The last few weeks have been anything but enjoyable for Plus500 traders. The broker blocked thousands of customers' accounts, the reason for this was new money laundering regulations. When the closures became known, the price of the Plus500 share dropped immediately by 37 percent and suffered days of losses. For the first time in weeks, the company can now breathe a sigh of relief. The Israeli software group Playtech takes over Plus500 and wants to put the broker back on the road to success.
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Weak crisis management
Around 55 percent of the customer's accounts British brokers were allegedly affected by the ban. In a statement, Plus500 stated that this was done for reasons of state money laundering regulations. The company had no choice but to immediately block suspicious accounts until all data had been examined and information had been checked. During this review, traders were not allowed to trade or withdraw money from their accounts.
It now appears that human error in particular has meant that several standard account checks have been out of the ordinary since February Frames were executed. In a further statement, Plus500 announced that the blockages had occurred as part of a technical implementation of a new and very strict monitoring process for money laundering. It was also said that this review had already been recommended by external consultants in February, but was delayed due to human error. At the same time, the broker assured that the blocking of accounts for most traders would only last a few days, in special cases a few weeks. The statement met with a lot of criticism from dealers, as it can mean drastic financial losses for a few days of downtime.
The low point - betting against Plus500
The Bloomberg information service reported quickly after the crisis became known of the broker that the first investors were already betting short positions on the further fall in the price of the Plus500 share. These included well-known investors such as Valiant Capital Management or Ennismore Fund Management. They assumed that blocking the accounts would have a lasting impact on the broker's image, especially since Plus500 did not warn its customers. So Gotham City Research LLC tweeted. For example: "How many brokers freeze their customers' accounts and stay in business? Why should a customer stay with such a broker if he has other options?"
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New hope through takeover?
At the beginning of June, the first positive headline for the broker. The Israeli group Playtech had planned to take over the troubled group and had already largely carried it out. Approval has already been received from the management of the broker, which holds a total of 35 percent of the shares. The Israelis allegedly offer 400 pence per share, officially only major shareholder Odey Asset Management has to agree. However, it is inconceivable that those responsible at Playtech have not already made such agreements in advance. All other shareholders are also said to be selling their papers. Against the background of the rapid fall in the price of the security from 750 pence to 200 pence within five days, most investors should be happy to receive a relatively large amount of money for the Plus500 share.
That said about the sale of the share Management of Plus500 recently in a written statement. The pressure on the broker's day-to-day business was too great to continue to work profitably in the future. The freezing of the accounts is the decisive point for this. A few days earlier, those responsible had emphasized that the company's treasury was filled with over $ 90 million and that the company was doing well. However, managers can now expect that a majority of customers will withdraw their money immediately after opening the respective accounts. To survive the impact, you need a financially strong partner who was found in Playtech.
In retrospect, the takeover of Plus500 by Playtech is not surprising. Plus500 is officially registered on the London Stock Exchange, but the company's headquarters are in Israel. The buyer Playtech is also based there and has so far only made its money by developing software for betting providers and online casinos. With the acquisition of Plus500, the company wants to expand its portfolio and strengthen the CFD and Forex trading area. The Israelis had already bought the broker TradeFX in April, a merger of the two platforms is likely in the coming weeks.
Trading is always associated with a risk. Traders can lose their invested capital.
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