Disclosure: Short PLUS. This content is not directed toward persons with residence or place of business in the United Kingdom. By accessing, transmitting, or reviewing this material, you acknowledge that the author has represented his honest opinion and made statements of fact believed to be true at the time of publication. No content herein should be construed as a recommendation to take action with respect to any security.
Part 1: Short Plus500
Part 2: Bucket Shop
Part 3: Customer Lifetime Value
Part 4: Companies House Inconsistencies
Part 5: Audit Opinions
Part 6: Unlicensed Activity
Part 7: Whois Plus500?
Part 8: Scalping
Part 9: Worldwide Web
Part 10: Competition
Part 11: Unanswered Questions
Part 12: Legal Consequences
Gotham City Research is on my mind as I write this. I have no affiliation with Gotham and have never met Daniel Yu, but he’s been in the news lately for comments about Plus500.
In addition, Gotham keeps me mindful of the fact that the Internet is global. Even though British libel judgments are unenforceable in the United States, I have no wish to be sued for expressing my opinions in good faith. I have written these blog posts in a deliberately restrained manner and intentionally not directed my comments at UK persons.
Plus500, on the other hand, has no such qualms about making its marketing materials accessible in jurisdictions where it is not authorized to operate, including the United States. The company states in the Admission Document (p.47) that it has run afoul of advertising regulations:
In the past, the Group has been in breach of, or may have been in breach of, and there is a risk that going forward the Group may not be in full compliance with or may be in breach of, the laws and regulatory requirements regarding the promotion of investment activities in some of the jurisdictions in which it advertises. Any non-compliance with such applicable laws or regulatory requirements could subject members of the Group or its directors and/or employees to disciplinary action, criminal penalties, civil lawsuits and/or fines. Further, there is a heightened risk of the FCA imposing a sanction on Plus500UK as a result of repeated instances of non-compliance with the financial promotions regime. Any such action could have a material adverse effect on the Group’s reputation, business, financial condition and operating results.
The Admission Document (p.46) notes that activity by its affiliates could subject the company to similar risks:
Further, the Group has not investigated the local laws and regulations which may apply to its affiliates’ activities or the relationship between the Group and its affiliates, and the Group has no visibility or control over whether the affiliates are conducting their advertising activities in accordance with such laws and regulations. There is a risk that liability for activities of affiliates which are in breach of local laws and regulations could attach to the Group and result in civil, criminal, regulatory or other penalties being imposed upon the Group or its directors, or that such activities could result in or contribute to action being taken against the Group by a regulator in any relevant jurisdiction.
Unfortunately, most affiliates use free web-hosting services or Domains by Proxy registrations that make it very difficult to ascertain the identity and location of their owners. However, in at least one instance there appears to be evidence that a Plus500 website, or one operated by an affiliate, is hosted in the United States. The screenshot below is from domaintools.com:
The hosting provider in question, A Small Orange, operates a web server in St. Louis that hosts several gambling-related domains, likely for the same affiliate marketing customer. Not only are several of these domains advertising services illegal under US law, they also appear to violate ASO’s terms of service. ASO did not respond to a request for comment. In an interesting coincidence, ASO’s parent company is Endurance International Group (EIGI, no position), the most recent target of Gotham City Research.
A full reconciliation of Plus500′s marketing activities to local investment promotion regimes is beyond my limited resources, but suffice it to say that 500traders.com is hardly the only Plus500 marketing website that could attract customers from jurisdictions where the company is unlicensed.
The Whois record for 10pips.com suggests a possible undisclosed related party. “yossi sh” does not appear to be a real person, but crazymarketing.com is one of 65 domains registered to a Vadim Drabkin, who attended the same university, Technion, as the Plus500 founders. We already know that 10pips.com was operated by Plus500; it is unclear why it is now registered to one of Plus500′s affiliate marketers. Note the @investhead.com email address. Investhead.com is currently a defunct website, but it redirected to 10pips.com in 2011 and later displayed affilliate advertising for Plus500, among others, until late 2012. This indicates that Vadim Drabkin has been acting (and possibly being compensated) as a member of the Plus500 affiliate program while also controlling one of Plus500′s assets.
In short, one of Plus500′s affiliates owns a domain name that was operated by the company.
Record Date: 2014-01-11
Registrar: GODADDY.COM, LLC
Domain Name: 10PIPS.COM
Registry Domain ID: 1515596000_DOMAIN_COM-VRSN
Registrar WHOIS Server: whois.godaddy.com
Registrar URL: http://www.godaddy.com
Update Date: 2013-03-29 14:17:07
Creation Date: 2008-08-22 05:51:28
Registrar Registration Expiration Date: 2014-08-22 05:51:28
Registrar: GoDaddy.com, LLC
Registrar IANA ID: 146
Registrar Abuse Contact Email: firstname.lastname@example.org
Registrar Abuse Contact Phone: +1.480-624-2505
Domain Status: clientTransferProhibited
Domain Status: clientUpdateProhibited
Domain Status: clientRenewProhibited
Domain Status: clientDeleteProhibited
Registry Registrant ID:
Registrant Name: yossi sh
Registrant Street: Dubnov 7
Registrant City: Tel Aviv
Registrant State/Province: Not Applicable
Registrant Postal Code: 61400
Registrant Country: Israel
Registrant Phone: 972545885555
Registrant Phone Ext:
Registrant Fax Ext:
Registrant Email: email@example.com
Registry Admin ID:
Admin Name: yossi sh
Admin Street: ben yehuda
Admin City: tel aviv
Admin State/Province: Not Applicable
Admin Postal Code: 55555
Admin Country: Israel
Admin Phone: 972545885555
Admin Phone Ext:
Admin Fax Ext:
Admin Email: firstname.lastname@example.org
Registry Tech ID:
Tech Name: yossi sh
Tech Street: ben yehuda
Tech City: tel aviv
Tech State/Province: Not Applicable
Tech Postal Code: 55555
Tech Country: Israel
Tech Phone: 972545885555
Tech Phone Ext:
Tech Fax Ext:
Tech Email: email@example.com
Name Server: NS1.INVESTHEAD.COM
Name Server: NS2.INVESTHEAD.COM
URL of the ICANN WHOIS Data Problem Reporting System: http://wdprs.internic.net/