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KNF Investigates mPay SA Over Insider Trading Allegations

COMPANIESKNF Investigates mPay SA Over Insider Trading Allegations

The Financial Supervision Authority (KNF) has filed a notification with law enforcement agencies regarding the suspicion of committing crimes related to the illegal disclosure of confidential information and its use in mPay SA stock transactions. According to KNF, these actions had a direct impact on the company’s stock market performance.

These events pertain to the unauthorized disclosure and use of confidential information regarding the signing of a contract by mPay SA. This contract anticipated work on the introduction of a crypto asset (stablecoin) and enabling mPay app users to purchase this crypto asset, transfer it to independent accounts and wallets, as well as use it for payments for tickets and other fees.

The information about the contract was published by mPay SA in current report no. 50/2021, dated November 22, 2021. The project also involved a well-known stock market speculator, Rafał Zaorski.

It is significant that even before the official announcement of the contract, during the trading session, mPay shares significantly increased.

These actions are a potential violation of financial market regulations, prompting the KNF to take appropriate legal steps. The unlawful disclosure and use of confidential financial information not only violates investor trust but also destabilizes the financial market, undermining its integrity and fairness.

The proceeding, now in the hands of law enforcement agencies, aims to clarify the circumstances of these actions and determine whether and to what extent there has been a violation of the law.

In response to the notification from the Financial Supervision Commission (KNF) about the suspected unlawful disclosure and use of confidential information in the trade of mPay S.A. shares, the mPay S.A. board announces that it is making every effort to support the Financial Supervision Commission in promptly resolving the case. The mPay board has provided all the requested information and clarifications to KNF. It is cooperating with the KNF with the objective of a complete and comprehensive explanation of the case. It also declares its continued full cooperation with the KNF and law enforcement agencies.

Additionally, the mPay S.A. board declares that the information related to the notification of the Financial Supervision Commission regarding the stablecoin project, which mPay published in its report from 21.11.2021 number 50/2021, was not implemented due to the lack of regulation and market conditions, and the deal was terminated. Accordingly, neither the project nor the proceedings involving the disclosure of confidential information about it have any impact on the company’s current operations.

Is the misuse of confidential information on the Warsaw Stock Exchange a common occurrence?

In the past year, we have recorded several spectacular increases in stock prices that raised suspicions of the use of confidential information. For example, in June 2023, the market valuation of Elektrociepłownia Będzin increased by 1,200% (from PLN 20 million to PLN 240 million) in just three weeks. Similarly, in June 2023, the share price of STS rose just before the announcement of a call to sell shares. These are not isolated examples where the behavior of company stocks stirs investor emotions.

The use of confidential information in stock market transactions is a violation of the law and can result in serious legal consequences. According to Article 14(a) of the MAR regulation, the use of insider information is subject to a fine of up to PLN 5 million or a prison sentence of 3 months to 5 years. Meanwhile, the illegal disclosure of confidential information is punishable by a fine of up to PLN 2 million or a prison sentence of up to 4 years.

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