Auditor resigns at eMerchantPay citing governance concerns

Grant Thornton has resigned as auditor of eMerchantPay, a London based global high-risk acquirer. and wrote:

“In the course of our work, we learned of certain transactions for which we sought supporting information, including management’s evaluation of whether the accounting for them is in accordance with relevant accounting standards and an assessment of risks and compliance with applicable laws and regulations. Following this process, which resulted in an absence of sufficient, appropriate audit evidence, we have been unable to conclude whether the accounting for the transactions is appropriate and whether there has been a breach of applicable laws and regulations.

The nature of the transactions and the absence of supporting evidence have resulted in us becoming concerned about the quality of the Companies’ governance.

Given the significance of these matter, we do not consider it appropriate that we continue to act as the Companies’ auditor.”

Grant Thornton’s resignation, revealed in a document deposited at UK Companies House, will likely delay publication of eMerchantPay’s accounts for the year ending August 2022 and will doubtless also interest regulators.

eMerchantPay employs 322 staff worldwide, the majority at its service centre in Bulgaria but also at sales offices in London, Germany, India and Brazil. The business is regulated as an EMI by the UK’s Financial Conduct Authority. Following the UK’s exit from the European Union, eMerchantPay transferred its continental European customers to an associated company, UAB Phoenix Payments, in Lithuania. In December 2021, eMerchantPay invested €12m into this business “for required capital restructuring to ensure the ongoing strength of the business” noting that the ongoing operation of UAB Phoenix was “critical” for the Group.

The most recent financial statements available show eMerchantPay to be highly profitable company, generating $151m revenue in the year ending August 2021 from processing $5.7bn payments. This was split between in-house acquiring and a PSP/gateway service that links merchants with 3^rd party acquirers. Acquiring revenue more than doubled in 2021 to just over $100m with a take rate of 2.7%.

Management said its business had benefited in 2021 from “a market surge in crypto-currency activity”. In addition to crypto and FX, eMerchantPay also specialises in gambling, including casinos.

Like many high-risk acquirers, eMerchantPay has been making efforts to diversify its client base to include low-risk segments such as retail POS transactions. Nevertheless, in March 2023, the company invested $18.5m into Ibanera, “to enable them to keep supporting” Bitline, a Florida based gateway that helps people gamble cryptocurrencies in casinos. Despite current volatility, Jonas Reynisson, eMerchantPay’s founder, CEO and majority owner, believes crypto has a future, saying “Crypto currencies are no longer for speculation by risky traders, but instead represent the transition of Web2 to Web3 environments that requires easy adoption for everyday consumers.”