Spreadbetting group London Capital may have to pay up to £7.7 million to clients who lost money on a third-party currency fund, according to the Financial Ombudsman Service.

Despite a previous ruling, a second report by the Ombudsman ruled that the company, which provides a number of white-labelled services to well known brands such as Paddy Power, must repay £100,000 to investors who lost money in the third party fund.

Simon Denham, chief executive officer of London Capital Group, said a revised assessment of the situation was received by the company on 11 February 2011.

He explained, ‘On the basis of a previous decision given by the FOS in respect of this case, we had expected that the impact of the FOS enquiry would be immaterial on the business. However, a revised assessment from the FOS was received on 11 February.

‘While London Capital Group believes its actions did not cause the loss to the client in question, the FOS adjudicator has now made an assessment that London Capital should repay the total losses incurred by the client of £100,000 plus interest.

'While on its own this is not material, in total the fund to which the client belonged lost £7.7 million.’

London Capital Group has been in discussions with the Financial Ombudsman Service pertaining to commission rebating of a managed spot FX fund which occurred in H1 09.

The query was in relation to complaints from clients that had participated in the programme. It is not yet clear to what extent London Capital Group may be found to be liable for this total loss.

The company said in a stock market announcement that the group has sufficient resources to meet a liability which extends to the full amount which the fund lost.