Betfair's £23m betting liability was caused by small-scale customer - The Guardian

The Betfair betting exchange said on Thursdayyesterday that its technicians had identified and fixed the software flaw that caused the in-running betting on Wednesday's Christmas Hurdle at Leopardstown to be declared void. Voler La Vedette, the easy winner, was available to back at odds of 28-1 from early in the race until she crossed the line, causing £800,000 to be staked on the mare worth a total payout, in theory, of nearly £23m.

Tony Calvin, Betfair's spokesman, also launched a defence of the exchange's response to the unprecedented betting activity on the Leopardstown race, in an interview with At The Races. While he acknowledged that the episode had been "highly embarrassing and an unacceptable betting experience for people", Calvin said that "there was a unique set of events that allowed this to happen".

Calvin speculated that an automated trading programme, or "bot", had almost certainly been responsible for placing the rogue bet into the exchange, but confirmed that Betfair itself operates in-house bots on the exchange.

He also said that Betfair, which now operates its exchange via Gibraltar to avoid betting duty, had nothing to hide from Britain's betting regulators. "If the Gambling Commission want to come and have a look, that's fine," he said. "We're always honest and transparent."

Calvin's interview also suggested that punters who are dissatisfied with the way that the issue has been handled could take their concerns to the Independent Betting Arbitration Service (IBAS), which resolves disputes between punters and betting operators.

Betfair is expected to release an extensive and final report on the incident on Friday, but in a statement issued early on Thursday afternoon, the exchange said that "we have identified the issue and replicated it in a test environment last night. A fix was applied overnight, and is now subject to rigorous testing."

The statement added that "contrary to some media speculation, we can confirm that all in-running bets on this market would have been voided, had Voler La Vedette won or lost. There was never any chance of the account in question profiting yesterday. The account in question was also immediately suspended after the Leopardstown race."

The identity of the Betfair customer who placed the rogue bet remains the subject of speculation, though the account is believed to have been operated by an individual client with a modest balance, rather than a bookmaker seeking to hedge liabilities or an account linked to the exchange itself.

"If you're looking for a £1m-plus customer, you would be barking up the wrong tree," Calvin said when questioned on ATR. "People think we are protecting the customer, but that is not the case."

The bizarre betting patterns on Voler La Vedette's race, and the decision to void bets which left a number of Betfair's customers believing they had been denied a generous payout, came at the end of a difficult year for the betting exchange.

Its share price has been stuck below £8 for many months, well adrift of the £13 at which the exchange floated in October 2010. A number of senior staff, including Ed Wray, Betfair's chairman and one of its co-founders, and David Yu, its chief executive, have either left the company or are in the process of doing so, while in September, Betfair left a number of customers disappointed when its software failed to process a significant number of bets, including some winners, into the biggest Tote Jackpot pool in history.

The most damaging long-term effect of Betfair's latest PR disaster, however, could be a loss of trust on the part of its customers. The phantom money put up against Voler La Vedette was too obvious to miss, but some may now wonder whether the everyday sums too are really what they seem.

The events at Leopardstown could also increase awareness of the extent to which the day-to-day activity on the site is controlled by bots, rather than "ordinary" punters with a laptop or a smartphone. And any betting operation that loses the trust of its customers is on a slippery slope.