A former senior employee of the failed betting platform Football Index has spoken for the first time about the structural flaws which brought down the business and the increasingly desperate attempts to save it in the months leading up to its collapse in early March.

Football Index went offline after a series of crashes in its “football stock market”, where users could buy and trade “shares” in leading players which returned dividends according to their performances on the pitch. The Gambling Commission, which regulated the company, suspended its licence on 11 March, leaving customers with stakes of at least £90m in open bets trapped in the platform.

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The Guardian reported last week that FI’s directors were warned by an ex-employee soon after launch that its business model was an “unsustainable” bubble similar to a Ponzi scheme, and now another former employee has described the months leading up to the moment when it finally burst.

A fundamental problem with FI’s business model, the former employee says, was that it was impossible to price shares – or bets – accurately, with a workable profit margin for the platform included, when the firm could expect to pay dividends on each bet for the duration of a player’s career.

“They basically constantly sold bets that would pay out five quid for three quid in the early days of the platform,” the ex-employee said. “It’s as simple as that; they sold loads and loads of bets at prices that were stupid.

“What we couldn’t understand was, if all things are equal, what is the level at which we should issue a share to break-even? But we couldn’t work it out, we literally didn’t have a clue.

“They sold bets for a particular value, at a point where they didn’t know what it was worth, and then they were always increasing the price, when in reality a player’s potential to earn money is decreasing throughout their career.

“It’s upside down. They’re increasing the price when the player’s price should be falling. The only way to make that attractive is to make everybody make money, and the way you make everybody make money is you issue the bets at too low a value.

“The early users all make money because the price is rising, later users pay more and more for the bets. Eventually, that last group of users have massively overpaid for those bets, there’s nobody else to buy those bets and that’s when the platform goes bust. There is literally no other source for that money and it’s built in as a structural problem.”

FI’s shares were, technically at least, three-year bets, but most users would sell on to other users long before the term was up, creating a new three-year liability for the company. While it charged a small commission on any sale, however, its main revenue on any bet derived from selling a freshly “minted” share in the first place.

It was also promoted as a “safer” alternative to traditional betting on football, since a stake was “invested” over months or years and could not be lost entirely in an afternoon.

This deliberate imitation of an investment product, however, had implications for users and Football Index. Customers were effectively obliged to deposit significant sums and stake most or all of the money on shares, since cash balances could not earn dividends. This, in turn, left all but a fraction of money deposited with the site with no protection if it failed.

Football Index, meanwhile, found it impossible to price its bets, though the former employee is unsure whether its directors grasped the problem. “I don’t know whether they understood the model,” the ex-employee says. “Obviously it’s a gambling product, they have to know that the average client’s got to lose money, but they advertised it as a way to make money. This could not be a way for anyone to make money, at least not on average, because it’s a betting product and it’s a closed system. The product should never have got off the ground in the first place.”

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One of many questions about Football Index that remains unanswered is what happened to the stakes of at least £90m which had been “invested” in the platform. The Athletic reported this month that FI spent £15m on plans for global expansion in the months leading up to its collapse, but that still leaves many tens of millions of pounds unaccounted for.

“I don’t know where the money’s gone,” the ex-employee says, “but you have an organisation of roughly 100 people, with salaries of maybe £1m per month. You’ve got the inherent costs of running a business, the marketing, some major sponsorship deals [including shirt sponsorships with Nottingham Forest and QPR] and all the bets they paid out on.

“I also see people on Twitter saying, ‘I was lucky, I got out with all my profits’, and a good portion of it is in the hands of people who walked out with profits early doors.”

Adam Cole, Football Index’s co-founder and former chief executive, did not respond to a request for comment.