The Dutch Payvision and the Israeli-Lithuanian Bruc Bond (formerly Moneta International) have in common that they were intensively involved in the fraudulent binary options as payment processors. Let us make no mistake here and therefore make clear that neither of them were scammers or fraudsters themselves. But both have provided services to operators of fraudulent binary options and broker scams and thus facilitated those schemes for their own financial benefit. There have been consequences for both companies in recent days which may or may not be related to their binary options legacy. While Bruc Bond lost his license in Lithuania, the three founders and board members of Payvision resigned. This is, in any case, a watershed situation for both FinTech’s and others may follow this path.
The Smart Exit and the road to Singapore
The founders of both payment processors are veterans in the FinTech sector. Payvision was founded in Amsterdam in 2002 by the Dutch guys Rudolf Booker, Cheng Lim Li, and Gijs Op de Weegh. Lithuania-registered Bruc Bond (formerly Monata International) was founded in 2016 by the Israelis Eyal Nachum and Tamir Zoltovski. The two had previously gained worldwide experience with the unlicensed Israeli payment processor Payotech Ltd (d/b/a Payobin). Nachum and Zoltovski were also already active in the binary options industry with their Payobin as was the regulated Lithuanian International Fintech UAB, also controlled by Nachum and Zoltovski.
While the founders of Payvision sold 75% of their shares to the Dutch ING Bank on a valuation basis of €360 million and thus made an excellent exit, Nachum and Zoltovski still hold their shares today. An exit is likely to become a bit more difficult for them after the withdrawal of their license in Lithuania.
The exit was probably the masterpiece of the Payvision founders and they deserve respect for it. According to the FinTelegram available documents, the sales of Payvision with illegal and fraudulent customers have made a huge increase in turnover, profit, and thus the valuation. Rudolf Booker and his co-founders used the binary options hype and the parallel Fintech hype perfectly for their exit.
Siem Eikelboom, an investigative journalist for the Dutch magazine Follow the Money has made a short portrait of the now ING subsidiary Payvision on the occasion of the surprising departure of the founders. He portrayed the three founders are presented as a sort of FinTech cowboys who know how to play the game. With an estimated net worth of €370 million, Rudolf Booker played himself into the list of the most wealthy tech millionaires in the Netherlands.
We learn from the files that the transaction volume with the illegal and fraudulent brokerage firms of Lenhoff and Barak alone amounted to around €130 million in 2017 and 2018. There were many more clients like Lenhoff and Barak. Hence, it may not be too far from reality to conclude that between 2016 and 2018 hundreds of millions of Euros of scams and their victims were processed via Payvision. This results in a pretty nice valuation uptick in an exit scenario, especially if you include future expected increases in a Discounted Cash Flow (DCF) valuation. Well, €360 million is a nice valuation for Payvision in 2018, isn’t it?
While Payvision was sold to ING in a nice deal, Bruc Bond went down the path of expansion. The money earned by scam customers via Payobin, Bruc Bond, or Moneta International, among others, was invested in expansion into Asia. There, Nachum and his partners saw the big growth potential. In December 2019, a Bruc Bond branch was consequently opened in Singapore. It remains to be seen how this will continue after the revocation of the license of the parent company in Lithuania.
The KYC/AML Wild West Trap
Granted, it is tempting for FinTechs to use new technologies to disrupt the existing financial system. Truth is that many of the traditional financial providers have never really made the leap into the digital cyber world with their sluggish organization. As so-called challengers, FinTechs like TransferWise, Revolut, Monzo, Starling Bank, or N26 have snatched away their customers and reinvented the financial world.
The downside, however, is that not only the established banks but also the regulators and law enforcement were caught on the food side by the FinTech revolution. It is now known that FinTechs had a problem with KYC/AML for a long time. This applies to N26 as well as Revolut or Payvision or Bruc Bond (formerly Moneta International). But the question is how the problem arose and how it was addressed.
The documents in the Payvision case suggest the payment processor may have deliberately circumvented the KYC/AML rules or at least interpreted them very generously. The KYC/AML documents of Nachum and Zoltovski’s companies, which are available to FinTelegram, also prove this without any doubt. The Bank of Lithuania must also have seen it that way. The serious and systematic violations of regulatory requirements and KYC/AML were a reason for revoking the license.
Financial service providers are also the watchdogs of the financial world. The KYC/AML regulations are designed to block cybercriminals and terrorists from accessing the financial system. Negligent handling of these regulations not only enables scams and cybercrime and thus damage investors, but threatens our society as a whole. FinTech cowboys not only challenge the establishment (which is good) but threaten the stability of our financial system and thus our economy (which is not so good).