Where are They Now? Does Anyone Remember the Plus500 Fiasco?

Chris Lee

81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.


One of the most interesting stories of 2015 in the world of forex has been the Plus500 Fiasco. It has seen more plot twists and turns than any housewives reality show or Shakespearian drama could ever imagine. OK, that last statement was a bit extreme, but the Plus500 story was one that kept on giving for weeks on end. Our last article on the topic was back in June. The drama has obviously cooled down, as the protagonists withdrew into the shadows on stage left. There has actually been very little to write about, but the final act has yet to conclude, so there may still be a chance for fireworks.

Our friendly UK regulators, the Financial Conduct Authority (FCA), the ones who started all of the fun in the first place, have yet to give their final approval on the pending merger with Playtech, nor has any competition oversight committee given its green light, as well. It is, however, pretty safe to say that approvals are not being withheld or we would have heard some yelling and screaming at some juncture in the proceedings. Odey Management, a UK-based hedge fund, was the largest single individual loser from a stock loss perspective. If they are maneuvering in the background, then there may be sparks left to fly. In any event, let’s update what has transpired since June of this year.

A brief summary of the travails of Plus500

As per its website, “Plus500 is a leading provider of Contracts for Difference (CFD’s), delivering trading facilities on shares, forex, commodities and indices, alongside innovative trading technology. The Plus500 trading platform is offered by Plus500UK Ltd., a UK based company with its main offices located in the city of London. The company is authorised and regulated by the Financial Conduct Authority (FCA) to offer Contracts For Difference (CFD). The company is a rapidly growing CFD provider in Europe and Asia and currently offers its portfolio of over 1000 instruments to over a million clients.”

Everything was peaches and cream for Plus500 in early 2015. It was clearly a darling of the London Stock Exchange. After years of explosive growth, the firm had conducted an Initial Public Offering (IPO) in 2013 and soon there after achieved a market cap in excess of $1 billion. When any entity rises so quickly in fame and fortune, they will attract attention from all venues, both good and bad. Competitors will develop new strategies of attack. Customer expectations will grow, and regulators will soon become more than curious that shortcuts and rule violations may be in play. Investors, however, were smiling broadly and eager for more stock appreciation.

But the party came abruptly to an end on May 18th. Deadlines for AML documentation issues occurred on the preceding Friday, and, as a result, client accounts were frozen. When the word got out over the weekend of what was happening, the management of Plus500 posted a statement on its website that sent the stock market into a maelstrom. The firm’s share value plummeted some 30% and was in freefall for days, as the news of problems with the regulators became more transparent. The story had only just begun.

What was the nature of the regulators’ problems with Plus500?

In hindsight, it appears from public filings that the FCA had been auditing Plus500 for some time. The May 15thdeadline was specified many months back, giving the firm plenty of time to rectify its paperwork shortcomings. One of the primary pillars in combating money laundering and the funding of terrorist groups overseas is the imposition of tough controls on money flows that cross a national border. Know-Your-Customer (KYC) rules have existed in banking for decades, but only on a domestic level. New international legislation pushed these KYC rules to a higher level.

For brokers dealing in cross-border payments, the rules require that personal identity information be filed and kept current on a timely basis. The clock starts ticking once you become a client with a deposit. Forex brokers are required to request that information up front, but many have unfortunately bent the rules a bit and delayed ID verifications until a withdrawal request was submitted. Since the casualty rates are high in our industry, the majority of clients loses its funds and never makes a withdrawal request, thereby dramatically reducing the documentation burden for the broker.

The forex brokerage industry, especially those brokers that focus only on the binary/CFD market, is very profitable. Do keep in mind, however, that losses occur as well. There have been public outcries over the social problems created by purported get-rich schemes that never pan out for the gullible public. There have also been numerous complaints about poor customer service, deliberate slippage and re-quotes, and account managers that pressure clients to increase their deposits. Regulators have had enough, especially after many high-profile scandals regarding rate fixing in Libor and foreign exchange.

