Fintech
UK restricts fintech owned by Uruguay’s top billionaires
(Bloomberg) — U.K. regulators have imposed a series of restrictions on a financial technology company owned by Uruguay’s first billionaires as part of a widening crackdown on payments companies that process transactions worth hundreds of millions of dollars every day.
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The Financial Conduct Authority has banned Larstal Ltd. from providing payment services or taking on new customers without the regulator’s written approval, according to a post on the FCA’s website. The company, which does business as AstroPay and is part of a global payments empire overseen by Andrés Bzurovski Bay and Sergio Enrique Fogel Kaplan, specializes in processing transactions for high-risk customers, filings show.
The FCA has sought to improve standards among so-called electronic money institutions, which are loosely regulated payments companies. The agency has authorized dozens of EMIs, including AstroPay, to operate in the UK in recent years, but is now concerned the sector is riddled with fraud and poor anti-crime controls.
Fogel said in an emailed statement that AstroPay and FCA “have mutually agreed to voluntarily suspend” the company’s EMI license. The move follows discussions with the regulator and “the realization that the license it held was not necessary to carry out its business at this time”, it said. An AstroPay spokesperson said separately that the company had “voluntarily placed restrictions to improve operational capabilities.”
An FCA spokesperson declined to comment.
The FCA placed the restrictions on AstroPay through a so-called voluntary commitment, under which a company pledges to improve its operations.
“Voluntary initiatives of this nature are rarely truly company-driven,” James Borley, a former FCA regulator and chief executive of Cosegic Ltd., said in an email. “Rather than taking the company through a formal process, leading to the issuing (and publication) of a formal supervisory notice, the FCA typically ‘persuades’ the firm itself to apply for a restriction on its authorisation.”
AstroPay owed several million dollars to customers at the end of 2022, the documents show, and the company must also ensure that “all relevant funds are adequately ring-fenced”, according to the FCA. Services in the UK are “temporarily unavailable due to voluntary restrictions on our financial activities,” AstroPay said in a notice posted on its website.
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The company, closely controlled by Fogel and Bzurovski, processes transactions for clients in industries such as online gambling, foreign exchange trading and adult entertainment, filings show. Most of its business takes place in emerging markets such as Brazil and India.
AstroPay is listed as a payment processor for multiple currency exchange websites based in offshore locations such as Belize, Saint Lucia, and Saint Vincent and the Grenadines. Many of them claim to allow customers to borrow hundreds and even thousands of times the initial deposit, a practice that British and European regulators have banned for retail investors.
The company was also the main sponsor of Wolverhampton Wanderers – a Premier League soccer team known as Wolves – from 2022 until the end of the most recent season, according to the club’s website. AstroPay’s logo was featured on the front of players’ uniforms and they even introduced a Wolves-branded debit card. The team announced a new sponsor this week.
Fogel and Bzurovski became the first-ever billionaires in their native Uruguay in 2021 when they spun off another part of their group, Montevideo-based dLocal Ltd., as a publicly traded company. Its market capitalization rose to more than $20 billion that year, but its shares tumbled about 88% from their peak following fraud allegations made by famed short-selling firm Muddy Waters LLC and a separate regulatory investigation in Argentina.
Fogel and Bzurovski remain major shareholders and board members of dLocal, and Fogel took on an expanded management role last year, also overseeing AstroPay. According to dLocal’s latest annual report, dLocal still provides some payment services to AstroPay, but a company spokesperson said those payments ended in the first half of 2023. Former dLocal CEO Sebastián Kanovich previously held the same role at AstroPay.
A spokesperson for dLocal said in an emailed statement that there is “no relationship” between the two companies “other than shareholders who are investors in both companies.”
The pair’s complex patchwork of companies was part of a 47-page report released in November 2022 by Muddy Waters that claimed “one of the most extensive catalogs of governance shortcomings that we can remember.” The investment firm, renowned for high-profile bets against companies accused of wrongdoing, cited “prior and ongoing involvements” between dLocal and AstroPay.
The allegations, which dLocal has denied, sent the company’s shares plummeting 51% in one day. The stock recovered much of its value last year, but has since fallen again.
(Updates with information on the sponsorship deal with the Wolves in the eleventh paragraph.)
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