One of the reasons why Israeli-US digital payments company Payoneer Global (Nasdaq: PAYO) may have preferred listing on Wall Street through a SPAC merger rather than a conventional IPO may be found in its past. This week Payoneer listed on Nasdaq with a market cap of $3.3 billion.
Payoneer's past included a connection with the activities of pornographic sites until 2016, which would not have made a positive impression with investors on Wall Street.
Documents recently linked to the International Consortium of Investigative Journalists (ICIJ), NBC, and BuzzFeed showed the Payoneer's digital wallet was being used by customers in the live-pornography field. In the professional investment sector, such customers are considered to be high-risk. Through the Payoneer pre-paid card that customers received, they could draw a salary that they had earned by taking part in various activities such as undressing in front of live porn cameras almost anywhere in the world.
While Payoneer declined to serve customers in the gambling and forex trading sectors, it did serve content sites and blogs promoting such services (affiliates). However, in 2016 it halted these operations and increased its monitoring and supervision operations. Today Payoneer focuses on huge clients such as Amazon and eBay.
Payoneer has developed a platform and that allows companies to transfer money to employees and suppliers around the world using a pre-paid debit card, which is secure and discreet. Employees who receive their salary via Payoneer can simply take the card to the nearest ATM and withdraw the cash loaded onto it.
"Globes" has been informed that until 2016, the pornography business accounted for 10% of Payoneer's transactions, which was thwarting the company's plans to eventually go public and in effect delayed them until now. Only in 2016, a decade after it was founded, did Payoneer jettison these dubious activities, making its debit card subject to the regulations of MasterCard.
Payoneer's most famous investor is Israeli Prime Minister Naftali Bennett. He invested hundreds of thousands of shekels in the company in 2006, according to IVC. Bennett was introduced to Payoneer founder Yuval Tal by the comany's COO and CEO R&D Keren Levy, who worked with him at Cyota.
Bennett himself now reportedly has a stake in Payoneer worth several million dollars, which is held in trust. One can only wonder what Bennett actually knew about the conduct of the company when he became a Knesset Member and cabinet minister back in 2013. As he had only acquired the smallest of stakes in the company as a private investor who was not a director, there is only a very small likelihood that he knew what was actually going on in the company. Bennett's spokesperson declined to comment on the matter.
In its early years, Payoneer was also involved in another controversial affair. Immediately after the assassination of Hamas activist Mahmoud Al-Mabhouh in 2010 in Dubai, the UAE police found cards from Payoneer and MasterCard, which enabled the assassin to withdraw money. The publicity put Payoneer on the map as a growing Israeli company, which enabled the discreet transfer of money from country to country.
Payoneer's activities have also recently received publicity from two financial affairs. The first was Choice Bank from Belize in Central America, which went into liquidation. The bank's customers, who include several live pornography workers, have sued the bank for accounts they held amounting to about $100 million, when the bank was closed in 2018. Payoneer founder Yuval Tal, who served as the company's president until last year, held Choice Bank shares between 2010 and 2012.
Some of those customers suing the bank said that they thought they were involved with a US company called Payoneer and not with the bank in Belize, even though Payoneer changed the way that it operates with customers like these back in 2016, when these customers in the pornographic sector had their Payoneer cards exchanged for First Choice cards, issued by Choice Bank. In Choice Bank's liquidation report, Choice Bank claimed that it had provided Payoneer a range of permissions to operate in its name including the ability, "to conduct independent money transfers without needing to request individual approval for each transaction," according to an investigation by NBC.
"Globes" has found that the liquidation proceedings against Choice Bank have been completed and creditors received 84% of their money.
The second financial affair was part of the leaking of 2,500 documents to the ICIJ from the US Department of the Treasury's Financial Crimes Enforcement Network (FinCEN). These documents had been sent to FinCEN by various banks and financial institutions between 2011 and 2017 as part of the US's Money Laundering Law so that suspicious activities could be investigated. According to an investigation by the "Time of Israel," Payoneer customers and partners were flagged by those banks in reports sent to FinCEN. On the basis of these documents a US Treasury official recently received a six months jail sentence.
As a business service, Payoneer is signed on an obligation to fight money laundering and to appoint somebody responsible for monitoring if any money laundering occurs. According to a fintech source, Payoneer's department for monitoring customer accounts comprises 6% of its workforce of 1,800.
It should be stressed that there was nothing illegal about the activities that Payoneer and Choice Bank were involved in. Nor does the fact that the US banks mentioned Payoneer in their reports on suspicious activities necessarily have any significance. It simply illustrates the problematic world of transferring money from country to country using pre-paid cards as well as the connection between financial technology and banks in exotic countries.
According to NBC. Citibank received $20.6 million from Payoneer in 2015 and 2016 for "Online video services connected to websites operating video camera pornography services related to human trafficking."
Adv. William Lindo who represents some of the pornography workers in Belize told the NBC investigation that Choice Bank was known for servicing many employees in the industry and claims that MasterCard asked Choice Bank to end its involvement in the industry in which there were "high risk customers" between the end of 2015 and early 2016.
In 2016 Payoneer changed gear regarding customers in the pornography industry when it ended its connection with them or proposed that they switch to an alternative plan called First Choice Pay, a pre-paid MasterCard card issued by Choice Bank.
as part of the new plan, Payoneer became a technology provider for Choice Bank, and Choice Bank took responsibility for the customers and risks involved. When the bank collapsed, its former customers were forced to turn to the liquidator in order to get back their money. Many customers told the investigation that Payoneer and Choice Bank had not bothered to highlight the new policy in their reports and many of them opened fire, even if by mistake, on Payoneer. The liquidation was completed in 2020.
Payoneer said in response, "In 2016, Payoneer took the decision to stop providing payment services to high risk businesses. Today Payoneer complies with the highest standards in the fintech business, and regularly undergoes due diligence by leading international auditors and financial regulators. FinCEN or any other regulator or authority has never found that Payoneer does not meet or has not met its obligations under the Money Laundering Law. Payoneer loyally serves the world's leading brands. Payoneer's founder Yuval Tal, stepped down as President of the company in September 2020 after 14 years at the company in order to focus on his new position and not for any other reasons."
Published by Globes, Israel business news - en.globes.co.il - on July 1, 2021
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