dLocal, the Uruguayan company facing allegations of potential fraud from a short-seller, has applied for a UK regulatory license, the company's chief executive told investors in a recent call reviewed by Reuters, amid claims that it dodged rigorous regulatory oversight by relying on Maltese regulators.
Nasdaq shares in dLocal backed by major tech funds including General Atlantic, Tiger Global and D 1 have dropped more than 50 per cent since short hedge fund Muddy Waters published its report, which dLocal denied.
In a closed-door call hosted by Goldman Sachs, dLocal CEO Sebastian Kanovich said that a full license with the UK regulator FCA was pending, citing the UK exit from the European Union.
Kanovich said we are in close consultation with the FCA and we have already filed our application.
He did not say what stage they were at with the application - which can take around 12 months - or which of its entities would fall under UK jurisdiction.
Payment companies in the UK need to be regulated as e-money institutions, and those with an existing European license need to apply by December 31 to continue operating uninterrupted, according to the regulator's website.
Kanovich was repeatedly asked by the host of the call, why he wouldn't issue a written rebuttal regarding the use of customer funds, despite verbally blaming flaws in Muddy Waters' methodology and offering alternative mathematical calculations.
He said that dLocal was only engaging privately with stake holders and that they had been advised not to engage in a tit for tat.
An attendee of the call, who asked to remain anonymous, shared the recording with Reuters.
The FCA didn't want to say anything. Neither dLocal nor Goldman Sachs responded to a request for comment.
Muddy Waters told Reuters that Kanovich's explanations for the multi-million deficit in merchants' accounts were so implausible that we laughed out loud. dLocal failed to withdraw before the collapse, and was asked by the CEO of the company, who had nearly $6 million in funds trapped in the disgraced FTX exchange.
Kanovich stated that dlocal had used stablecoins to move funds out of one African country in a bid for efficiency, relying on FTX to liquidate those stablecoins and send them to our banks. He said that we took that learning and I think it's very unfortunate.