterminded the wholesale short-selling of sterling that eventually forced the British government to take its currency out of the European Exchange Rate Mechanism, the euro’s forerunner.
The fund was reported to have made more than $1 billion profit from its sterling trades in just a few days in early 1992. It effectively broke the Bank of England, which did not have the reserves to prop up the currency.
Mr Druckenmiller is reckoned to be worth $2.5 billion and has given an estimated $700 million to charities.
Mr Tudor Jones turned down a place at Harvard Business School to set up his own hedge fund in 1980. He famously predicted the 1987 “black Monday” crash, tripling his fund’s investments through short selling. Forbes Magazine has estimated his fortune at $3.4 billion.
