The parent company of binary options brokerage EZTrader, EZTD Inc has just filed its delisting notification last night. The news comes after months of havoc for the binary options industry as a whole and years of challenging operations for the firm.
In May the company and its CEO Shimon Citron parted ways, an event that promoted the executive to ask for the filing of an 8K form in which with the SEC, in which he provided peppery details about internal matters at the firm.
The history of the brokerage as a listed company however started in 2014. EZTrader’s parent company at the time was Win Global Markets Ltd. The stock of the company was being traded as a pink sheet on OTCMarkets. With the filing of an application with the US Securities and Exchange Commission, the company was moved to a new tier of firms that regularly report financial results: the OTCQB market.
At the time, the firm reported that in 2014 its revenues roughly quadrupled over the previous year, reaching $7.95 million. The company raised $3.94 million in May 2014 and actively engaged in sports sponsorship deals. German team Bayer Leverkusen and Dutch Feyenoord Rotterdam were the first, followed on with a deal with the German Handball Federation.
First Signs of Regulatory Trouble
In November 2014, the company’s license got suspended by the Cyprus Securities and Exchange Commission (CySEC) over alleged violations in client funds, capital adequacy and large exposures.
The decision was quickly reversed as the company has taken measures to address concerns expressed by the regulator. In what wasn’t the best time for the brokerage, EZTrader launched its mobile trading application, a necessary tool for the successful operations of a company. Later, in 2015, the CySEC slapped on the company one of the biggest fines in its history – €340,000.
Several More Sponsorship Deals Later
After the partnership with Feyenoord quickly fell apart, EZTrader refilled its budget for football sponsorships with the addition of Everton in March 2015, French Monaco AS in November 2015 and Tottenham Hotspur in January 2016.
In March of the same year, despite growth in revenues that totaled 29 percent, the company posted a full year loss for 2015 of $6.2 million. This period coincided with an additional investment of $6 million in a private placement transaction. The appropriate match in losses and new investments could have been funneled through the company for tax reasons, but the biggest trouble for EZTrader was yet to come.
While the company got a license to operate in Japan, US authorities have been investigating the broker’s operations dating to a few years back.
The SEC Steps Into the Fray
Just after EZTrader announced a deal with Italian football team Roma, and as the company reported on its intentions to get listed on NASDAQ, (an event that seems to make brokers in this industry become pariahs) EZTrader got a call from the US Securities and Exchange Commission.
In November 2016, the company settled charges and paid disgorgement and a fine that totaled to about $1.7 million for soliciting deposits from about 4,000 U.S. investors. At the time the company’s management classified the event as “legacy issues”.
Since then, the company stopped its regular reports filings and got back in pink sheet territory, a rather long full circle that is culminating with last night’s SEC filing about the delisting of the firm. But there was more in between.
Hedge Fund Investment and Management Dispute
In November last year, a hedge fund subsidiary called Yorkville Advisors has announced a $10 million investment to help a restructuring that included phasing out all of the company’s sponsorships. At the time the company posted its latest financials showing that its revenues slid by $3 million for the first 3 quarters when compared to the previous year to $16.5 million.
In May 2017, the CEO of the company whose position at the time was turned into a merely formal one due to the new ownership structure effectively resigned from his post. In a letter that furiously criticizes the moves of the new ownership, stating that the company was losing $500,000 per month, Shimon Citron has voiced his concerns in a long letter filed in an 8K form with the SEC.
All of this happened after reports that the Israeli subsidiary of the company stopped paying its employees their salaries. With the regulatory crackdown on the binary options industry yet to conclude, the likelihood that we are going to see another publicly listed brokerage in this area any time soon is very remote.