There's a feature called the 'time weight'.
The weighing will help reduce the effect of people putting on large bets after the result is known, but such behaviour would still significantly harm the return on winning bets placed in advance, especially if the default happens significantly before the deadline of the bet.
I would hope bets placed after the default became apparent would be cancelled, but I don't see anything about this on their site.
How are the losing bets distributed?
Here is the breakdown of the distribution:
45% goes to the bet winners proportional to their bets.
45% goes to the bet winners proportional to their weighted bets.
5% goes to the user who submitted the bet.
5% goes to the site.
Here is an example:
Let's say total of 10 btc is lost on a statement and there are three users who won:
User A bets 1 btc 6000 minutes before the deadline (weighted bet of 6000), she is also the submitter.
User B bets 3 btc 1000 minutes before the deadline (weighted bet of 3000)
User C bets 1 btc at the last second (weighted bet of 0)
4.5 btc is distributed proportional to bets:
User A gets 0.9, User B gets 2.7, User C gets 0.9.
4.5 btc is distributed proportional to weighted bets:
User A gets 3.0, User B gets 1.5, User C gets 0.
User A also receives 0.5 commission as a submitter.
So in total:
User A profits 4.4, User B profits 4.2, User C profits 0.9, and site profits 0.5.
Obviously every winner also receives back the bet they put.
Take home message: Bet early, win more.