LONDON (Alliance News) - Paysafe Group PLC shares dived on Tuesday as the payment processing company denied claims made by a short-seller that it is enabling "both illegal gambling and Chinese capital control evasion" for one of its customers.
FTSE 250-listed Paysafe said in answer to the claims, made by an organisation called Spotlight Research, "all material information in the report is either factually inaccurate or has been previously disclosed".
However, shares in Paysafe were down 18% to 303.50 pence on Tuesday afternoon, having hit a low of 229.21p.
Spotlight Research, which disclosed a short interest in Paysafe shares, alleged that Paysafe's largest customer represents around 50% of the company's earnings and is operating a business that "appears to facilitate and engage in illegal gambling", amongst other claims.
Spotlight Research said it believes that UK-based gambling company Bet365 Group Ltd is that customer, and that it is running a gambling website for Chinese customers. Gambling is illegal in China, and Spotlight said such a site "could potentially be used to evade Chinese capital controls".
Paysafe say it relies on an "outsourced service provider" for the Chinese activities of an unnamed partner, which Spotlight Research believes is Bet365. However, Spotlight Research claimed this outsourced provider may actually be an undisclosed related party of Paysafe.
A spokesperson for Bet365 declined to comment to Alliance News.
Spotlight Research pointed to Paysafe's e-wallet operation Quick Access, which was shut down in 2010 over regulatory concerns. Spotlight Research said it believes that operation's main product, a digital wallet called 1-Pay, continued to operate to the end of 2014, based on internet traffic data.
According to the organisation, this e-wallet tool would allow for the evasion of Chinese capital control regulations, such as limits on foreign exchange.
Spotlight Research said it believes 1-Pay continued to be operated by a company run by Joyce Wong, former Paysafe director of Asian operations. The organisation also claims that this business was shut down by the Chinese authorities in 2015, but a new company, named Hamber Services, has been set up to provide a similar service by former Paysafe executive Eric Sherritt.
The report claims that Sherritt left Paysafe at the end of October 2015, two days after becoming director of Hamber Services.
Spotlight Research also claimed to have identified other gambling operations targeting the Chinese market and other countries where gambling may be illegal such as India, which are run by Paysafe customers.
The organisation claimed that Paysafe may face the risk of "criminal prosecution and sanctions" in the UK and its Chinese operation being shut down, if it is shown to have enabled gambling in China.
Paysafe said Tuesday that it has a history of "significant, transparent disclosure to the market, publishing two prospectuses in 2015 and being subject to substantial additional scrutiny through a full UKLA listing process as part of its move to the Main Market of the London Stock Exchange".
Paysafe said that its business continues to perform well and it expects to next update the market on January 12.
By Adam Clark; adamclark@alliancenews.com
Copyright 2016 Alliance News Limited. All Rights Reserved.
