Officials with Betfair, the world's leading betting exchange, released a statement on Wednesday confriming it played a key role in uncovering a possible betting ring.
Betfair said that an ongoing investigation looked at the betting habits and patterns of a handful of accounts on the site since January after some speculation was raised by Betfair.
On Tuesday, the Racing Post in the UK published a report that an investigation had been launched into a gambling ring that was profiting from laying horses on Betfair that it knew wouldn't win.
Betfair identified a number of accounts that were suspicious but the exchange agreed to keep them open so officials from Betfair and the Jockey Club could monitor them for corrupt or unusual activity.
While no individuals have been identified in the ring, Betfair did say that the investigation was made possible after a memorandum of understanding was signed between the Jockey Club and Betfair two years ago. As part of the agreement Betfair agrees to give Jockey Club investigators unlimited access to betting accounts once they have been identified as suspicious.
If the ongoing Jockey Club investigation reveals that racing officials (jockeys, trainers, owners, etc.) were involved in the ring, they could face sever penalties from racing regulators.
A report in the Racing Post said a trainer whose horses accounted for four of the five largest liabilities from laying on one of the accounts had no knowledge of the account holder.
Mark Davies, Betfair's managing director, said the Jockey Club and Betfair both agreed to keep the accounts open in order to determine the seriousness of the case, or if there was even a case at all.
"We agreed to leave open the accounts in question, so that a solid case could be built against those alleged to be corrupting racing, or the accounts could be clearly and unequivocally exonerated," he said.
Davies said that Betfair had no knowledge or information regarding whether or not jockeys were paid to "facilitate results," but he did confirm that the accounts in question in the Racing Post report, had long been identified by Betfair and racing officials.
"The Jockey Club has since February been able to monitor these, and other, accounts live through Betfair's Betmonitor service," he said. "This allows the Jockey Club to see all bets as they are placed, in real time, in anonymous format."
The security department probe was spurred by the suspicion that privileged information from licensed individuals was being exploited in order to profit from laying horses who wouldn't win.
As part of the agreement between Betfair and the Jockey Club, regulators can get named information about accounts if they feel they are suspicious.
At the center of the alleged ring are two Betfair accounts that were used at different times to facilitate bets. One account had potential liabilities of more than £56,000 after laying the second favorite in a Midlands race last year. The heavily favored horse eventually finished ninth in the 12 horse field, netting the account holder £7,479 on the bet.
He risked losing more than £44,000 when another second favorite finished 13 of 14 in a handicap last year after getting upset in the stalls. That bet won the account holder more than £5,400, according to the Racing Post.
In a third race in the Midlands the account holder won more than £4,300 after another horse was beaten, had the horse own it would have cost more than £36,000 to the bettor.
In total, the user risked over £200,000 laying eight runners on Betfair's win or place markets in 2004, winning over £28,500 in the process.
The account holder never had a horse win a race that he was betting against, a high success rate for any sports bettor, but almost unheard of on a betting exchange.
The latest controversy has only added fuel to the fire for traditional bookmakers in the UK, and throughout the world, who have long argued that exchanges only increase the ease in which races can be fixed.
On Wednesday, Betfair said that the illegal betting ring may not have been discovered or brought to light had it not been for the memorandum of understanding between Betfair and the Jockey Club, and for Betfair's ability to know their customers and account holders.
Ladbrokes chief executive Chris Bell has been at the forefront of the opposition to Betfair and other exchanges, having said last year that "at least one race a day, if not more, is being corrupted by the availability of laying horses to lose," he said.
William Hill chief executive David Harding said news of the latest betting scandal was somewhat bittersweet for him.
"I take no satisfaction in it," he said. "I'd rather not be quoted as saying 'I told you so' because it's not great to see, but in away it was inevitable. What I said was if you create the opportunity for people to benefit from doing this sort of thing then don't be surprised if they take you up on it."
Harding thinks that no matter what kind of an agreement Betfair has with the Jockey Club, or other racing industry leaders, some individuals will try to exploit what the exchanges have to offer.
"It's very difficult to stamp it out completely," he said. "It's kind of late now. If people had tackled it from that stance a few years ago it might have been manageable but now I think in reality exchanges are here to stay. I suspect we are going to see Jockey Club inquiries like this year in year out."
The bookmakers have been pressing the government to ensure the new Gambling Commission has the authority to closely scrutinize betting exchange activity.
Tom Kelly, chief executive of the Association of British Bookmakers said recent scandal validates their position on exchanges and is hopefully the Gambling Commission will look at exchanges more closely now.