Whether or not the FCA singled out Plus500 on purpose to make a point and scare the living daylights out of other brokers remains to be seen, but, at the end of the day, the shareholders of Plus500 paid a dear price when their prized possession was sliced and diced in public view. After the dust cleared, shareholders had lost a combined total of roughly $650 million on paper. Were the shares of Plus500 overvalued before the crash? Many analysts would say that “irrational exuberance” had played a part in order for shares to lose half of their value, but paper losses are monies lost, just the same.


81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.


Playtech enters the scene, posturing itself as a White Knight

Playtech, the world’s largest online gaming software supplier traded on the London Stock Exchange, sensed a bargain and swooped in with a takeover bid of £4 per share, about half the peak value of the Plus500 shares. Plus500 management approved the deal, as did its and Playtech’s shareholders. Odey Asset Management (Odey), a hedge fund that owns over 25% of Plus500 shares, protested loudly, claiming the bid was “opportunistic” and should be raised, but it found no support. Government clearances are all that remain for this merger to conclude in late September.

The IG Group (IG), a direct rival of Plus500 and Playtech had been accused of instigating this entire ordeal in the background, but it has not made a public move to counter the thrust of Playtech. While IG sits on its collective hands, Teddy Sagi, the Israeli billionaire and aggressive founder of Playtech, is actively expanding his franchise in 2015. In addition to Plus500, he has opened up his checkbook for the acquisition of TradeFX and AvaTrade, while claiming that he is still hungry for more. He has already announced reorganization plans to combine these entities into one operating unit and added many new high-level executives to his growing management team.

Is there any new news on the press front?

There have been no more reports of frozen accounts at Plus500, such that we perhaps can assume that their reported $10 million of additional expenses actually fixed the problem to the satisfaction of FCA officials. Gal Haber, Chief Executive Officer of Plus500, recently was very upbeat in his delivery of his firm’s first-half results for 2015. His actual comments were as follows:

“Despite the disappointing regulatory setback in the second quarter, the Group was profitable in every month in the first half and our business model continued to be cash generative. Our easy to use and robust platform continued to attract new customers and encourage active customers… Whilst the Group has been the subject of a high level of regulatory scrutiny, we have made significant progress in enhancing our compliance and onboarding processes in line with the recommendations of our regulatory advisors.”

For the six months compared to the similar period for 2014:

  • New customers grew at 60%; Active customers by 39%;
  • Revenues were 20% over last year ($127 vs. $106.2 million);
  • Net profits were down 25% ($40.6 vs. $53.8 million);
  • Net cash was down 17% ($95.5 vs. $115.2 million).

All in all, the firm obviously weathered the regulatory storm, is still highly profitable, and growing at a dramatic pace, considering overall economic conditions on the whole. In the meantime, Teddy Sagi has also begun to brag about the earnings performance of his new “Financial Division”, the eventual successor of TradeFX, AvaTrade, and Plus500. Since nearly all of these deals are in some stage of completion, it is difficult to interpret his bluster that revenues have grown 60% to $$48.2 million, but he is setting the stage for tremendous growth going forward after all components have been consolidated. Total results for Playtech are also impressive: Revenues up 33% to $324 million, and profits up 19% to $130.3 million.

Concluding Remarks

It is surprising how little in the way of press headlines have come to pass after the ruckus these characters generated back in May and June. Aside from a bit of bragging by Sagi and company, there has been little in the way of interest expressed as to how these protagonists have settled down to the business at hand. We still do not know if shareholder lawsuits will erupt. Odey has been unusually quiet over this period, and the IG Group has certainly been a disappointment. One would have expected a battle of the titans, considering the amount of money up for grabs in the UK market.

Playtech, however, is on the move and clearly focused on the road ahead. In an interview with Reuters, Chief Executive Mor Weizer stated that, “We definitely intend to continue considering certain additional M&A opportunities going forward, for both gaming and online CFD trading. I think given the size and position of Playtech, we can afford to do larger acquisitions. We definitely see a further opportunity for Playtech to further extend and support companies in the process of their merging.”

CEO Gal Haber at Plus500 cannot contain his enthusiasm: “Looking ahead, Q3 has started strongly, and as a result the Board now expects revenues to be ahead of 2014 and previous market expectations.” This story has now come full circle, but you never know what might happen next, even when the “fix” is in.


81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.


Chris Lee

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