ParagonEx Ltd was incorporated in the British Virgin Islands and commenced its operations in 2008 with the Company’s headquarters on the Isle of Man. Ever since its inception, ParagonEX has been the technology and services provider behind the UFX broker platform. Given the agreements, personal relationships, and shareholdings, the ParagonEX people have also been in control of the UFX business. Currently, ParagonEX together with UK BNN Technology PLC performs a sort of reverse takeover with NASDAQ-listed MICT Inc with the goal to have a Global Fintech Holdings Ltd (GFH) established as the resulting issuer and a public listed $300m fintech company. To form a new globally acting public listed fintech company on the grounds of a Forex broker is an impressive transaction which deserves our coverage.
Business Combination creating $300m valuation
The ParagonEX transaction has been announced on December 20, 2018, informing the public that the newly formed GFH already successfully raised $23.5 million at $1.65 per share to fund the transaction. The transaction is a “three-way business combination” with BNN Technology Plc, a private UK company engaged in development and supply of technology, content and services to distributors of online lottery products in China, and MICT Inc., a U.S. public company traded on Nasdaq and engaged in development and supply of mobile devices for the commercial mobile resource management (MRM) market.
Reading through the SEC filings, one learns many details about the UFX & ParagonEX group of companies and the background of the GFH project. The ParagonEX shareholders around Haim Toledano, Saar Pilosof, Robin Alvarez, Eric Perez, and Mark Gershinson receive quite a nice compensation for their ParagonEX shares (Source: SEC filing):
- USD 25 million in cash,
- a senior unsecured note in the principal amount of USD 10 million and
- 86,382,373 ordinary shares of GFH, representing approximately 50.36% of GFH.
The combination of the businesses is expected to generate synergies in technology, services,
ParagonEX was represented by the Israeli law firm Herzog Fox and Neemann in the transaction. The transaction was executed on the basis of an equity valuation of approximately $165 million for ParagonEx and approximately $300 million for the new GFH. Upon successful completion of the transaction, the ParagonEX shareholders will control more than 50% of the GFH shares.
The ParagonEX Group
ParagonEX, as well as UFX Global Limited and other operating entities behind the UFX broker platform and the Forex brand UFX itself, were orchestrated and coordinated by Haim Toledano, Saar Pilosof, Dennis-Hendrik de Jong over the past 10 years.
The Panama Papers provided some interesting information on the beneficial owners and the network of companies and people associated with UFX (see Panama Papers). Actually, the lawyers identified the exposure by the Panama Papers as a risk factor for GFH:
The publication of the ‘Panama papers’ exposed, among other things, the breakdown of the shareholdings in ParagonEx as well as the shareholdings in UFX. This exposure gives rise to potential tax, regulatory and banking risks which are currently difficult to assess.SEC filing (December 2018)
At the time of the combination of businesses, the ParagonEX Group comprises the following subsidiaries:
- PX Exchange Ltd (Belize)
- Hexagon Technologies Ltd (Israel)
- ParagonEx UK Ltd (UK)
- Tianjin Fu Yi Marketing Management Consulting Co. Ltd (China)
- UPL Marketing Sp z.o.o., (Poland)
- Toyga Media Ltd (Israel)
- Toyga Online Ltd (Israel)
- Urom Support Srl (Romania)
- NGJ Limited (Isle of Man)
- Capi tech LLC (Ukraine)
ParagonEX Ltd has not only been the group’s holding company (see below) but also the developer of the trading software for UFX. Moreover, it operates the market maker platform behind UFX via its subsidiary PX Exchange Ltd, a company regulated by the regulator IFSC in Belize with the license number IFS/60/272/TS/18. In this respect, the shareholders of ParagonEX are the beneficial owners of the UFX business.
This means that the upcoming listing on the NASDAQ is also and above all the listing of the operator of the UFX and Ubinary schemes.
Financially dependent on UFX
From a financial point of view, ParagonEX is dependent on UFX and so is this new GFH. As of December 31, 2017, the revenues from UFX accounted for approximately 93% of ParagonEx’s revenues which is identified as a risk factor for
Hence, any disruption in the business operations of UFX, including as a result of regulatory or banking restrictions, would likely result in a substantial reduction or complete loss of the revenue, which would have a material adverse impact on ParagonEx’s financial condition and performance.SEC filing (December 2018)
The ParagonEX Group cares about all aspects of the UFX business – technology, services, boiler rooms, market making, Client Acquisition, affiliate system, and customer care. According to the SEC filing, the Belize-regulated PX Exchange Ltd also holds client funds for UFX clients. The FinTelegram Research Team established a chart on the business model as described in the SEC filing:
to be continued