EZTrader: The Story of a Publicly Listed Binary Brokerage Gone Awry

The full story of how a publicly traded company got delisted in the aftermath of a managerial dispute.

EZTD Inc., the parent company of binary options brokerage EZTrader, 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.

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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 with the SEC, in which he provided spicy details on 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 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 took measures to address concerns expressed by the regulator. During this tough time, EZTrader launched its mobile trading application, a necessary tool for the successful operations of a company. Later, in 2015, CySEC slapped the firm with one of its biggest fines – €340,000.

Several More Sponsorship Deals Later

After the partnership with Feyenoord quickly fell apart, EZTrader moved on to football sponsorships with Everton in March 2015, French Monaco AS in November 2015 and Tottenham Hotspur in January 2016.

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In March of the same year, despite growth in revenues that totaled 29 percent, the company posted a full year loss 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 had 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 intention to be listed on NASDAQ (an event that seems to make brokers pariahs in the industry), 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 about $1.7 million for soliciting deposits from about 4,000 US investors. At the time, the company’s management classified the event as “legacy issues”.

Since then, the company stopped its regular report filings and got back in pink sheet territory, a rather long full circle that culminated with last night’s SEC filing. But there was more in between.

Hedge Fund Investment and Management Dispute

In November last year, a hedge fund subsidiary called Yorkville Advisors announced a $10 million investment to help a restructuring process that included phasing out all of the company’s sponsorships. At the time, the company posted its latest financial results 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 had become a mere formality due to the new ownership structure, effectively resigned from his post. In a letter that furiously criticized the new ownership, stating that the company was losing $500,000 per month, Shimon Citron voiced his concerns in a long letter filed in an 8K form.

All of this happened after reports that the Israeli subsidiary of the company had 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.

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