Odds that the story behind InTrade's collapse will get more interesting just keep on rising: One possible reason that the firm suddenly shut down may now be the recent discovery of millions of dollars in undocumented payments to the site's former CEO John Delaney, who died on Mount Everest in 2011.
When the prediction market (the what?) closed up shop abruptly over the weekend, the rationale it offered for doing so was vague. "Due to circumstances recently discovered," it offered, trading would cease, since "[t]hese circumstances require immediate further investigation, and may include financial irregularities".
The Irish newspaper Sunday Independent yesterday clarified what the auditors apparently discovered: "Brian Dunne of the accountants Caulfield Dunne could not give a "true and fair view" of Intrade's 2011 accounts, citing payments apparently made to the late Mr Delaney, without the proper paperwork." According to the Financial Times, Delaney received payments of $1.2 million in 2010 and nearly $1.4 million in 2011.
From the auditor's report, provided by the Financial Times.
The company lost $1.6 million in 2011. Delaney died that May while climbing the world's highest peak (not an inexpensive endeavor). The timeline of the payments isn't clear, though if they all preceded Delaney's death, he averaged more than $280,000 a month in undocumented payments in 2011, compared to $100,000 a month in 2010.
These odd payments may not be the auditors' only concerns. The auditor's report was released on February 4 — more than a month before InTrade announced its closure — and it suggested that Caulfield Dunne had "not obtained all the information and explanations we consider necessary" to complete the audit.