Fintech startup dLocal faces regulatory scrutiny after raising $200 million

It has been over two years since we last covered dLocal, a Montevideo, Uruguay-based fintech startup that offers a cross-border payment platform that connects global merchants in emerging markets. The Latin America-based dLocal raised $200 million for cross-border payments in order to become a member of the highly coveted unicorn club at a $1.2 billion valuation.

Fast forward to this year. According to a report from Reuters, dLocal faces allegations of potential fraud from a short-seller. Glancy Prongay Murray LLP, a leading securities fraud law firm, has launched an investigation into DLocal Limited DLO on behalf of defrauded investors.

According to another report from CNBC, citing short hedge fund Muddy Waters, Muddy Waters Capital LLC Muddy Waters, on November 16, 2022, Muddy Waters published a research report concluding that DLocal is likely a fraud. The dLocal has applied for a UK regulatory license during a call reviewed by Reuters, and the startup is now under fire for weak regulation. The revelation came amid claims that dLocal dodged rigorous regulatory oversight by relying on Maltese regulators.

Since the Muddy Waters report was published in November, dLocal, which is backed by major tech funds such as General Atlantic, Tiger Global and D 1, has seen its stock drop by nearly 50%. But dLocal denied it.

In January 2016 dLocal was founded by Sebastian Kanovich and Sergio Fogel as a spin-off of AstroPay. The payment platform empowers people to reach billions of customers, accept payments, send payouts, and settle funds globally. Its 360 single-API platform is designed to handle and facilitate mass online payments across Latin America, APAC, the Middle East, and Africa. dLocal empowers global merchants to reach billions of customers, send payouts and settle funds globally by operating as a merchant s local payments processor in each country.

In a closed-door call hosted by Goldman Sachs, Kanovich said a full license with the UK Financial Conduct Authority FCA was pending, citing the UK exit from the European Union.

We are in close consultation with the FCA and we have already filed our application, Kanovich said.

According to Reuters, Kanovich did not provide any details of what stage they were at with the application, which could take around 12 months or which of its entities would fall under UK jurisdiction. dLocal's single-API platform was designed to handle and facilitate mass online payments across Latin America, APAC, the Middle East, and Africa. By operating as a merchant's local payments processor in each country. By operating as a payments processor and merchant of record in each market, dLocal is making it easy for online companies to reach 2 billion digitally-savvy consumers in today's fastest-growing markets.

Over 450 global e-commerce merchants, online travel providers, and marketplaces rely on dLocal to accept more than 300 locally relevant payment methods, including local credit and debit cards, bank transfers, and cash payments, as well as issue millions of payments to their contractors, agents, and sellers in growth markets around the world.

The company has been profitable every year, achieving over 100% annual organic growth over the past four years. dLocal's recent momentum is reflected by successful new business wins in additional high-growth markets, including India, Morocco, Nigeria and South Africa. Its global customers include Amazon, DiDi, Gearbest, Nike, Shopify, Spotify, Uber, Visa Earthport, Zara, and many others.