Payment systems provider Paysafe saw its shares tumble on Tuesday after a short-selling firm Spotlight Research claimed it was enabling illegal gambling and Chinese capital control evasion, local media reports.
The short seller pointed out that Paysafe's largest customer, Bet365, which represents around 50 percent of its earnings, is operating a business that appears to facilitate and engage in illegal gambling, which caters to Chinese customers, and could also be used to circumvent Chinese capital controls.
"Paysafe appears to be enabling both illegal gambling and Chinese capital control evasion through undisclosed related parties run by recent former executives," it said.
"Paysafe is headquartered and listed in the UK and may face risk of criminal prosecution and sanctions by the Financial Conduct Authority, while the Chinese business (an estimated 50 percent of earnings) may be at risk of being shut down by Chinese authorities,” it said, adding that recent Chinese court cases may link a recent former Paysafe executive, an alleged undisclosed related party, (most likely Bet365), and by implication, Paysafe itself, together in an illegal gambling ring.
Responding to the share price slump, Paysafe released a statement saying all material information in the report "is either factually inaccurate or has been previously disclosed".
"The group 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."
At 10:00am GMT 8, Paysafe shares were down 16.7 percent to 308.74GBX (US$3.91).
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