It was just a week ago that we wrote about Mark Cuban’s proposal for a sports betting hedge fund. In that article, we referenced a UK-based hedge fund that had launched to pursue Cuban’s idea. Well, that hedge fund has already collapsed.
A London investment company, Centaur, launched its Galileo fund to provide investors with the opportunity to generate returns through sports betting. This was the first-ever sports betting fund and it received a lot of press attention. CNBC covered it. So did BusinessWeek. As did the LA Times.
Â Tony Woodhams, managing director for Centaur, told CNBC â€œWe have unique software weâ€™ve written over five years that ensures we purely trade on statistics and probabilities. The process is very clinical, which is our edge.” Woodhams also indicated the hedge fund’s projected rate of return was 15 to 25%.
Well, if Centaur ever had an edge, it appears to be gone. And the actual rate of return for investors looks like it will be about minus 100% asÂ The Journal is reporting that angry investors have lost $2.5M and the fund has filed for liquidation. The fund’s website has been stripped of all information as the liquidation unfolds.
While re-reading past comments Centaur management provided to the media in light of today’s news, the Centaur Galileo fund has the feel of a tout operation wrapped in a Wall Street brand. In particular, Mr. Woodhams claimed The Centaur Sports fund had returns in excess of 40% per year over the past 5 years. Obviously, that seems to be very unlikely.
Perhaps another red flag was the fact that this fund was not regulated by the UK Financial Services Authority. Instead, the fund was regulated by the Gibraltan government. Yes, Gibraltar has its very own government.
This story behind the collapse of the world’s first ever sports betting hedge fund has just started and will surely get more interesting over the coming weeks. At this point, it’s unclear if the fund has lost all the money as a result of bad bets or if there was some type of fraud. As new information comes out, we’ll be updating this story.