20 February 2019: The bankruptcy of the founder of the Layezy Racing Owners Club, Mike Stanley, has hit the headlines this week and has highlighted the risks involved with one particular form of “investment” that often goes unreported – betting syndicates.
Mr Stanley was declared bankrupt upon his own petition on 11 February 2019 and whilst the club owns 23 racehorses, the ultimate beneficial owner is Mr Stanley. The rules of racing make it clear that insolvent individuals or entities are not permitted to own and run racehorses and all 23 horses have therefore been barred from running until further notice. As a consequence, the horses will probably be assets in the bankruptcy estate to be realised (sold) by the trustees.
The owners club is connected to the Layezy Racing Betting Syndicate, which is also being wound up. Betting syndicates are an ever more popular way for smaller-staking punters to win big alongside fellow like-minded gamblers by pooling resources to stake a larger amount across more bets than would be possible if the individuals were betting alone. Often a syndicate will be organised by third parties who will promise that their experts will do their best to find the winning selections. The Layezy Racing betting syndicate appears to have made an offer along similar lines and to have tempted large numbers of people to invest. Stories are already starting to emerge of punters who handed over their life savings or pension funds, with one estimate of the total sum that may have been introduced into Layezy Racing being £70m.
How much of that money was actually placed on bets remains to be seen. Regardless, as Layezy Racing promoted itself as a betting syndicate and betting in the UK is legal and regulated, then you would presume that its activities were at least monitored by a regulatory body. Well, not quite. The Gambling Commission has already stated to one punter who asked them whether money invested in a betting syndicate had any legal protection, “As we do not regulate syndicates any issues that you may have would be a civil matter. If the syndicate had won but refused to pay you your share then the only way to proceed would be through the courts”. The Gambling Commission’s view appears to be that a bet is only a bet if the person funding it has a say in the selection(s) whereas if the money is introduced into a syndicate then it counts as an investment. Maybe then the regulator would be the Financial Conduct Authority but no-one seems to know for sure.
This case has demonstrated that betting syndicates currently operate in a rather grey regulatory area and it would seem that the only recourse available to those who have invested in Layezy Racing is to claim in the bankruptcy in the hope of recovering their money. Whether they are able to recover any of it will therefore be entirely dependent on the quantum of Mr Stanley’s assets.
The key message to take away from all of this is that any potential investment opportunity should be fully considered before any money changes hands as the risk is very much all your own. Should you or one of your clients be experiencing financial difficulties as a result of an investment gone wrong or otherwise please do not hesitate to contact one of the BRI management team. We are here to help.