Online bookmaker Betfair is set to pay out tens of thousands of pounds to gamblers who bet on a particular horse race, after a major IT problem saw their bets voided.

During the Christmas Hurdle race at Leopardstown on 28 December, a major error allowed one client to place bets at much longer odds on a horse than were set at the start, and to continue to place a high volume of bets throughout the race and after the race had finished.

The customer in question was using an automated trading system to place the bets, and bets had been accepted way beyond the £1,000 in the customer's account. The large number of orders and "unique sequence of events" led to the glitch, the company said. It declined to state the specific technical nature of the problem, but said it had taken steps to ensure it does not happen again.

The problem was so bad that Betfair's IT systems began to calculate a potential liability of up to £600 million for the customer.

The Daily Telegraph reported that following the glitch, Betfair will pay compensation to customers totalling nearly £100,000, but the bookmaker has not confirmed the exact figure.

Betfair said in a statement that following talks with regulator the Gibraltar Gaming Commission, "in the interests of fairness, certain categories of voided bets will be compensated by way of ex-gratia payments".

Two days after the glitch, Betfair chief executive Stephen Morana wrote to customers to apologise for the problem. He added: "This is the first time that we have ever experienced anything like this ... which goes to show how robust and resilient the bet matching engine is and will continue to be."

In other news, Betfair has agreed to work with the International Olympic Committee during the London 2012 Games, in order to exchange data about suspicious betting patterns. The move is part of efforts to tackle organised illegal gambling.

It emerged last year that the company, which has invested heavily in technology, did not inform customers for 18 months of a major data breach, in which over three million people's data was stolen. The data was encrypted, however.