Betfair offer punters help over rival firm's failure

"It is our understanding that Sporting Options are effectively dead and that there will be no return for any clients with money tied up there," he said.

"Their collapse does the industry no favours, but there is a big overlap between our customers and the customers of Sporting Options and this package gives those who have lost out the chance to recover their money provided they register with Betfair."

Punters who had up to £1,000 in a Sporting Options account will receive an immediate refund under the package, while those owed in excess of £1,000 will receive a lump sum plus a reduced Betfair commission offer designed to help them secure a full refund over time.

However, the demise of Sporting Options will come as a serious blow to the exchange industry, especially if the inquiry into the collapse of the company unearths evidence that client funds were misused.

Internet bookmaking company Blue Square pulled out of a deal to buy Sporting Options in September after looking into the financial problems of the firm, which are believed to centre around the practice of "seeding" markets in order to give the impression of greater liquidity. According to one industry expert, much now depends on whether that practice was carried out using company funds or client funds. "Seeding markets isn't illegal, but using client funds to run your business certainly is," he said.

Paul Cooper, who has been acting as head of communications for Sporting Options, was unavailable for comment this morning.