LearnDirect website photographed on 5 October 2017. Photo credit: Tolga Akmen

Customers of a UK-based financial technology company have been left unable to access money stuck in their accounts after the Maltese authorities froze activities at a bank co-owned by the company’s founder.

London-based LeoPay provides international money transfers and multi-currency bank accounts, but some customers began complaining over the weekend that they could no longer make payments while others discovered that their accounts had been closed without warning.

The case raises concerns about regulation of the growing number of digital start-ups offering financial services in the UK, as rising numbers of customers keep large cash balances on upstart platforms rather than in traditional bank accounts.

LeoPay presents itself as a way for non-residents to have a de facto European bank account that can be used for salary payments and other day-to-day spending, but its customer deposits are not covered by deposit guarantee schemes.

The company is owned by iCard AD, a Bulgarian company founded by Christo Georgiev, a self-described pioneer of innovative payment solutions who has worked in the fintech sector since 2000, according to a biography on one of his company’s websites.

Mr Georgiev co-owns Malta-based SataBank, which was set up in Malta in 2016, according to the Malta Independent newspaper, which carried a picture of Maltese prime minister Joseph Muscat shaking hands with Mr Mr Georgiev at an inauguration ceremony.

Last week the Malta Financial Services Authority (MFSA) issued a public notice that ordered SataBank bank to stop accepting deposits or processing withdrawals and transfers “in order to ensure that the interests of the depositors are safeguarded”.

Ernst & Young, the Big Four auditor, was appointed as a “competent person” to “assume control of the bank’s business”.

Maltese media organisations reported that the restrictions had been imposed because of concerns over the bank’s anti money-laundering controls. In July, the MFSA fined SataBank €60,500 after it was found to be in breach of risk management laws.

LeoPay’s website was updated on Wednesday morning to remove all reference to SataBank. However, terms and conditions documents that have since been removed showed that its accounts were previously provided through a SataBank “e-money account”. This suggests that customers are being affected by the MFSA’s block on transactions.

Funds placed into e-money accounts are not covered by Malta’s depositor and investor compensation schemes. A spokesperson for Mr Georgiev, and SataBank did not respond to a request for comment in time for publication. Nor did the UK Financial Conduct Authority.

LeoPay said: “We can confirm a limited number of LeoPay customers are affected by an issue which means they cannot transfer funds from their accounts. This is because the deposits in these accounts, which total less than 1 per cent of LeoPay’s customer base, are held with SataBank. The remaining 99 per cent of customers are unaffected. We would like to apologise to those impacted customers and reassure them that we are working hard to rectify the situation. We would like to reiterate that there is no liquidity issue at LeoPay.”

LeoPay is listed on several internet directories as sharing an office in Canary Wharf and phone number with myPos, an FCA-regulated payments company co-founded by Mr Georgiev. MyPos said the two companies had never shared an office. Companies House records show that until earlier this year LeoPay was owned by Liechtenstein-based myPos AG.

One customer said he had built up a cash balance totalling €11,000 after his employer, a cruise ship operator, insisted it pay his salary into a LeoPay account rather than a normal bank account.

Lucian, who asked for his surname to be omitted, said he had been trying to contact LeoPay and SataBank about the problem since the weekend but had not yet been told if or when he would be able to access his cash. He said the app was showing he had a balance of zero.

Trustpilot, a reviews site, has been filling up with negative comments for LeoPay since the weekend, with scores of customers complaining they are unable to access their accounts.

Separately, dozens of Brazilian customers of Leopay have complained on Twitter in the past couple of days that they cannot access their money after the company stopped servicing their country.

Pedro Benevides tweeted that Leopay had “just closed all Brazilians’ accounts without any previous advice. Really a bad way to treat its clients. You could at least give us a week to get prepared”.

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